tsx_trader

CHR (Just looking) + My investing strategy in airline stocks.

TSX:CHR   CHORUS AVIATION INC
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I have a position with an Avg . price of 2. 40 in CHR . I totally mistimed my entry and got stuck in it at least 3 weeks now. At some points I was down a little bit. Now it looks like I am finally going to be able to go back to break even tommorow.

Today was a nice green day, hoping tomorrow is a reversal confirmation day. I can't find any news at to why this is happening. I did notice that every airline related stock I watch had a nice green day today. Perhaps its just a cycle in the market at the moment, a welcome one!

I highlighted some levels of resistance and support above.

For me, CHR is an absolute buy at 2.12. It traded at 2.12 on October 2nd, 2020.

it had only traded that low three times since Covid started; 18, 19 and 23rd of March.

Some people talk about shorting airlines, I dont think that makes any sense. Because Airlines are so oversold, it is not entirely fathmable that they can trade lower than the levels they are at now. People will simply buy them at those prices and its hard to drive the price down. I would say, I would never short airlines. They are too oversold, just how I would not buy certain Tech plays like Tesla , as it is far overbought.

To drive my point, Tesla released wonderful earnings report recently and the price went down instead of up. Likewise, AAL released earnings pre market today and they had bad earnings , but the price went up.

Anyhow, there are still two problems with airlines on a long position. The 1st problem is, they will not pick up and go to where they once were any time soon. You are looking at 3-5 years before they are back where they used to be.

The 2nd problem, as you can see above, each airline stock will have lots of clusters of resistance. So even now, as much as I want to buy into this potential CHR rally, Its hard because I see resistance at 2.51, 2.88, 3.10, 3.50 etccc.....

The other problem is that, I don't wana accumulate stocks in something that will take so long to move because Id prefer if my capital was doing something for me in stocks that are moving.

Having said all of that, there are a few good thing about airline stocks. 1) You will get your money back, specially in Air Canada , CHR , Canadian companies. Its completely unfathomable to think that AC is going to go out of business, AC will exist long after we all pass. Canada the country wont let AC go away! And CHR is a subsidiary of AC .

2nd) The consistent price movement allows you to go in and out of trades and accumulating "free shares." You see, a lot of swing traders like to buy the low, sell the high to make the money. I see it differently, for now anyways. I dont wanna accumulate money as much as I wana accumulate free shares. The reason being, is that instead of making a feww hundred dollars on each swing trade. I wana constantly accumulate shares which in 5-7 years from now will get me a lot more bang for my buck so to speak.

If you can time entering and exiting the trades, be it buying the low, selling the high. Buying into the breakouts, buy the consolidation, etc.... What you can do is that when you are in the green, you exit your position taking your inital investment back, this was, you have your cash, which you can you to re-invest in other stocks and apply this strategy again.

Essentially, lets say I buy a 100 shares of CHR at $2. for an over all investment of $200. I would wait until CHR reaches, say $3. So my investment is now worth $300. I would sell 66 shares at $3. This gives me back my original $200 which I can now put elsewhere. and I am left with 34 shares of CHR that are 'free'!

And because you did not technically aquire capital gains (you dont until you sell them), it is not taxed for this year either.

Now, say CHR goes back down to $2. or is breaking through levels of resistance at 3.50 in convincing fashing, you simply re-apply the strategy and accumulate yet more shares.

Instead of taking profits at $3. let your free shares simmer until CHR goes back to where it once was before Covid. which is 8.30!!!!!!