Markets finally closed today, which ends the 2007. Next year is a brand new world and it's all due to your prediction.
I am never a good fortune teller, but as I said everyone needs a plan ahead before they commit their money, so I want to finish off the theme in 2008 in here.
I'm not going to pinpoint specific sectors, funds or stocks but I'll generally state what I think may come up. Let's start with what we had in 2007.
1. If we talk about 2007 we cannot skip the topic of subprime mortgages blown up. Many times I heard news or articles said the subprime issue is small relative to the whole market size and so on and so on... I'm tired about reading it. If there is no additional insight, those articles look the same to me. I want to say, subprime taught me a lesson that, there is always something you don't know about a public company, and that something can blow your investment up. So, trust less about any public company, unless you know so much like an insider. Now how big is the subprime issue? Well I don't know. I know only one thing, there are (still) many ways to interrupt free flow of information about anything on earth so nobody can really make sure how big the impact could be. To say the market is small and will only have small impact is like to say people only gamble on casino table but ignoring all the side-bet. You see what I mean? Whatever people have put on the table does not represent the whole picture, as the size of the side-bet can be so huge that it can easily be many times of the amount on the table. If you don't want to bet on any single bank or brokerage, I suggest to use UYG and SKF, the ultra long and short of S&P Financials, which are what I'm going to use in 2008.
2. I already talked about China in my part 1. I don't want to repeat much here. Just want to add a bit more. The first one is CAF, which is a closed-end fund of Chinese A-shares. Since in North America there is limited way to invest in A-shares so CAF is a good vehicle. The second, TAO, is a new ETF of China real estate market, which composes of the mix of Hong Kong and Chinese real estate companies. Lastly, there are still quite a few pink sheet over-the-counter ADRs available in US. Do not expect a high trading volume nor lots of news, but we do not have many choices.
3. US market as a whole I think will whipsaw up and down throughout 2008. I know there is a president election in 2008 and people believe the FED will do anything to make the market goes higher. With the FED in the hot spot to balance between lower the rate and higher inflation, it's hard to do than to say to lift the market. So overall, I will only go long on strong stocks but long and short the ultra indices from time to time. With the invention of ultra long and short ETFs, one should learn how to make use of them to capture extra profits or at least, to protect the portfolio from any downside risk.
4. Hot sector. Well I can't tell you which sector will become hot in 2008. But from time to time there are hot sectors, there is no doubt. In 2007 I saw bulk shipping and solar energy. But I was scared I could be late in finding them so I didn't invest in any. Look at DRYS as an example of shipping stocks, it went all the way up from the teens to as high as $131 before it retreated, 900% up in about 9 months. Look at FSLR as an example of solar energy, it went all the way up from $30 to about $270 as of today, again 900%. So you see, if you can spot a hot sector early, the potential is humungous.
Before the new year of trading begins, let's have a good rest tomorrow.
Monday, December 31, 2007
Sunday, December 23, 2007
FXP again
Market will be slow these days due to Christmas and New Year. But my brain cannot slow down not to think how will 2008 look like.
Anyway, I want to update here that I bought into FXP (again) at $73.50. Originally I thought I couldn't get it but it did reach my limit price so here I go. I bought less shares this time because I agree that one should not commit all money at once. As well, FXP is a very volatile position that I guess I should use less money but more cautions.
I tried to buy more Nintendo too but my order didn't get fill. I put down $70 but on Friday it never traded at that price so my order expired.
I felt a little bad that I didn't buy RIMM. If I would have bought it I know I'll sell into this rally. Since I forecast an (at least) slightly down market in 2008 in all areas, so I think I should start to be very picky and careful. After all, I acknowledge that I'm not good at picking individual stocks.
Anyway, I want to update here that I bought into FXP (again) at $73.50. Originally I thought I couldn't get it but it did reach my limit price so here I go. I bought less shares this time because I agree that one should not commit all money at once. As well, FXP is a very volatile position that I guess I should use less money but more cautions.
I tried to buy more Nintendo too but my order didn't get fill. I put down $70 but on Friday it never traded at that price so my order expired.
I felt a little bad that I didn't buy RIMM. If I would have bought it I know I'll sell into this rally. Since I forecast an (at least) slightly down market in 2008 in all areas, so I think I should start to be very picky and careful. After all, I acknowledge that I'm not good at picking individual stocks.
Monday, December 17, 2007
Bad Monday
Well I already expected a bad Monday so it's not surprised to me. Guess I'm just a little disappointed myself that I sold my FXP a bit too early at $85, only to see it closed at $88.99.....
I am not perfect and I never am. Perfect timing is not possible. So I am still happy that I managed to make a 1.5% profit since I bought at $83.50. I'm glad that I sticked to my plan and analysis and have not sold when FXP went all the way down to as low as $61.74. As I said in my theme 2008 part 1, FXP is something you cannot ignore.
The market has been down for a while and could possibly take a rest because it goes down further. If FXP goes back to the 20-day EMA (which current is about $76.50) I will consider buying in again, but this time will buy no more than 2/3 of position. I don't want to make the same mistake as last time.
As well, I bought into Nintendo as said yesterday at $70.88. This is the first time I buy stocks on pink sheet. Throughout the day I saw no quotes, no bid/ask show. I entered $72.30 and got at $70.88, meaning Nintendo was brought down by the board market as well. Now I have filled my theme 2008 part 2 and need to sit on it.
I am not perfect and I never am. Perfect timing is not possible. So I am still happy that I managed to make a 1.5% profit since I bought at $83.50. I'm glad that I sticked to my plan and analysis and have not sold when FXP went all the way down to as low as $61.74. As I said in my theme 2008 part 1, FXP is something you cannot ignore.
The market has been down for a while and could possibly take a rest because it goes down further. If FXP goes back to the 20-day EMA (which current is about $76.50) I will consider buying in again, but this time will buy no more than 2/3 of position. I don't want to make the same mistake as last time.
As well, I bought into Nintendo as said yesterday at $70.88. This is the first time I buy stocks on pink sheet. Throughout the day I saw no quotes, no bid/ask show. I entered $72.30 and got at $70.88, meaning Nintendo was brought down by the board market as well. Now I have filled my theme 2008 part 2 and need to sit on it.
Sunday, December 16, 2007
Theme in 2008 (Part 2)
Part 2 will be very short. And I think I'm going to look to put up my money tomorrow to buy a little bit for this part 2.
Besides investing, I like video gaming. Although I'm not a huge big fan of Nintendo Wii (I do have one but played less than my PS2 and 3) and Nintendo DS, but you have to acknowledge that the Wii and DS are very popular among groups from young to old, and of course they made a lot of money on it.
It comes in no surprise that Wii and DS continued to top the holiday shopping gift lists throughout 2007. With more titles and games hitting the stores during the Christmas season, you will see the consoles out of supply very quickly again. Yes, it's 2006 Christmas all over again.
Nintendo (NTDOY.PK) only trades on pink sheet, not much trading volume, and it went up more than 150% from last year already. With a console that is not expensive to produce but comes out as a big hit, owning Nintendo gives me confidence that the downside is not as much as other tech stocks. If you buy into a video game software company you may face a risk that they cannot release hot games, but buying Nintendo helps you to diversify that kind of risk.
As well, I can see Wii and DS have a lot of party games or multi-player games. Those games are good interface to connect people. Many people liked to be connected (that is why facebook becomes so popular so quickly). Players enjoyed the experiences to play together, comparing scores, and even compare the characters (Mii) they created. It's like Apple's product, everybody has it and if you don't have one, you feel isolated from people.
I will look into the market tomorrow and consider buying NTDOY from there. I was already late to buy into Nintendo last year. I still think there are (at least) a few good years for Nintendo Wii and DS, my guess is potentially a 30% to 50% upside in 2008, 100-day EMA should provide good support.
Besides investing, I like video gaming. Although I'm not a huge big fan of Nintendo Wii (I do have one but played less than my PS2 and 3) and Nintendo DS, but you have to acknowledge that the Wii and DS are very popular among groups from young to old, and of course they made a lot of money on it.
It comes in no surprise that Wii and DS continued to top the holiday shopping gift lists throughout 2007. With more titles and games hitting the stores during the Christmas season, you will see the consoles out of supply very quickly again. Yes, it's 2006 Christmas all over again.
Nintendo (NTDOY.PK) only trades on pink sheet, not much trading volume, and it went up more than 150% from last year already. With a console that is not expensive to produce but comes out as a big hit, owning Nintendo gives me confidence that the downside is not as much as other tech stocks. If you buy into a video game software company you may face a risk that they cannot release hot games, but buying Nintendo helps you to diversify that kind of risk.
As well, I can see Wii and DS have a lot of party games or multi-player games. Those games are good interface to connect people. Many people liked to be connected (that is why facebook becomes so popular so quickly). Players enjoyed the experiences to play together, comparing scores, and even compare the characters (Mii) they created. It's like Apple's product, everybody has it and if you don't have one, you feel isolated from people.
I will look into the market tomorrow and consider buying NTDOY from there. I was already late to buy into Nintendo last year. I still think there are (at least) a few good years for Nintendo Wii and DS, my guess is potentially a 30% to 50% upside in 2008, 100-day EMA should provide good support.
Thursday, December 13, 2007
Theme in 2008 (Part 1)
No kidding. China as one of the theme in 2008.
I know it's a boring topic as people keep talking and talking about Olympic games in Beijing next year will boost GDP for the whole country and so on and so on......
I'm not a big fan of "Olympic game will boost economic activities". Well it will to a certain level, but it can be a one-time event only. I didn't do any attribution analysis on Olympic games to an economic system, so I cannot say it has no impact. But I think all kinds of business exhibitions together with an improving country-wide infrastructure are more important than a one-time Olympic game.
So what could happen to China in 2008 and how should we position ourselves to look for profit? Let me start guessing from the macro view.
China just finished their political meeting before end of this year. New committee members were introduced to the closed loop of authority. It almost means we can expect who could be the next president in China 5 years down the road. I don't expect any dramatic change in the government body, so China should be politically stable in 2008.
It's hard to say if their fiscal and monetary policies can work out well on controlling inflation and trade surplus and even the appreciation of currency, but given that the government is quite pro-active in controlling the economy, I'm not surprise that the Chinese government will act quickly and aggressively to solve any economic problem.
But there's only that much human beings can do, so China is still facing tough challenge ahead. My guess on the overall China stock market is continued to be volatile, and in the meantime I'm slightly bias to the downside. If inflation really becomes out of control, expect larger movement from the government and watch out from the downside.
Notwithstanding, I believe there are still strong stocks can hold their grounds and possibly move up to take the lead. Below I'll focus on ADRs which we can buy here in North America.
Baidu - I guess we are now in 2008 and we cannot ignore Chinese tech stocks. Baidu as the most famous search engine in China surely has the potential to move on and expands itself. Although China is still considered as emerging market by measures of governance and transparency, but the size of its market is enormous compare to any emerging market country. So if Google can grow to become a $200 billion company I don't see why Baidu cannot. I don't expect Baidu to become a $200 billion company in 2008 (currently it's about $13 billion), but double in size is possible. To be conservative given the possible challenge in China next year, a 50% increase is reasonable. I expect Baidu to close 2007 at around $350. So my guess is it stands a chance to reach $525. The worst case in the meantime I can think of is about $300 then $225 (unless the CEO of Baidu is a criminal and the whole firm just collapses).
