Conventional wisdom strongly recommends investors avoid putting “all their eggs in one basket”. Rather, they should build a balanced portfolio so gains and losses on individual holdings will balance out and result in a more even return over time.
This is good advice for those still working, but is it wise once retired and perhaps on a full or near full, pension, to risk their limited capital on buying shares?
Unfortunately they have few safe choices for their surplus cash, with most bank deposit accounts offering over the past decade or so, interest rates of only a fraction of 1%. A $30,000 cash reserve placed with one of the major banks at 0.5 %, would add a meager $150 to the balance after 12 months. Sufficient to celebrate by dining out with one’s partner!
An alternative strategy to having a balanced share portfolio, is to select perhaps only a single well-managed, “blue-chip” stock which has delivered above average returns over many years.
Strongly recommended is Healthcare company CSL, manufacturer of diversified medical products, including anti-cervical cancer vaccine Gardasil, and influenza vaccine of which it is the world’s largest producer.
Although CSL’s dividend return is only 1%, with no franking credit, it is still more than can be obtained on most deposit accounts at the moment.
However, particularly with the help of technical analysis, it should be possible to lock in capital gains from time to time, since CSL is a growth, rather than income, stock.
My plan has been to hold CSL for the long-term, with a target holding of 100 shares, purchased at multiple entry levels, aiming at near low levels for the day.
When there is an upsurge in the share price tempting me to take part profit, I buy first, early in rise, with the expectation that higher prices will be possible later in the uptrend. The intent is to thus ensure that my target holding remains intact whilst still taking small profits,
Technical considerations to date
Key lead-up price action, prompting me to take a position in CSL, starting 2 Feb 2022 was a sequence of falling candlesticks in two steps of five initially, followed by ten red candles. This resulted a fall of $50 to $240. after not so long ago trading at over $320.
An inevitable rebound carried the share-price almost to the trend line, but a succession of six Doji candles in the preamble to the half year report, halted further gains.
Despite the uncertainty I took the opportunity to start to build my holding, first to my target parcel of 100 shares, and then overweight to 125 shares as the share price continued to rise.
Penetration of the $272 resistance level has been a technical signal for me to sell 20 of the additional shares I purchased, leaving me with a present balance of 105. I expect that CSL is now likely for a time to trade in the Zone B range. I have $323.75 realized profit so far for 2022, and over $2000 unrealized profit which I wish to leave intact unless there is a major trend reversal signal such as a head and shoulder pattern.
This post is written from the perspective of a small retail investor in his eighties who has studied technical analysis since retiring 22 years ago.
He is not a financial adviser, and urges readers to always seek qualified personalized advice from some one who is, before making important decisions.
Categories: Chart Review