[Platinum Watchlist] (3.10.23)

Good morning,  

Markets were hit yesterday with concerns in the banking sector and specifically in Silicon Valley Bank. This morning SVB stock has been halted pending some upcoming news.   

This week we exited positions in APD and BRKB based on some of the oscillator movement and knowledge of potential market moving situations which was Powell’s Testimony to congress. Since the paper trade exit from BRKB, price action has decreased over 3% and APD price action has decreased over 2.6%. Combining technical analysis with general market conditions & events helped prevent loses this week.   

With market trending down, the S&P trading below the 200-day SMA and some unknowns in the banking sector, conditions are not conducive for successful swing trading at the present. We will keep the powder dry and look for more set-ups as the market present them to us. 

We need to manage risk and the opportunity to not lose money is greater than risk required to make money today. This is opportunity cost.  This information is for educational purposes only and is not a recommendation to buy or sell a security. 

Opportunity Cost for Swing Trading:  

Opportunity cost is the value of the next best alternative that is forgone when choosing one option over another. It is the cost of an economic decision in terms of the value of the next best alternative that is not chosen. 

Lost opportunity cost refers to the potential benefits or profits that are missed out on when choosing one alternative over another. It is the cost of an opportunity forgone or missed, and the benefits that could have been obtained if that choice had not been made.  

For Example:  If an investor had invested $50,000 in the S&P 500 in 2008 and it lost nearly half its value during the financial crisis, the value of the investment would have decreased to approximately $25,000. 

Assuming the investor did not sell the investment and held onto it until it recovered, which took 2 years, the value of the investment would have returned to approximately $50,000. 

 If instead, the investor had invested $50,000 in treasury bills paying 5% interest, the investment would have earned interest over the 2-year period. The total return on the investment would be:  Interest earned = $50,000 x 0.05 x 2 = $5,000  

Total value of the investment after 2 years = $50,000 + $5,000 = $55,000  Therefore, the opportunity cost of investing in the S&P 500 instead of treasury bills paying 5% interest was the difference between the returns earned from both investments over the 2-year period: 

Opportunity cost = $55,000 – $50,000 = $5,000  In other words, the investor could have earned an additional $5,000 in returns over the 2-year period by investing in treasury bills paying 5% interest instead of buying and holding in the S&P 500 during the same timeframe.  

Have a Great Day!