Focus Media - Well I already put my money where my mouth is. Focus Media has an almost monopoly ad market in Chinese malls, elevators and etc (except airports). With several acquisitions they made in 2007 they will only become stronger, and hopefully the profit margin numbers as well. Again I hate to use Olympic game as the excuse, but if anyone would like to reach the public during Olympics by commercials Focus Media almost is their only choice. I will not be surprise that Focus Media will charge them more during Olympics, as it's just like TV station charges more on commercials that show in peak hours. My guess in 2008 is FMCN could reach a 50% return, approximately to $80. Downside is $50, then $40.
Ctrip.com - I like it because it's still small and consistently making money. They are the expedia in China, and they are by far the largest. With Chinese people having more and more money to spend, travelling definitely is one of the big thing they will do. Don't make me to tell you the Olympic story again. My guess is a 50% return to about $90, downside is $52.5 then $45.
Netease - Netease is not the biggest online game company in China, but they just kicked start their own search engine called yadao. Will it be a success I don't know now, but having a new revenue stream without a need to invest huge capital I won't say why not? You can imagine this company can approve $100 million to buy back their own shares and at the same time getting revenue from new type of business. Even something can go wrong but it won't kill them. As i have mentioned in some of my previous blog it didn't drop below the 200-day EMA even they reported so-so earnings. I think in the meantime it found a bottom and building up from there. So, my guess is a possible 50% return to mid $30's, if they report good growing revenue in their search engine, a double is possible too. Downside is $19, then $16.
China Digital TV Holdings (STV) - The problem of STV is it's an IPO. Generally I'm scare about IPO as there is not much trading history. But STV is kind of the biggest player in this area so I guess I cannot totally ignore it. China is such a volatile and immature market so I prefer to pick the leader of the industry. Do not try to pick anything other than the leader, unless you dig pretty deep into that company. You never know what can happen to these Chinese company. My guess is a possible 100% upside and 30% downside.
China Mobile - Again I like the pick the leader only. I don't mean there is no value in CHA or CHU, just that picking CHL I guess I can sleep better. But since CHL is pretty big already, so I guess one should trade in and out with CHL instead of just holding it. If you catch at the right moment I guess a 20% every time you trade is possible. At the least if you think you get in at the wrong time, you have much better confidence to hold it longer.
China Life - LFC in this case is even stronger than CHL, because insurance company is too important to an economy and I believe if anything goes wrong, the governemnt will not let it dies. LFC is quite big as well so one should try get in and out to seek the 20% return.
Finally, do not ignore FXP. This is by far the only chance you can play the downside of China. It is not for long term but if you can make good use of FXP, I'm sure you will love the person who brought it to the market. Just that it is very gappy and you have to play it with confidence and cautious.
I know it's a boring topic as people keep talking and talking about Olympic games in Beijing next year will boost GDP for the whole country and so on and so on......
I'm not a big fan of "Olympic game will boost economic activities". Well it will to a certain level, but it can be a one-time event only. I didn't do any attribution analysis on Olympic games to an economic system, so I cannot say it has no impact. But I think all kinds of business exhibitions together with an improving country-wide infrastructure are more important than a one-time Olympic game.
So what could happen to China in 2008 and how should we position ourselves to look for profit? Let me start guessing from the macro view.
China just finished their political meeting before end of this year. New committee members were introduced to the closed loop of authority. It almost means we can expect who could be the next president in China 5 years down the road. I don't expect any dramatic change in the government body, so China should be politically stable in 2008.
It's hard to say if their fiscal and monetary policies can work out well on controlling inflation and trade surplus and even the appreciation of currency, but given that the government is quite pro-active in controlling the economy, I'm not surprise that the Chinese government will act quickly and aggressively to solve any economic problem.
But there's only that much human beings can do, so China is still facing tough challenge ahead. My guess on the overall China stock market is continued to be volatile, and in the meantime I'm slightly bias to the downside. If inflation really becomes out of control, expect larger movement from the government and watch out from the downside.
Notwithstanding, I believe there are still strong stocks can hold their grounds and possibly move up to take the lead. Below I'll focus on ADRs which we can buy here in North America.
Baidu - I guess we are now in 2008 and we cannot ignore Chinese tech stocks. Baidu as the most famous search engine in China surely has the potential to move on and expands itself. Although China is still considered as emerging market by measures of governance and transparency, but the size of its market is enormous compare to any emerging market country. So if Google can grow to become a $200 billion company I don't see why Baidu cannot. I don't expect Baidu to become a $200 billion company in 2008 (currently it's about $13 billion), but double in size is possible. To be conservative given the possible challenge in China next year, a 50% increase is reasonable. I expect Baidu to close 2007 at around $350. So my guess is it stands a chance to reach $525. The worst case in the meantime I can think of is about $300 then $225 (unless the CEO of Baidu is a criminal and the whole firm just collapses).
Focus Media - Well I already put my money where my mouth is. Focus Media has an almost monopoly ad market in Chinese malls, elevators and etc (except airports). With several acquisitions they made in 2007 they will only become stronger, and hopefully the profit margin numbers as well. Again I hate to use Olympic game as the excuse, but if anyone would like to reach the public during Olympics by commercials Focus Media almost is their only choice. I will not be surprise that Focus Media will charge them more during Olympics, as it's just like TV station charges more on commercials that show in peak hours. My guess in 2008 is FMCN could reach a 50% return, approximately to $80. Downside is $50, then $40.
Ctrip.com - I like it because it's still small and consistently making money. They are the expedia in China, and they are by far the largest. With Chinese people having more and more money to spend, travelling definitely is one of the big thing they will do. Don't make me to tell you the Olympic story again. My guess is a 50% return to about $90, downside is $52.5 then $45.
Netease - Netease is not the biggest online game company in China, but they just kicked start their own search engine called yadao. Will it be a success I don't know now, but having a new revenue stream without a need to invest huge capital I won't say why not? You can imagine this company can approve $100 million to buy back their own shares and at the same time getting revenue from new type of business. Even something can go wrong but it won't kill them. As i have mentioned in some of my previous blog it didn't drop below the 200-day EMA even they reported so-so earnings. I think in the meantime it found a bottom and building up from there. So, my guess is a possible 50% return to mid $30's, if they report good growing revenue in their search engine, a double is possible too. Downside is $19, then $16.
China Digital TV Holdings (STV) - The problem of STV is it's an IPO. Generally I'm scare about IPO as there is not much trading history. But STV is kind of the biggest player in this area so I guess I cannot totally ignore it. China is such a volatile and immature market so I prefer to pick the leader of the industry. Do not try to pick anything other than the leader, unless you dig pretty deep into that company. You never know what can happen to these Chinese company. My guess is a possible 100% upside and 30% downside.
China Mobile - Again I like the pick the leader only. I don't mean there is no value in CHA or CHU, just that picking CHL I guess I can sleep better. But since CHL is pretty big already, so I guess one should trade in and out with CHL instead of just holding it. If you catch at the right moment I guess a 20% every time you trade is possible. At the least if you think you get in at the wrong time, you have much better confidence to hold it longer.
China Life - LFC in this case is even stronger than CHL, because insurance company is too important to an economy and I believe if anything goes wrong, the governemnt will not let it dies. LFC is quite big as well so one should try get in and out to seek the 20% return.
Finally, do not ignore FXP. This is by far the only chance you can play the downside of China. It is not for long term but if you can make good use of FXP, I'm sure you will love the person who brought it to the market. Just that it is very gappy and you have to play it with confidence and cautious.
Tuesday, December 11, 2007
FMCN
I bought into FMCN at $57.30 before the FED announced the 0.25% cut. Maybe I'm stupid but I expect good numbers keep coming out from FMCN. As well, I committed about 2/3 of my position only. So I may still want to add to my position.
The FED might have disappointed many investors, but, it is doing what it needs to do, but not to please every single investor. Yes, there maybe more rate cuts in 2008, but anyway, a Christmas rally may end for now.
Many sectors reversed to drop almost simultaneously when the FED announced (only) a quarter point cut. Even strong stocks, like solar energy stocks retreated. Quite a few of them retreated with high volume as well. The market has rebounded quite a lot since the end of November, guess they need more substantial good news to go up from here. But Christmas usually is slow, I don't see any one will be making significant move in Christmas, so expect a slow and slightly down market from now on to the end of the year.
Well, since end of 2007 is fast approaching, I guess it's time to sit down and think about what theme may play out in 2008. Let me get back to this topic and brainstorm about this topic from now.
Besides, I'm still holding my FXP that I bought at $83.50. I guess a high $70's is not difficult (it's $73.65 already), just not sure if I can go back to break even in December......
The FED might have disappointed many investors, but, it is doing what it needs to do, but not to please every single investor. Yes, there maybe more rate cuts in 2008, but anyway, a Christmas rally may end for now.
Many sectors reversed to drop almost simultaneously when the FED announced (only) a quarter point cut. Even strong stocks, like solar energy stocks retreated. Quite a few of them retreated with high volume as well. The market has rebounded quite a lot since the end of November, guess they need more substantial good news to go up from here. But Christmas usually is slow, I don't see any one will be making significant move in Christmas, so expect a slow and slightly down market from now on to the end of the year.
Well, since end of 2007 is fast approaching, I guess it's time to sit down and think about what theme may play out in 2008. Let me get back to this topic and brainstorm about this topic from now.
Besides, I'm still holding my FXP that I bought at $83.50. I guess a high $70's is not difficult (it's $73.65 already), just not sure if I can go back to break even in December......
Saturday, December 1, 2007
FXP
I'm being very lazy these days, as I should have updated my position on Tuesday that I bought FXP again at $83.50. As you see i'm not hiding my position here to make up a good looking gain, I'm sitting at a loss of more than 15%.
This coming week is pretty critical. As DIA and SPY both tested the most highest daily EMA (in this case it's the 100-day). Many people might think the 200-day EMA should be the most important one as a test. I do not totally agree, as I saw on many charts that quite often the stock (or ETF/index) will test the most highest daily EMA from below and eventually heads back down.
I would say, a stock is resuming upward trend if:
1. After it breaks through the 200-day EMA with hugh volume, it doesn't drop below that again
2. Eventually the shorter-time EMA is above longer-time EMA (20-day > 50-day > 100-day > 200-day)
3. The uptrend may still be quite choppy until the stock/ETF makes new high
Of course, you may say, to wait till it shows all these characteristics I already missed a big move, that probably can be a hugh amount. Well, unfortunately trend following is not to find the bottom and get onto the bottom. A trend needs time to develop, so using a trend following technique you can never find a bottom.
To quickly find bottom or top I guess you need to use techniques of swing trading. I'm not good at that so I won't get into it here.
