Tax-Loss Analysis Greetings all.
The following is not without speculation; however, to me is a logical analysis of what is about to transpire with respect to bid/ask and total volumes in the coming days.
Most of you recognize that tax requirements stipulate that a 30-day wait period is required before you can re-purchase the same security without incurring tax consequences. Now, please take a look back at the large volumes that we hit between November 14th-23rd:
Volume - Date (Nov 2016)
2.395 - 14th
1.794 - 15th
2.610 - 16th
6.470 - 17th
3.616 - 18th
1.899 - 21st
1.669 - 22nd
2.133 - 23rd
__________
22.58 mil (This also represents roughly 10% of the floating shares)
Note: the average sale price during this time period was roughly 0.105 - 0.11 per share.
Consider this -- there are two mindsets going into tax loss selling season:
a) Sell & get out forever!
b) Sell (gain the tax credit) and get back in at the bottom!
I suggest that a good portion of the volumes sold between (Nov 14-23) were tax loss sales. Why?
1) The volume was inconsistent with historical levels (higher) and not related to any news releases or substantial rumours about the company.
2) It occurred after Q2 results (many losers were on the fence, still holding on until this point)
3) It coincided with a period of time that still permitted tax-loss sellers an opportunity to buy back into the stock during 2016.
4) Strategically, for those tax-loss sellers of mindset (b), it coincides with a period of opportunity that still afforded buy-back during a time when tax-loss sellers from mindset (a), are applying continued selling pressures on the stock price [remember tax-loss selling credit is valid until Dec. 23 for this tax year]. This presnts a greater chance that mindset (a)'s are still getting "back in" on the relative lows.
5) Mindset (a)'s also get back in to the stock before Q3 results, and see very little risk of a run-up on the stock price during the 30-day wait, as there has historically been very little news or guidance between quarters.
Remember, tax-loss sellers of mindset (a) didn't give up on CXV, they simply saw a strategic opportunity to sell/re-buy. They still believe in the company.
I know this because I am one of them. In early November, I wrote off 90,000 shares that I had acquired at an average price of 0.27 / share over the past year or so. This was a tax-loss sale, and I reacquired the same number of shares just last week.
Now look at the calendar, we are Dec. 13th.... tick tick tick. The volumes that moved last month [and I speculate that a good number of these were tax-loss sales from sellers of mindset (a)], are now eligible to re-purchase their stake in CXV. I believe they will do so at first opportunity [ie. Dec. 14th-23rd] for fear of missing out, as the risk of near-term, rapid, upward price movement is increasing daily. If I'm right, there will be above average volumes in the coming days.
I'm only a novice investor, grinding out my day job as a shift worker in a hospital. Investing is a hobby when time permits. The more savy, sophisticated, and intelligent investors here clearly saw this opportunity and have also participated to some degree in tax-loss selling.
Once tax loss selling ends, once Q3 results are out, once short-positions cover (and go long), this is going up, up, up! Thinner volumes are traditionally traded over Christmas break and we might see a big Santa Claus rally with CXV. There are thousands of investors in the health-care space that were badly beaten up this year... they are looking to re-balance their portfolios. They won't all abandon the health-care space, and CXV will be the recipient of new investment dollars through interest and re-allocation. As news spreads, as results prove out, and for the countless other reasons that many of the other contributors here have mentioned, CXV will soar.
Also, look at the shortdata on CXV. [https://www.shortdata.ca/?c=transcanada-corporation-short-sales&sym=CXV.V]. Those short positions from Nov 16, and Dec 1, are there solely to capitalize on volatility, tax-loss selling, and a lack of anticipated news before Q3 results. There is very limited downside risk here and taking a short position now -- lol - that would be entirely foolish. I predict that once Q3 results are out, these positions will have all but disappeared -- flipped long, and CXV will quickly move back to the 0.20's.
Good luck all longs -- DYODD!
Cheers,
Esther