So when should I cover my FXP? Will China market drop given that US Fed will reduce rate on Dec 11 very likely? I want to use financial and brokerage stocks as the first measure.
Looking at XLF, in mid-Sept the Fed lowered the rate by 50 basis points, XLF went up from around $32 (when people started to anticipate a rate cut) to as high as $36, about 13%. Using the same time period we can see:
C: up from $45 to $50, about 11%
BAC: up from $48 to $53, about 10%
WFC: up from $33 to $38, about 15%
JPM: up from $43 to $48, about 12%
WB: up from $45 to $52, about 16%
MER: up from $68 to $77, about 13%
MS: up from $56 to $69, about 23%
GS: up from $165 to $220, about 33%
LEH: up from $50 to $65, about 30%
BSC: up from $100 to $127, about 27%
I don't want to include CFC or WM as they dropped so much that I guess you don't need to see them. The above 10 stocks (5 banks, 5 brokerages), only GS and LEH did not drop below the lowest price shown above. JPM and BSC dropped below the lowest price but not by too much. All the rest dropped by quite a lot from that lowest price. Let's take a quick comparison of new low price to last low price of the worse 6.
C: down from $45 to $30
BAC: down from $47 to $42
WFC: down from $33 to $29.50
WB: down from $45 to $37
MER: down from $68 to $50.50
MS: down from $56 to $47.50
That is not surprising to me, as usually when the Fed started to reduce rate, the weak sectors usually will continue to drop further. Anyone who thinks one rate cut from the Fed will save the economy is simply naive.
Now let's take a quick look of the 6 above and XLF due to the anticipation of rate cut on Dec 11.
XLF: up from $28 to $31, about 11%
C: up from $30 to $33, about 10%
BAC: up from $42 to $46, about 10%
WFC: up from $29.50 to $32.50, about 10%
WB: up from $37 to $43, about 16%
MER: up from $50.50 to $60, about 19%
MS: up from $47.50 to $52.50, about 11%
HHmmm, not much difference than the last rate-cut rebound. I don't think history will repeat exactly the same way, that is a stupid assumption. But at least these stocks have to show that they will not drop below the last lowest price first, before I can say they are really coming back. If they fall back to their lowest price, I will think about putting in some money in UYG maybe.
So given the US is not very clear, China may continue its volatile characteristics for a while. A Christmas rally may be true, but what about after Christmas? Anybody thought about that?
This coming week is pretty critical. As DIA and SPY both tested the most highest daily EMA (in this case it's the 100-day). Many people might think the 200-day EMA should be the most important one as a test. I do not totally agree, as I saw on many charts that quite often the stock (or ETF/index) will test the most highest daily EMA from below and eventually heads back down.
I would say, a stock is resuming upward trend if:
1. After it breaks through the 200-day EMA with hugh volume, it doesn't drop below that again
2. Eventually the shorter-time EMA is above longer-time EMA (20-day > 50-day > 100-day > 200-day)
3. The uptrend may still be quite choppy until the stock/ETF makes new high
Of course, you may say, to wait till it shows all these characteristics I already missed a big move, that probably can be a hugh amount. Well, unfortunately trend following is not to find the bottom and get onto the bottom. A trend needs time to develop, so using a trend following technique you can never find a bottom.
To quickly find bottom or top I guess you need to use techniques of swing trading. I'm not good at that so I won't get into it here.
So when should I cover my FXP? Will China market drop given that US Fed will reduce rate on Dec 11 very likely? I want to use financial and brokerage stocks as the first measure.
Looking at XLF, in mid-Sept the Fed lowered the rate by 50 basis points, XLF went up from around $32 (when people started to anticipate a rate cut) to as high as $36, about 13%. Using the same time period we can see:
C: up from $45 to $50, about 11%
BAC: up from $48 to $53, about 10%
WFC: up from $33 to $38, about 15%
JPM: up from $43 to $48, about 12%
WB: up from $45 to $52, about 16%
MER: up from $68 to $77, about 13%
MS: up from $56 to $69, about 23%
GS: up from $165 to $220, about 33%
LEH: up from $50 to $65, about 30%
BSC: up from $100 to $127, about 27%
I don't want to include CFC or WM as they dropped so much that I guess you don't need to see them. The above 10 stocks (5 banks, 5 brokerages), only GS and LEH did not drop below the lowest price shown above. JPM and BSC dropped below the lowest price but not by too much. All the rest dropped by quite a lot from that lowest price. Let's take a quick comparison of new low price to last low price of the worse 6.
C: down from $45 to $30
BAC: down from $47 to $42
WFC: down from $33 to $29.50
WB: down from $45 to $37
MER: down from $68 to $50.50
MS: down from $56 to $47.50
That is not surprising to me, as usually when the Fed started to reduce rate, the weak sectors usually will continue to drop further. Anyone who thinks one rate cut from the Fed will save the economy is simply naive.
Now let's take a quick look of the 6 above and XLF due to the anticipation of rate cut on Dec 11.
XLF: up from $28 to $31, about 11%
C: up from $30 to $33, about 10%
BAC: up from $42 to $46, about 10%
WFC: up from $29.50 to $32.50, about 10%
WB: up from $37 to $43, about 16%
MER: up from $50.50 to $60, about 19%
MS: up from $47.50 to $52.50, about 11%
HHmmm, not much difference than the last rate-cut rebound. I don't think history will repeat exactly the same way, that is a stupid assumption. But at least these stocks have to show that they will not drop below the last lowest price first, before I can say they are really coming back. If they fall back to their lowest price, I will think about putting in some money in UYG maybe.
So given the US is not very clear, China may continue its volatile characteristics for a while. A Christmas rally may be true, but what about after Christmas? Anybody thought about that?
Monday, November 26, 2007
Christmas rally?
I feel like haven't been writing for a long time.... Anyway.
People are still arguing about will there be a Christmas rally. Of course they mean a broad base rally. Well my take is if there is a rally it probably will only be limited to a few stocks, but not the broad market.
The market generally takes only the combination of the following 2 sets of conditions. {no news, good news, bad news} and {trends up, trends down}. So you see there are mainly 6 scenarios. Over the last week or so I believe we were experiencing the combinations of bad news/trends down and no news/trends down.
Let me use a few ETFs to check how are we going from here. Let's start with SPY.
SPY was once about $155 back in mid-July, of course it crashed down to around $145 due to sub-prime news with extremely high volume. After that it went back up to as high as $157.52 by end of September, with volume back to normal. And then since end of September it started crashed back down again to currently $141. So, SPY did not make a higher high compared to mid-July, as well not with a significant volume. Currently the 100-week EMA (about $140) is a testing point (I don't want to say support level because it may not support it), and the 20-week EMA is the first resistance (currently about $149). If it cannot get support at the 100-week EMA, not good for the short term my friend.
QQQQ is a bit better, but given the broad market is not doing good, it's hard for QQQQ to go up by itself.
DIA has very similar experience like SPY in the second half of 2007, so I don't repeat in here.
IWM is even worse as it already dipped below the 100-week EMA. Testing the 200-week EMA here is quite possible (which is currently about $68.50).
FXI is fighting to stay above the 20-week EMA, but given the Chinese government wants to slow the stock market a bit, it's hard for FXI to go up much in the meantime.
EEM as well is fighting against 20-week EMA, it dipped below that by the end of today with quite an amount of volume, so testing the 50-week EMA of about $131 is possible.
XLF already dropped below the 200-week EMA, with many US banks keep making new lows, even if XLF is not going to go down by much from here, it doesn't seem to have any steam to go up much. In the near term it may try to break through the 200-week EMA of about $31.80. My guess is it will fail and stay below the 200-week EMA for a while, until there is obvious good news in this sector.
XHB is no better. Back from the beginning of June this year, XHB actually dropped faster than XLF. If you use a daily graph you'll see it started to drop below all 4 major daily EMAs. From then on, it never crossed back up above the 50-day EMA. Over the last 6 months or so it dropped about 50%. This drop is pretty significant as we are talking about a sector here, not one individual stock. I don't think it will keep dropping in this kind of speed, but it will need quite a long time to confirm the bottom.
XLU, on the other hand, is near its yearly high. Well this is understandable as when market gets weak, people go to sectors that are defensive, and utilities is one of those.
Finally GLD. It took off nicely from about $65 back in August to recently above $80. People always think gold is a good hedge of inflation. I personally don't think it is that simple. As the gold itself does not produce more value for you, so to fight inflation I believe the better way is to bet on good companies and keep switching to good companies. Or on the other hand target on good and stable companies that consistently increase their dividends.
What may rally from here to Christmas and the beginning of 2008? Well I cannot tell. I can only say, in the meantime, most stocks would go down more often than go up. Therefore, the probability that you correctly pick a poor stock that will go down is higher than to correctly pick a good stock that will go up. So for now I'll stay with my strategy of, making use of different ETFs, specially the Ultra and Ultrashort ETFs but not individual stock.
People are still arguing about will there be a Christmas rally. Of course they mean a broad base rally. Well my take is if there is a rally it probably will only be limited to a few stocks, but not the broad market.
The market generally takes only the combination of the following 2 sets of conditions. {no news, good news, bad news} and {trends up, trends down}. So you see there are mainly 6 scenarios. Over the last week or so I believe we were experiencing the combinations of bad news/trends down and no news/trends down.
Let me use a few ETFs to check how are we going from here. Let's start with SPY.
SPY was once about $155 back in mid-July, of course it crashed down to around $145 due to sub-prime news with extremely high volume. After that it went back up to as high as $157.52 by end of September, with volume back to normal. And then since end of September it started crashed back down again to currently $141. So, SPY did not make a higher high compared to mid-July, as well not with a significant volume. Currently the 100-week EMA (about $140) is a testing point (I don't want to say support level because it may not support it), and the 20-week EMA is the first resistance (currently about $149). If it cannot get support at the 100-week EMA, not good for the short term my friend.
QQQQ is a bit better, but given the broad market is not doing good, it's hard for QQQQ to go up by itself.
DIA has very similar experience like SPY in the second half of 2007, so I don't repeat in here.
IWM is even worse as it already dipped below the 100-week EMA. Testing the 200-week EMA here is quite possible (which is currently about $68.50).
FXI is fighting to stay above the 20-week EMA, but given the Chinese government wants to slow the stock market a bit, it's hard for FXI to go up much in the meantime.
EEM as well is fighting against 20-week EMA, it dipped below that by the end of today with quite an amount of volume, so testing the 50-week EMA of about $131 is possible.
XLF already dropped below the 200-week EMA, with many US banks keep making new lows, even if XLF is not going to go down by much from here, it doesn't seem to have any steam to go up much. In the near term it may try to break through the 200-week EMA of about $31.80. My guess is it will fail and stay below the 200-week EMA for a while, until there is obvious good news in this sector.
XHB is no better. Back from the beginning of June this year, XHB actually dropped faster than XLF. If you use a daily graph you'll see it started to drop below all 4 major daily EMAs. From then on, it never crossed back up above the 50-day EMA. Over the last 6 months or so it dropped about 50%. This drop is pretty significant as we are talking about a sector here, not one individual stock. I don't think it will keep dropping in this kind of speed, but it will need quite a long time to confirm the bottom.
XLU, on the other hand, is near its yearly high. Well this is understandable as when market gets weak, people go to sectors that are defensive, and utilities is one of those.
Finally GLD. It took off nicely from about $65 back in August to recently above $80. People always think gold is a good hedge of inflation. I personally don't think it is that simple. As the gold itself does not produce more value for you, so to fight inflation I believe the better way is to bet on good companies and keep switching to good companies. Or on the other hand target on good and stable companies that consistently increase their dividends.
What may rally from here to Christmas and the beginning of 2008? Well I cannot tell. I can only say, in the meantime, most stocks would go down more often than go up. Therefore, the probability that you correctly pick a poor stock that will go down is higher than to correctly pick a good stock that will go up. So for now I'll stay with my strategy of, making use of different ETFs, specially the Ultra and Ultrashort ETFs but not individual stock.
Tuesday, November 20, 2007
sold my SVA
Yes, I sold my SVA at a loss of about 20% at $4.83. I ran against my original thinking because the markets don't look right. And when markets don't look right smaller stocks can get kill much faster. So to be safe I rather take a loss now and wait for better timing to get back in strong stocks.
So in the meantime I have no trading position.
These days I think a safer way to play with it is to go long and short ETFs. Too bad I missed the UltraShort Financials (SKF) totally due to the fact that I had experience of couldn't trade it due to the very low daily volume. Anyway, a miss is a miss. But I'll keep an eye on any ETF I can play with.
Articles here and there are still arguing recession or not. I don't know if there will be recession in US, I only know investors placed their votes in the markets. Look at all the 4 major ETFs (QQQQ, DIA, SPY and IWM), all of them are below 100-day EMA, except QQQQ all of the other 3 are below the 200-day EMA. Even today they rebounced a bit with high volume, it doesn't help them to get back above a meaningful support at all. So how can I believe we are not in trouble here?
Remember I said I'll keep an eye on NTES? Its rival GA reported earnings last night and got slaughter today by 25%. NCTY and SNDA in the meantime are not looking very good too. Just that NTES holds the 100-day EMA. Interesting, it seemed to me it finds the support above the 100-day EMA, which is pretty good under this market condition.
Other than ETFs, still waiting for chance to get some AAPL, RIMM, BIDU or even CTRP. I'm almost thinking buy and hold them for a while and at the same time, go in and out with the ETFs of long and short to take the advantage of any decline. Anyway, will see.
So in the meantime I have no trading position.
These days I think a safer way to play with it is to go long and short ETFs. Too bad I missed the UltraShort Financials (SKF) totally due to the fact that I had experience of couldn't trade it due to the very low daily volume. Anyway, a miss is a miss. But I'll keep an eye on any ETF I can play with.
Articles here and there are still arguing recession or not. I don't know if there will be recession in US, I only know investors placed their votes in the markets. Look at all the 4 major ETFs (QQQQ, DIA, SPY and IWM), all of them are below 100-day EMA, except QQQQ all of the other 3 are below the 200-day EMA. Even today they rebounced a bit with high volume, it doesn't help them to get back above a meaningful support at all. So how can I believe we are not in trouble here?
Remember I said I'll keep an eye on NTES? Its rival GA reported earnings last night and got slaughter today by 25%. NCTY and SNDA in the meantime are not looking very good too. Just that NTES holds the 100-day EMA. Interesting, it seemed to me it finds the support above the 100-day EMA, which is pretty good under this market condition.
Other than ETFs, still waiting for chance to get some AAPL, RIMM, BIDU or even CTRP. I'm almost thinking buy and hold them for a while and at the same time, go in and out with the ETFs of long and short to take the advantage of any decline. Anyway, will see.
Saturday, November 17, 2007
FXP and TWM
They increased as I expected on Friday, just that not by a lot and since the market rebounded to closed higher, I sold my two positions.
Bought FXP on Wednesday at $74.24 and sold on Friday at $82.51.
Bought TWM on Wednesday at $67.98 and sold on Friday at $72.51.
Not a lot but I'm still satisfied.
Market these days can turn around very quickly, although I think there are still a bit more downside from here, but these ETFs can still whipsaw by a lot. At least as I said, I never think of holding them for long term, no way you want to bet on an index that goes to zero on a long term.
Previous strong stocks held up pretty well on Friday to the end, except BIDU and the several shipping stocks. BIDU seems like doesn't want to go too low, as I said before, I am still looking for opportunity to get back in, unless I see another Chinese search engine really haunts BIDU's leading market share in China. In this case, will NTES be that engine? well I don't know, but I'm surprise that NTES holding above 20-week EMA pretty well after unimpressive earnings report, massive sell off throughout last week and bad earnings from competitor NCTY on Friday (note that NCTY is another Chinese online gaming stock that dropped 30% on Friday). I'll keep an eye on NTES for now.
Let me screen through stocks that I'm watching on this weekend and see which may come out as the strong stocks in the next wave.
Bought FXP on Wednesday at $74.24 and sold on Friday at $82.51.
Bought TWM on Wednesday at $67.98 and sold on Friday at $72.51.
Not a lot but I'm still satisfied.
Market these days can turn around very quickly, although I think there are still a bit more downside from here, but these ETFs can still whipsaw by a lot. At least as I said, I never think of holding them for long term, no way you want to bet on an index that goes to zero on a long term.
Previous strong stocks held up pretty well on Friday to the end, except BIDU and the several shipping stocks. BIDU seems like doesn't want to go too low, as I said before, I am still looking for opportunity to get back in, unless I see another Chinese search engine really haunts BIDU's leading market share in China. In this case, will NTES be that engine? well I don't know, but I'm surprise that NTES holding above 20-week EMA pretty well after unimpressive earnings report, massive sell off throughout last week and bad earnings from competitor NCTY on Friday (note that NCTY is another Chinese online gaming stock that dropped 30% on Friday). I'll keep an eye on NTES for now.
Let me screen through stocks that I'm watching on this weekend and see which may come out as the strong stocks in the next wave.
Wednesday, November 14, 2007
Market swings
Well I have to acknowledge that I don't remember I have seen such a big swing up and down of stock indices since tech bubble burst in 2000/2001. If you are brave and very skillful or lucky to catch the swing you probably have earned a lot only over a few days.
There are diverge opinions on where market is heading. One opinion from bulls is tech stocks usually are strong by end of year, however, what do you mean by usually? What about I tell you "usually money market fund provides positive returns", and only to see that GE told investors that they can liquidate their money from the money market fund for 96 cents of a dollar. Usually doesn't mean always. History may not repeat.
People don't get it wrong. Technical analysis is not to confirm will history repeat. You have to understand technical analysis from another angle.
People use technical analysis to try to find clues about where the smart money is going and anticipating. It is nothing do to history or whatsoever. Therefore, a perfect technical analysis does not just analyze some statistics or charts, but line-up those analysis with the actual situation you are encountering.
Okay a little update on my portfolio. Still holding SVA, Tuesday's downward movement worries me a bit, as the markets rallied so much but SVA dropped, doesn't look very promising, I'll keep an eye on it.
Besides, I bought into FXP and TWM before noon. I acknowledge I got into a bit late or early, as before noon actually was almost the highest prices throughout the day. If I got into it right at the opening I will be much better. But since I want to confirm the sentiment of the strong stocks that's why I got into a bit late.
I have no intention to hold the two ultra short for very long, just a swing or two to the downside like we had late last week will do me good.
The market today did show weakness to me, provide that GOOG opened up by $13 only to see it closed at down by $19. Or BIDU opened up by $25 and closed with only up by $2.55. Or AAPL opened up by $7 and closed down by $3.85... The list goes on specially to tech stocks and Chinese stocks. Anyway I feel uncertain about a strong tech Q4.
There are diverge opinions on where market is heading. One opinion from bulls is tech stocks usually are strong by end of year, however, what do you mean by usually? What about I tell you "usually money market fund provides positive returns", and only to see that GE told investors that they can liquidate their money from the money market fund for 96 cents of a dollar. Usually doesn't mean always. History may not repeat.
People don't get it wrong. Technical analysis is not to confirm will history repeat. You have to understand technical analysis from another angle.
People use technical analysis to try to find clues about where the smart money is going and anticipating. It is nothing do to history or whatsoever. Therefore, a perfect technical analysis does not just analyze some statistics or charts, but line-up those analysis with the actual situation you are encountering.
Okay a little update on my portfolio. Still holding SVA, Tuesday's downward movement worries me a bit, as the markets rallied so much but SVA dropped, doesn't look very promising, I'll keep an eye on it.
Besides, I bought into FXP and TWM before noon. I acknowledge I got into a bit late or early, as before noon actually was almost the highest prices throughout the day. If I got into it right at the opening I will be much better. But since I want to confirm the sentiment of the strong stocks that's why I got into a bit late.
I have no intention to hold the two ultra short for very long, just a swing or two to the downside like we had late last week will do me good.
The market today did show weakness to me, provide that GOOG opened up by $13 only to see it closed at down by $19. Or BIDU opened up by $25 and closed with only up by $2.55. Or AAPL opened up by $7 and closed down by $3.85... The list goes on specially to tech stocks and Chinese stocks. Anyway I feel uncertain about a strong tech Q4.
Sunday, November 11, 2007
Where will market go?
Despite the 8.7% increase in my SVA, market was choppy on Friday. Strong stocks like GOOG, BIDU, AAPL and RIMM fell fast, came back a bit and fell fast again. Shorter term EMAs of SPY, DIA, QQQQ and IWM were all going downward with heavy volume.
So, where is market heading to? Well I would say in the short term it is hard for the market to go higher, it probably will either go down a bit more or channel between certain range. We should lower our entry points for strong stocks and wait for the market price to come to your entry point, not raise your entry point to catch the market price. For example, in the meantime I'll take the 20-week EMA as the first support of the strong stocks. Base on how strong the stock you believe, you can adjust from there.
Chinese stocks slowed down by a lot as well, as Chinese government wants them to slow down. After all, the Chinese government is not stupid to let the market crash and do nothing (not that mean they can perfectly prevent it from crashing). As said, if my SVA goes up too fast I'll sell and look for opportunity to buy it back.
U.S. financials did not stop going down, in fact, they speeded up last week, leaded by Citigroup, Merill Lynch, Wachovia and Washington Mutual. I'm still waiting for a good entry point to step in with some money, just that it sounds like it's still not the time yet. But if there happens a very strong down day with tons of selling, I think I'll kick in some money, that's the idea of "buy when blood on the street".
So, where is market heading to? Well I would say in the short term it is hard for the market to go higher, it probably will either go down a bit more or channel between certain range. We should lower our entry points for strong stocks and wait for the market price to come to your entry point, not raise your entry point to catch the market price. For example, in the meantime I'll take the 20-week EMA as the first support of the strong stocks. Base on how strong the stock you believe, you can adjust from there.
Chinese stocks slowed down by a lot as well, as Chinese government wants them to slow down. After all, the Chinese government is not stupid to let the market crash and do nothing (not that mean they can perfectly prevent it from crashing). As said, if my SVA goes up too fast I'll sell and look for opportunity to buy it back.
U.S. financials did not stop going down, in fact, they speeded up last week, leaded by Citigroup, Merill Lynch, Wachovia and Washington Mutual. I'm still waiting for a good entry point to step in with some money, just that it sounds like it's still not the time yet. But if there happens a very strong down day with tons of selling, I think I'll kick in some money, that's the idea of "buy when blood on the street".
Thursday, November 8, 2007
EFUT
I finally sold EFUT at $17.24 today. I'm a bit disappointing about the pos, not just due to the massive 35% loss, it's also the fact that I did not spot the market was going to retreat by a lot. But since I was getting in EFUT at the wrong time by using daily graph, if I changed to use weekly graph at least my loss should much smaller. Anyway, this pos originally was more like a pure technical bet than quantitative analysis, I accepted the loss and learn from it.
Surprisingly in such a down day my SVA moved up instead of down, it showed some strength to hold above the 20-day EMA. Now using both daily and weekly graphs, it showed 20-period > 50-period > 100-period > 200-period. Looking backward further enough, $7 is more or less the most critical level as it's the historical high (base on closing price, not intraday).
Market is losing steam in here, even strong stocks like GOOG, BIDU, AAPL and RIMM drop like crazy in a day. Yes they rebounced a bit but if CSCO said they see slow down due to lower spending from the financial sectors, then the ripple effect may spread to other tech stocks.
In the meantime I will erase all my previous recommendation on buying into any position, including NTES (with disappointing earnings anyway), FMCN and any others.
It is not the end of the world, but patient is a very important ingredient, I don't want to make mistake like EFUT again. When I think market starts to consolidate and calm down, I'll look to buy into higher respect name like the 4 mention above. As well, Chinese stocks I believe can still go from here as the Chinese economy may slow down but still grow. When things are settled I'll try to pick the leaders in the sectors, not just any Chinese stock.
Surprisingly in such a down day my SVA moved up instead of down, it showed some strength to hold above the 20-day EMA. Now using both daily and weekly graphs, it showed 20-period > 50-period > 100-period > 200-period. Looking backward further enough, $7 is more or less the most critical level as it's the historical high (base on closing price, not intraday).
Market is losing steam in here, even strong stocks like GOOG, BIDU, AAPL and RIMM drop like crazy in a day. Yes they rebounced a bit but if CSCO said they see slow down due to lower spending from the financial sectors, then the ripple effect may spread to other tech stocks.
In the meantime I will erase all my previous recommendation on buying into any position, including NTES (with disappointing earnings anyway), FMCN and any others.
It is not the end of the world, but patient is a very important ingredient, I don't want to make mistake like EFUT again. When I think market starts to consolidate and calm down, I'll look to buy into higher respect name like the 4 mention above. As well, Chinese stocks I believe can still go from here as the Chinese economy may slow down but still grow. When things are settled I'll try to pick the leaders in the sectors, not just any Chinese stock.
Tuesday, November 6, 2007
SVA
So many news these days. Is market heading up or down??? Are people too crazy about chinese stocks??? How bad can financial stocks go??? So many questions being unanswered.
Anyway, PTR suddenly becomes the biggest firm on earth with about $1 trillion market cap. Holy cow that's a lot. I guess I have to admit that it goes up a bit too much for now, hey I don't mean it should fall by a lot, it may just hang in there for a while to let the earnings catch up the market value.
On the other hand, Alibaba.com went public in HK and boosted 169% in IPO. People probably are thinking about tom.com in tech bubble's time.
If you really just think these are again purely tech bubble hypes you probably are not perfectly right. Ask anyone on the street to see if she has a computer at home and ask the same question about 10 years ago, you'll see how computer/internet changed our basic living style.
Anyway, I initiated a position in SVA, a Chinese biotech firm, which is pretty small. It's 20-week EMA is around $4.50 and I got in at $6.07, a bit high but again I mean to hold it for longer, unless it went up too fast like BIDU did.
BIDU shot up as high as $430 before it retreated, I should have sold it this morning instead of yesterday, well but I guess I profited from it so shouldn't complained.
I feel bad about CTRP as if I have hold onto it I'm now making 20%..... If I have use the weekly graph to guide my trade probably I'll hold onto it (or may not). Can't believe similar things happened to CEDC as well.... I'm such a loser.....
Anyway, PTR suddenly becomes the biggest firm on earth with about $1 trillion market cap. Holy cow that's a lot. I guess I have to admit that it goes up a bit too much for now, hey I don't mean it should fall by a lot, it may just hang in there for a while to let the earnings catch up the market value.
On the other hand, Alibaba.com went public in HK and boosted 169% in IPO. People probably are thinking about tom.com in tech bubble's time.
If you really just think these are again purely tech bubble hypes you probably are not perfectly right. Ask anyone on the street to see if she has a computer at home and ask the same question about 10 years ago, you'll see how computer/internet changed our basic living style.
Anyway, I initiated a position in SVA, a Chinese biotech firm, which is pretty small. It's 20-week EMA is around $4.50 and I got in at $6.07, a bit high but again I mean to hold it for longer, unless it went up too fast like BIDU did.
BIDU shot up as high as $430 before it retreated, I should have sold it this morning instead of yesterday, well but I guess I profited from it so shouldn't complained.
I feel bad about CTRP as if I have hold onto it I'm now making 20%..... If I have use the weekly graph to guide my trade probably I'll hold onto it (or may not). Can't believe similar things happened to CEDC as well.... I'm such a loser.....
Monday, November 5, 2007
BIDU
BIDU made new high in a volatile day. I sold at the open as I'm not sure how credit crunch news will affect the market, so I sold at $403 and locked my profit. As I said, I'll consider buying it back if it retreats some, but that may not happen, we will see.
Still looking for chances to buying into NTES or FMCN, I would prefer FMCN more than NTES though.
LOCM reported earnings after closing today, price dropped after hour. Let's see how it goes tomorrow.
Remember I said the columnist who wrote on Sunday shorting BIDU since $180? No surprise that he is still holding the position. Read a bit in his column and you will find that he likes to refer general investing public as "stupid people". As well, he likes to refer the market as "sustained by stupid people, just how long it can sustain".
There are always people that will never admit they are wrong (on timing) and try to hide their mistake by saying others are stupid. I'm pretty sure BIDU will go up and down along the way. But if BIDU did not go down when you think it should and went up by 140% more, it's pretty obvious that your original decision is wrong. Okay, anyway, I'm tired of talking about this "smartest person".......
Still looking for chances to buying into NTES or FMCN, I would prefer FMCN more than NTES though.
LOCM reported earnings after closing today, price dropped after hour. Let's see how it goes tomorrow.
Remember I said the columnist who wrote on Sunday shorting BIDU since $180? No surprise that he is still holding the position. Read a bit in his column and you will find that he likes to refer general investing public as "stupid people". As well, he likes to refer the market as "sustained by stupid people, just how long it can sustain".
There are always people that will never admit they are wrong (on timing) and try to hide their mistake by saying others are stupid. I'm pretty sure BIDU will go up and down along the way. But if BIDU did not go down when you think it should and went up by 140% more, it's pretty obvious that your original decision is wrong. Okay, anyway, I'm tired of talking about this "smartest person".......
Sunday, November 4, 2007
LOCM
Quick update on my holdings.
I sold LOCM on Friday at $5.24. The stock price broke below the all weekly EMA I use. As well, if I changed to use weekly EMA than daily EMA, the 20-week EMA actually failed to break above the 100-week EMA (there is no 200-week EMA for now). So if I used the weekly EMA to enter the signal, I shouldn't enter into the position at all. I took the 25% loss and move on.
BIDU broke through $400 and closed at $409 on Friday. It went up faster than I thought, I wonder should I take profit. If I take the profit it's primarily due to the speed of its move in such a short term, as well as I have capital loss to use to offset my 18% gain on BIDU. Market will still put more focus on subprime ripple-effect on all financials these days, at the end it may affect the sentiment on BIDU. I guess I would like to take the profit by this week as I anticipate BIDU to retreat and it may retreat to as much as low-$300. I will then buy it back.
Remember I mentioned that on a newspaper a columnist paper-traded and sold short BIDU at $180. This guy is still holding his short position..... sitting on a loss of 127%. I don't know what this guy is thinking. Anyhow, this guy hasn't updated his reason for holding the position. How ridiculous.
I sold LOCM on Friday at $5.24. The stock price broke below the all weekly EMA I use. As well, if I changed to use weekly EMA than daily EMA, the 20-week EMA actually failed to break above the 100-week EMA (there is no 200-week EMA for now). So if I used the weekly EMA to enter the signal, I shouldn't enter into the position at all. I took the 25% loss and move on.
BIDU broke through $400 and closed at $409 on Friday. It went up faster than I thought, I wonder should I take profit. If I take the profit it's primarily due to the speed of its move in such a short term, as well as I have capital loss to use to offset my 18% gain on BIDU. Market will still put more focus on subprime ripple-effect on all financials these days, at the end it may affect the sentiment on BIDU. I guess I would like to take the profit by this week as I anticipate BIDU to retreat and it may retreat to as much as low-$300. I will then buy it back.
Remember I mentioned that on a newspaper a columnist paper-traded and sold short BIDU at $180. This guy is still holding his short position..... sitting on a loss of 127%. I don't know what this guy is thinking. Anyhow, this guy hasn't updated his reason for holding the position. How ridiculous.
Stocks today act like tech bubble in Y2K? Part 3
How can we not talk about China when we talk about asset bubble today?
I haven't really defined what I mean by bubble here, it's now part 3, let me define what I mean by bubble before I continue. You may see my definition is totally different than what other people may define it.
My definition of asset bubble means the asset price is "X" standard deviations above the most optimistic expectations. For the value of X, it is more complicated as it depends on quite a few variables. I'm not going to discuss X in here for now, I will leave that later. In the meantime, just accept my definition and assign a value to X yourself which you think it's insane.
PTR is definitely on the hot spot these days because its market value is now only stayed behind Exxom as the second largest company on earth. So I'll use PTR as the talking point here.
Although it's just behind XOM, but I'm not using XOM here. In fact, I'm using CVX and BP, as their net incomes came close to PTR, serve as a better comparison (Their net incomes are all about $19 billion).
I checked from yahoo finance, both BP and CVX quarterly revenue growth (yoy) are about 4.0%, while PTR is 20.3%, five times higher. Operating margin of BP is merely 9%, CVX is 14% and PTR is 25.6%. Ok, tell me if I'm wrong. That means if their revenue growth continue for a few more years as last year, for each year BP and CVX make $1 revenue, PTR can make more than $1. As well, every $1 more of revenue to BP and CVX, only $0.09 and $0.14 go to net income, while PTR will make $0.256 as net income out of $1 revenue. You also compound the $0.256 to 5 times higher revenue growth, the difference becomes even larger.
Let's now look at the P/E and PEG, PTR's P/E (about 24) is double that of BP or CVX, while PTR's PEG is slightly higher than CVX (1.67 vs 1.42) but lower than BP (2.53). So even PTR is overvalued, it's not crazily overvalued as compare to CVX, it's probably not even overvalued compare to BP.
PTR's current dividend yield is among the lowest, 2.2% for now, while BP is 3.4% and CVX is 2.6%. But wait, let me pull back XOM in here, XOM's current dividend yield is only 1.6%, lower than PTR.
Finally, I want to pull in Mr. Warren Buffett as well. He sold all his stake in PTR and made probably $250 million of profit. But hold on, isn't Mr. Buffett's phliosophy is to buy and hold forever? Why would he sell PTR after holding for about 4 years? I guess other than whatever political reason/conspiracy, I can only guess that it's because he thinks PTR is an asset bubble.
Now you see my definition comes into play. If asset bubble means X standard deviation above the most optimistic expectation, and if my comparison above is at least reasonable, PTR could be overvalued but doesn't look like crazily overvalued. In this case I guess I can only say that Mr. Buffett has a very low X in his formula, if not negative.
So, is China forming an asset bubble? Let me move my discussion to Hong Kong market. HK's currency is linked to US dollar. While US dollar continues to depreciate, HK dollar cannot stay up due to the link. Therefore, it's very hard for HK market to raise interest rate unless they want to remove the link. Therefore, HK has (or at least approaches) to negative real interest. It creates an environment similar to Japanese Yen. Simply, borrow HK dollars cheaply and purchase HK assets, because inflation in HK assets is even higher than the interest you have to pay. And you know HK's currency amount cannot appreciate much in the short term. Yes, it's very similar to the case of Yen carry trade.
So, no wonder HK market up by so much this year because some very smart people know this relationship. My rough guess is, if US dollar does not appreciate, HK market cannot drop by much due to the currency link.
I cannot say if China is a bubble by now, at least use PTR as an example, because I think it doesn't reach the X yet (but should start to be cautious). There are always stocks that are overvalued and undervalued, I cannot conclude the whole market by only one statement.
I haven't really defined what I mean by bubble here, it's now part 3, let me define what I mean by bubble before I continue. You may see my definition is totally different than what other people may define it.
My definition of asset bubble means the asset price is "X" standard deviations above the most optimistic expectations. For the value of X, it is more complicated as it depends on quite a few variables. I'm not going to discuss X in here for now, I will leave that later. In the meantime, just accept my definition and assign a value to X yourself which you think it's insane.
PTR is definitely on the hot spot these days because its market value is now only stayed behind Exxom as the second largest company on earth. So I'll use PTR as the talking point here.
Although it's just behind XOM, but I'm not using XOM here. In fact, I'm using CVX and BP, as their net incomes came close to PTR, serve as a better comparison (Their net incomes are all about $19 billion).
I checked from yahoo finance, both BP and CVX quarterly revenue growth (yoy) are about 4.0%, while PTR is 20.3%, five times higher. Operating margin of BP is merely 9%, CVX is 14% and PTR is 25.6%. Ok, tell me if I'm wrong. That means if their revenue growth continue for a few more years as last year, for each year BP and CVX make $1 revenue, PTR can make more than $1. As well, every $1 more of revenue to BP and CVX, only $0.09 and $0.14 go to net income, while PTR will make $0.256 as net income out of $1 revenue. You also compound the $0.256 to 5 times higher revenue growth, the difference becomes even larger.
Let's now look at the P/E and PEG, PTR's P/E (about 24) is double that of BP or CVX, while PTR's PEG is slightly higher than CVX (1.67 vs 1.42) but lower than BP (2.53). So even PTR is overvalued, it's not crazily overvalued as compare to CVX, it's probably not even overvalued compare to BP.
PTR's current dividend yield is among the lowest, 2.2% for now, while BP is 3.4% and CVX is 2.6%. But wait, let me pull back XOM in here, XOM's current dividend yield is only 1.6%, lower than PTR.
Finally, I want to pull in Mr. Warren Buffett as well. He sold all his stake in PTR and made probably $250 million of profit. But hold on, isn't Mr. Buffett's phliosophy is to buy and hold forever? Why would he sell PTR after holding for about 4 years? I guess other than whatever political reason/conspiracy, I can only guess that it's because he thinks PTR is an asset bubble.
Now you see my definition comes into play. If asset bubble means X standard deviation above the most optimistic expectation, and if my comparison above is at least reasonable, PTR could be overvalued but doesn't look like crazily overvalued. In this case I guess I can only say that Mr. Buffett has a very low X in his formula, if not negative.
So, is China forming an asset bubble? Let me move my discussion to Hong Kong market. HK's currency is linked to US dollar. While US dollar continues to depreciate, HK dollar cannot stay up due to the link. Therefore, it's very hard for HK market to raise interest rate unless they want to remove the link. Therefore, HK has (or at least approaches) to negative real interest. It creates an environment similar to Japanese Yen. Simply, borrow HK dollars cheaply and purchase HK assets, because inflation in HK assets is even higher than the interest you have to pay. And you know HK's currency amount cannot appreciate much in the short term. Yes, it's very similar to the case of Yen carry trade.
So, no wonder HK market up by so much this year because some very smart people know this relationship. My rough guess is, if US dollar does not appreciate, HK market cannot drop by much due to the currency link.
I cannot say if China is a bubble by now, at least use PTR as an example, because I think it doesn't reach the X yet (but should start to be cautious). There are always stocks that are overvalued and undervalued, I cannot conclude the whole market by only one statement.
Thursday, November 1, 2007
Stocks today act like tech bubble in Y2K? Part 2
These days the most popular tech name in Canada I believe is Research In Motion. So I'll check RIMM to see if it deserves to be a bubble at today's price.
RIMM has experienced some negative earnings along the way, so I'll use the gross profit for now for simplicity.
Annual gross profit ending Feb 1999 was $18.6 million, while gross profit ending Feb 2007 is $1.66 billion. Well, it's 89 times. Okay, what about I use net income as measure, not to care that at some point in time net income decreased then going back up. Anyway, I'll show you what I mean.
Annual net income ending Feb 1999 was $6.4 million. Guess what, net income ending Feb 2007 is $631.6 million. 98.7 times, my friend.
RIMM's stock price (in $US) was $1.47 by end of Feb 1999 and $46.87 by end of Feb 2007 (adjusted for all stock splits). So, that is an increased of about 32 times. Hey, even lower than the increase of net income.
With RIMM trading at $122 today, that came to an increase of 83 times from $1.47. So, can I say RIMM is overvalued??? If $1.47 made sense by that time, shouldn't RIMM have gone up by 99 times to $145 by Feb 2007 already???
Okay, maybe I missed something. Earnings per share by Feb 1999 is $0.10. So with an unadjusted price of $8.88, RIMM's P/E back then was 89, quite high. Let's say we think a P/E of 30 should make more sense back then (30 is actually pretty low for a small growth stock), it will make the starting price became $0.50 instead of $1.47. So if we believe $0.50 was more fair by that time, given that net income increased 99 times, as at Feb 2007 RIMM should trade at $49.50. So, the actual price of $46.87 by end of Feb 2007 was not bad.
Now, with RIMM sitting at $122 per share, a bit more than double from Feb 2007. To me, it means if RIMM can show a net income increase by double then I think the price make perfect sense. Anything less than a double is more like a miss to me. Since $46.87 at Feb 2007 makes sense, so at least I will say RIMM was not a tech bubble by that time.
RIMM has experienced some negative earnings along the way, so I'll use the gross profit for now for simplicity.
Annual gross profit ending Feb 1999 was $18.6 million, while gross profit ending Feb 2007 is $1.66 billion. Well, it's 89 times. Okay, what about I use net income as measure, not to care that at some point in time net income decreased then going back up. Anyway, I'll show you what I mean.
Annual net income ending Feb 1999 was $6.4 million. Guess what, net income ending Feb 2007 is $631.6 million. 98.7 times, my friend.
RIMM's stock price (in $US) was $1.47 by end of Feb 1999 and $46.87 by end of Feb 2007 (adjusted for all stock splits). So, that is an increased of about 32 times. Hey, even lower than the increase of net income.
With RIMM trading at $122 today, that came to an increase of 83 times from $1.47. So, can I say RIMM is overvalued??? If $1.47 made sense by that time, shouldn't RIMM have gone up by 99 times to $145 by Feb 2007 already???
Okay, maybe I missed something. Earnings per share by Feb 1999 is $0.10. So with an unadjusted price of $8.88, RIMM's P/E back then was 89, quite high. Let's say we think a P/E of 30 should make more sense back then (30 is actually pretty low for a small growth stock), it will make the starting price became $0.50 instead of $1.47. So if we believe $0.50 was more fair by that time, given that net income increased 99 times, as at Feb 2007 RIMM should trade at $49.50. So, the actual price of $46.87 by end of Feb 2007 was not bad.
Now, with RIMM sitting at $122 per share, a bit more than double from Feb 2007. To me, it means if RIMM can show a net income increase by double then I think the price make perfect sense. Anything less than a double is more like a miss to me. Since $46.87 at Feb 2007 makes sense, so at least I will say RIMM was not a tech bubble by that time.
Stocks today act like tech bubble in Y2K? Part 1
Many articles and news have compared today's market to the tech bubble in about 8 years ago. Well no two markets are exactly the same, they may look alike, but I think it's too easy to come up with such conclusion that they are alike. Let me compare something between today and 8 years ago.
Google did not go public yet in 2000, its net income is roughly $3.5 billion per year in 2007. This kind of net income is like Microsoft in 1997.
In 1997, Microsoft traded between a P/E of 31 to 57. As at end of today, with Google sitting at $703 per share, it's P/E is about 55. Highest price of Microsoft in 1997 was $37.75. You know the peak of tech bubble was in 2000, where Microsoft reached $120 before it came back down (Microsoft splitted 2 to 1 once since then, so the highest now should be $60.). So Google sitting at P/E of 55 is still in Microsoft 1997's range.
Microsoft's net income grew from about $3.44 billion in 1997 to $9.42 billion in 2000, a 2.74 times. Its stock went up from highest to highest 3.2 times. I guess if I say if Google can grow its net income in this speed and its price should go up by 3 times to $2,100 per share ($6,000 billion in market value) sounds crazy to many people, but unless you see that kind of price movement in 3 years a new tech bubble may not be true.
Let's look at this issue in another way. We fast forward from 1997 to today. Microsoft reported annual earnings of $14.1 billion ending June 30, 2007, it's now at $346.7 billion in market value. I know everyone agrees Google can grow faster than Microsoft like China can grow faster than U.S., but still you need time to pick up the difference, which is a 4 times difference in net income.
So if Microsoft producing $14.1 billion net income and is (only) worth $346.7 billion in market value. While Google has (only) $3.5 billion net income and is now worth $219.5 billion in market value. I think people are betting on Google can make up the difference very fast, otherwise, the price of Google seems too high. But unfortunately I don't know if it's too high to worth shorting Google.
Anyway, judging an existing of tech bubble only by comparing Google and Microsoft is not fair.
Google did not go public yet in 2000, its net income is roughly $3.5 billion per year in 2007. This kind of net income is like Microsoft in 1997.
In 1997, Microsoft traded between a P/E of 31 to 57. As at end of today, with Google sitting at $703 per share, it's P/E is about 55. Highest price of Microsoft in 1997 was $37.75. You know the peak of tech bubble was in 2000, where Microsoft reached $120 before it came back down (Microsoft splitted 2 to 1 once since then, so the highest now should be $60.). So Google sitting at P/E of 55 is still in Microsoft 1997's range.
Microsoft's net income grew from about $3.44 billion in 1997 to $9.42 billion in 2000, a 2.74 times. Its stock went up from highest to highest 3.2 times. I guess if I say if Google can grow its net income in this speed and its price should go up by 3 times to $2,100 per share ($6,000 billion in market value) sounds crazy to many people, but unless you see that kind of price movement in 3 years a new tech bubble may not be true.
Let's look at this issue in another way. We fast forward from 1997 to today. Microsoft reported annual earnings of $14.1 billion ending June 30, 2007, it's now at $346.7 billion in market value. I know everyone agrees Google can grow faster than Microsoft like China can grow faster than U.S., but still you need time to pick up the difference, which is a 4 times difference in net income.
So if Microsoft producing $14.1 billion net income and is (only) worth $346.7 billion in market value. While Google has (only) $3.5 billion net income and is now worth $219.5 billion in market value. I think people are betting on Google can make up the difference very fast, otherwise, the price of Google seems too high. But unfortunately I don't know if it's too high to worth shorting Google.
Anyway, judging an existing of tech bubble only by comparing Google and Microsoft is not fair.
Tuesday, October 30, 2007
LOCM
Okay I have a dilemma here. Since I bought LOCM based on daily graph and now I want to revise my method to use weekly graph, therefore my entry price of $6.85 looked very expensive. Given that LOCM now sitting at $5.66, i'm down by almost 20%. If I got into the post based on weekly graph, guess I would only have got in last week at around $6.00.
I'm near a technical bottom (I think), if it holds around $5.50 I think there is a chance that it will go up from there, but no guarantee. I want to give the post a bit more time, if it doesn't hold $5.50 I must sell.
EFUT gave back a lot from yesterday. Well yesterday's volume did not give too much power, but still good. A back-to-normal-volume pull back may not be bad. We'll see.
The Fed is due to announce fund rate tomorrow. A cut is not guarantee. Even a cut is in I don't think we can expect a lot of upside based on the cut.
I'm near a technical bottom (I think), if it holds around $5.50 I think there is a chance that it will go up from there, but no guarantee. I want to give the post a bit more time, if it doesn't hold $5.50 I must sell.
EFUT gave back a lot from yesterday. Well yesterday's volume did not give too much power, but still good. A back-to-normal-volume pull back may not be bad. We'll see.
The Fed is due to announce fund rate tomorrow. A cut is not guarantee. Even a cut is in I don't think we can expect a lot of upside based on the cut.
Monday, October 29, 2007
EFUT and CEDC
I sold CEDC at $49.62, took a loss of about 2%. Now I can have some spare money for the new weekly-graph method.
EFUT finally moved today, suddenly I came all the way back from a loss of more than 20% to breakeven. Let's see what will happen tomorrow. EFUT is a small company that a little money can move it very quickly.
Remember I said I missed EDU at $61.75 at around the beginning of the month? It's now $90.68..... Almost a 50% return just missed in front of my eyes... my god.....
I'm loooking at FMCN now. It made new high today. Just about a month ago they reclaimed compliance with listing on Nasdaq, the stock made new high by that time with significant weekly volume. I hope it will pull back some and I can buy a little. But prices around $53 could be a pretty strong support, though the 20-week EMA is now about $49.
Finally, LOCM is not doing anything here.....
EFUT finally moved today, suddenly I came all the way back from a loss of more than 20% to breakeven. Let's see what will happen tomorrow. EFUT is a small company that a little money can move it very quickly.
Remember I said I missed EDU at $61.75 at around the beginning of the month? It's now $90.68..... Almost a 50% return just missed in front of my eyes... my god.....
I'm loooking at FMCN now. It made new high today. Just about a month ago they reclaimed compliance with listing on Nasdaq, the stock made new high by that time with significant weekly volume. I hope it will pull back some and I can buy a little. But prices around $53 could be a pretty strong support, though the 20-week EMA is now about $49.
Finally, LOCM is not doing anything here.....
Sunday, October 28, 2007
AMZN
These days, technology stocks come back as the talking point. Thanks to the lunatic price appreciation from GOOG, RIMM, AAPL, AMZN, BIDU, even newcomers like VMW. I wrote about GOOG, RIMM, AAPL and BIDU already. Want to use my new thinking of graph on AMZN this time.
Using the 4 weekly EMAs (20, 50, 100 and 200) as my new tool, let's went back to mid-April 2007. AMZN reported earnings there, it broke out significant from somewhere around $45 to over $60 in that week with a weekly volume of about 250 million shares traded, significantly higher than the usual volume of around 30 million shares a week.
Note that before that break out, the 4 EMAs were so tied up, after that break out the 4 EMAs of course started to diverge, with the shorter-time-EMA moved up faster. The next 2 to 3 weeks AMZN traded with volume closer to usual level, as well, less volatile, it traded within $60 to $65, a pretty small range of a famous technology stock.
AMZN by that time fulfilled many criteria that I would look for:
1. price break out with good earning expectation and much larger volume than usual
2. the price in the following week or so did not come back down to pre-break out level
3. volume went back to close to usual level and traded within much narrower range
4. all 4 EMAs became one higher than each other, while the 20-week EMA was not significantly higher than the 100 or 200-week EMAs
Point 1 is important because that means the price break out was appreciated by majority of investors. Point 2 is important because that means majority investors did not believe AMZN has much chance to go lower, so if they didn't get in now they probably would miss the boat. Point 3 is important because it means even after daytraders left the stock price did not fall, meaning there were really some serious longer term investors buying, the price appreciation was not just a hype. Point 4 is important because it means the stock still has a way before it becomes overbought.
With all these qualified criteria the stock continued to march up from around $63 all the way to a touch of $100. Note that along the way a significant weekly upward movement usually came with a higher than usual volume. A somewhat 50% return over about 5 months is not bad.
Okay now we turned the clock to last week, AMZN reported good earnings again but some experts said they worried a bit about AMZN's profit margin may shrink. It went up quite a lot before the earnings but then it dropped 12% after the earning report. No matter how hard it fell on the earning date it didn't go below the 20-week EMA. With the 20-week EMA is sitting at about $80 and the 200-week EMA sitting at around $50, I think this 20/200 ratio is still reasonable, so give AMZN about a week or two and if it didn't go below the 20-week EMA, I think price near the 20-week EMA is a good entry point for a longer term ride.
Just my guess.
Using the 4 weekly EMAs (20, 50, 100 and 200) as my new tool, let's went back to mid-April 2007. AMZN reported earnings there, it broke out significant from somewhere around $45 to over $60 in that week with a weekly volume of about 250 million shares traded, significantly higher than the usual volume of around 30 million shares a week.
Note that before that break out, the 4 EMAs were so tied up, after that break out the 4 EMAs of course started to diverge, with the shorter-time-EMA moved up faster. The next 2 to 3 weeks AMZN traded with volume closer to usual level, as well, less volatile, it traded within $60 to $65, a pretty small range of a famous technology stock.
AMZN by that time fulfilled many criteria that I would look for:
1. price break out with good earning expectation and much larger volume than usual
2. the price in the following week or so did not come back down to pre-break out level
3. volume went back to close to usual level and traded within much narrower range
4. all 4 EMAs became one higher than each other, while the 20-week EMA was not significantly higher than the 100 or 200-week EMAs
Point 1 is important because that means the price break out was appreciated by majority of investors. Point 2 is important because that means majority investors did not believe AMZN has much chance to go lower, so if they didn't get in now they probably would miss the boat. Point 3 is important because it means even after daytraders left the stock price did not fall, meaning there were really some serious longer term investors buying, the price appreciation was not just a hype. Point 4 is important because it means the stock still has a way before it becomes overbought.
With all these qualified criteria the stock continued to march up from around $63 all the way to a touch of $100. Note that along the way a significant weekly upward movement usually came with a higher than usual volume. A somewhat 50% return over about 5 months is not bad.
Okay now we turned the clock to last week, AMZN reported good earnings again but some experts said they worried a bit about AMZN's profit margin may shrink. It went up quite a lot before the earnings but then it dropped 12% after the earning report. No matter how hard it fell on the earning date it didn't go below the 20-week EMA. With the 20-week EMA is sitting at about $80 and the 200-week EMA sitting at around $50, I think this 20/200 ratio is still reasonable, so give AMZN about a week or two and if it didn't go below the 20-week EMA, I think price near the 20-week EMA is a good entry point for a longer term ride.
Just my guess.
TASR sold
TASR did not expose to the up side after upbeating earnings, as well, it went down after they announced some follow up orders on Thursday. The action didn't look very good, since I said I should try to change my strategy from using daily graph to weekly graph, it's a good time to sell and keep some cash for further use. I sold at $16.92, right at the opening of Friday, as given the action on Wed and Thurs and Friday pre-market, I had the feeling that TASR would again open up a bit in the morning and then would started to decline in 15 minutes. It's a total of 9%, not as good as I expected.
The other 3 positions varied. CEDC got to as low as $43ish, went back up to $49 for now, since again I didn't get in at a good price if I change to use weekly graph, I probably will sell on Monday to limit my loss (I bought at $50.05).
I have a feeling that EFUT may blast later, but there's no guarantee. It filled the gap from about a month ago and it stayed above the 20-week EMA, I want to hold a bit longer and see.
LOCM is in fact disappointing. It didn't move up with the market on Friday, pretty weak. As well I used the daily graph to time the entry but not weekly. Otherwise I may only buy around $6 instead of $6.92. I'll give it a few more days, whenever it stays under the 20-week EMA for the whole day and doesn't come back up, I'll cut it.
Finally a longer term position BIDU. Moving up on Friday. Although I said I'll keep it for long term, but if it moves up too quickly I'll still move out and wait for opportunity to move back in. After all, long term doesn't just mean buy and hold and do nothing to me.
The other 3 positions varied. CEDC got to as low as $43ish, went back up to $49 for now, since again I didn't get in at a good price if I change to use weekly graph, I probably will sell on Monday to limit my loss (I bought at $50.05).
I have a feeling that EFUT may blast later, but there's no guarantee. It filled the gap from about a month ago and it stayed above the 20-week EMA, I want to hold a bit longer and see.
LOCM is in fact disappointing. It didn't move up with the market on Friday, pretty weak. As well I used the daily graph to time the entry but not weekly. Otherwise I may only buy around $6 instead of $6.92. I'll give it a few more days, whenever it stays under the 20-week EMA for the whole day and doesn't come back up, I'll cut it.
Finally a longer term position BIDU. Moving up on Friday. Although I said I'll keep it for long term, but if it moves up too quickly I'll still move out and wait for opportunity to move back in. After all, long term doesn't just mean buy and hold and do nothing to me.
Wednesday, October 24, 2007
TASR and BIDU
TASR reported good earnings today but fluctuated roughly with the market. It started with an upward movement, then during the middle of the conference it started to drop with the market, eventually it recovered most of the loss, what a day.
The market is volatile as well. Dropped by a lot due to bad earnings reports from AMZN and MER. All financial stocks dropped by a lot, many made yearly new lows. In the meantime I'll avoid any financial stocks for now, as I'm holding closed-end funds and mutual funds that hold financial stocks already.
I started a position in BIDU at $337. BIDU is going to report earnings tomorrow, good or bad, I'm keeping BIDU if it drops. Yes, I already anticipated even if it drops, I'll hold onto it. If I have more reserve later and if it drops after earnings report, I may add more to the position. But I think the probability of up or down from here is like 50/50 to me, so I think it's okay to use some money to start a small position. After all, if I give BIDU a few years and if it can continue to lead in market share in China, I don't see a reason why it cannot grow to as big as half of a Google (which will mean $100 billion, 10 times from now) in let's say 5 years. So yes, I'm anticipating to invest in BIDU for long term.
If anyone reads one of the Chinese newspaper here you'll see someone shows a paper portfolio once every Sunday. Currently in that portfolio the columnist is shorted BIDU since $180. I don't know when did he short in his paper portfolio, but holding the short position of BIDU all the way to as high as $359 is kind of silly. Assuming shorting 100 shares it is now sitting at a loss of $15,600, or percentage-wise, a loss of 87%. I don't know how professional this columnist is, but no way a trader would like to keep a losing position for so long to see a 87% loss.
Going back to my long term idea. China definitely is a hot spot, it may encounter stock and real estate bubble and the burst. But if the market is that big it is that big. For example, for longer term hold I'll pick LFC rather than CHL, as CHL is already sitting at a market cap of close to $400 billion, how fast can it go from here? On the other hand, LFC is still below $100 billion, and it is the biggest insurance company in China. With the assistance of the government (as no government would like to see insurance companies collapse), LFC can have a long way to go from here. A triple to worth $300 billion in 7 years will not surprise me.
So I think the strategy to China should be, hold a few bigger names (but still not very big) and bet a smaller amount on upcoming mid-cap as "satellite" portfolio. Let me think of some names first.
The market is volatile as well. Dropped by a lot due to bad earnings reports from AMZN and MER. All financial stocks dropped by a lot, many made yearly new lows. In the meantime I'll avoid any financial stocks for now, as I'm holding closed-end funds and mutual funds that hold financial stocks already.
I started a position in BIDU at $337. BIDU is going to report earnings tomorrow, good or bad, I'm keeping BIDU if it drops. Yes, I already anticipated even if it drops, I'll hold onto it. If I have more reserve later and if it drops after earnings report, I may add more to the position. But I think the probability of up or down from here is like 50/50 to me, so I think it's okay to use some money to start a small position. After all, if I give BIDU a few years and if it can continue to lead in market share in China, I don't see a reason why it cannot grow to as big as half of a Google (which will mean $100 billion, 10 times from now) in let's say 5 years. So yes, I'm anticipating to invest in BIDU for long term.
If anyone reads one of the Chinese newspaper here you'll see someone shows a paper portfolio once every Sunday. Currently in that portfolio the columnist is shorted BIDU since $180. I don't know when did he short in his paper portfolio, but holding the short position of BIDU all the way to as high as $359 is kind of silly. Assuming shorting 100 shares it is now sitting at a loss of $15,600, or percentage-wise, a loss of 87%. I don't know how professional this columnist is, but no way a trader would like to keep a losing position for so long to see a 87% loss.
Going back to my long term idea. China definitely is a hot spot, it may encounter stock and real estate bubble and the burst. But if the market is that big it is that big. For example, for longer term hold I'll pick LFC rather than CHL, as CHL is already sitting at a market cap of close to $400 billion, how fast can it go from here? On the other hand, LFC is still below $100 billion, and it is the biggest insurance company in China. With the assistance of the government (as no government would like to see insurance companies collapse), LFC can have a long way to go from here. A triple to worth $300 billion in 7 years will not surprise me.
So I think the strategy to China should be, hold a few bigger names (but still not very big) and bet a smaller amount on upcoming mid-cap as "satellite" portfolio. Let me think of some names first.
Tuesday, October 23, 2007
TASR reporting tomorrow morning
Okay, TASR is reporting tomorrow morning, let me pull out the chart and study again.
Using weekly chart, the weekly closing price never dipped below $14 since it surpassed $14 back in July. It actually tested $14 several times (that is, several weeks). Even last time they reported earnings and it headed back down all the way from $19 it stopped going down below $14. After the consecutive dips last week, it headed back up from as low as $15 to $17.24 in two days. After hour is up a bit as well but since volume is not high so I don't pay attention to it.
One thing worths notice is AMZN reported as well and it dropped $10 after hours with very high volume. The market may sell-off a bit due to AMZN, I hope it does not affect TASR by much.
Since TASR is still a small firm so earnings is not easy to predict and trading must be volatile. Anyway only by knowing what happens tomorrow can I have a better idea of what is next.
Using weekly chart, the weekly closing price never dipped below $14 since it surpassed $14 back in July. It actually tested $14 several times (that is, several weeks). Even last time they reported earnings and it headed back down all the way from $19 it stopped going down below $14. After the consecutive dips last week, it headed back up from as low as $15 to $17.24 in two days. After hour is up a bit as well but since volume is not high so I don't pay attention to it.
One thing worths notice is AMZN reported as well and it dropped $10 after hours with very high volume. The market may sell-off a bit due to AMZN, I hope it does not affect TASR by much.
Since TASR is still a small firm so earnings is not easy to predict and trading must be volatile. Anyway only by knowing what happens tomorrow can I have a better idea of what is next.
Monday, October 22, 2007
EMA statistics - I invent it myself
I used S&P 500 in my analysis of exponential moving average. I took all the history of the S&P 500 daily index numbers (adjusted closing price from Oct 15, 1950 up to Dec 15, 2006) as my data and calculated the 20-day EMA and 200-day EMA.
I found that about 83% of the time, the ratio of the 2 EMAs is between -5% to +10% (ratio is 20-day EMA divided by 200-day EMA, calculated everyday). Over these 56 years of data, there were definitely some bull and bear markets including the boom and bust of tech bubble.
But even included those crazy trading days the ratio is rarely in the range of above 10% or below -5%. In fact, the time that the ratio is above 15% is merely 0.01%. On the other hand, the time that the ratio is below -15% is 2.73%.
You may think I want to tell you the conclusion is: when the 2 EMAs diverge for more than 15% the index should reverse the trend so the 2 EMAs will get close to each other again. If you think so you are only half right.
Base on the statistics definitely the 2 EMAs cannot sustain being far away for too long, but it does not necessarily mean the trend has to reverse from up to down or vice versa. The index just needs to stay flat for enough time, such that the 200-day EMA will catch up with the flat 20-day EMA. After the 200-day catches up with the 20-day, the same trend actually can continue.
Let me try using this idea on China and Hong Kong markets these days. Many people think they went up too fast and too much that they should drop. So, their 2 EMAs maybe diverging too much and not sustainable, but they may not drop back much as some people expect.
But at least I think this EMA statistics still give people some good idea that how fast can an index go. If I see S&P 500's EMAs ratio is sitting at above 15%, I can hardly believe it is not overbought.
I found that about 83% of the time, the ratio of the 2 EMAs is between -5% to +10% (ratio is 20-day EMA divided by 200-day EMA, calculated everyday). Over these 56 years of data, there were definitely some bull and bear markets including the boom and bust of tech bubble.
But even included those crazy trading days the ratio is rarely in the range of above 10% or below -5%. In fact, the time that the ratio is above 15% is merely 0.01%. On the other hand, the time that the ratio is below -15% is 2.73%.
You may think I want to tell you the conclusion is: when the 2 EMAs diverge for more than 15% the index should reverse the trend so the 2 EMAs will get close to each other again. If you think so you are only half right.
Base on the statistics definitely the 2 EMAs cannot sustain being far away for too long, but it does not necessarily mean the trend has to reverse from up to down or vice versa. The index just needs to stay flat for enough time, such that the 200-day EMA will catch up with the flat 20-day EMA. After the 200-day catches up with the 20-day, the same trend actually can continue.
Let me try using this idea on China and Hong Kong markets these days. Many people think they went up too fast and too much that they should drop. So, their 2 EMAs maybe diverging too much and not sustainable, but they may not drop back much as some people expect.
But at least I think this EMA statistics still give people some good idea that how fast can an index go. If I see S&P 500's EMAs ratio is sitting at above 15%, I can hardly believe it is not overbought.
Sunday, October 21, 2007
Market going from here
Friday definitely was not a good day. SPY and DIA challenging the 20-week EMA, IWM was now a bit below the 20-week EMA, only QQQQ is still ahead of the 20-week EMA. They all fell with large volume. I think in the meantime trend is turning a bit negative based on the following:
1. only stocks with very very good earnings expectation raised went up, all the rest fell
2. just a little bad news can create a large drop with hugh volume, meaning people rush to the exit
3. some days ago when investors saw bad statistics, market did not go down as they believe bad news can trigger the FED to reduce rate further, but now it looks like investor believe that the problem could be bigger than they originally think that now even FED reduces the rate may not help
4. market did receive bad news from the credit market when big banks need to report big write offs
So in the meantime the market is in the mode of "drop with bad news with hugh volume", meaning that this drop will not end in a short term of period.
Under this kind of circumstances, stay on the sideline is a very good strategy. Unless you know a company really well that you believe your fundamental analysis and find a good entry price.
1. only stocks with very very good earnings expectation raised went up, all the rest fell
2. just a little bad news can create a large drop with hugh volume, meaning people rush to the exit
3. some days ago when investors saw bad statistics, market did not go down as they believe bad news can trigger the FED to reduce rate further, but now it looks like investor believe that the problem could be bigger than they originally think that now even FED reduces the rate may not help
4. market did receive bad news from the credit market when big banks need to report big write offs
So in the meantime the market is in the mode of "drop with bad news with hugh volume", meaning that this drop will not end in a short term of period.
Under this kind of circumstances, stay on the sideline is a very good strategy. Unless you know a company really well that you believe your fundamental analysis and find a good entry price.
Big cap = good investment?
Pull up the historical prices of Wal-Mart (WMT), let's say from 5 years ago. I just picked the price as of Oct 21, 2002, it was $56.40. Even I use the current dividend of $0.88 per annum, to divide by the $56.40, I could only get 1.6% dividend yield. So a 5-year average dividend yield out of $56.40 I assume it is about 1%.
Friday's closing price is $44.98, it means a 5-year annualized return of holding WMT is -4.4%. Assume you earn the 1% dividend each year it means you lose 3.4% per annum. If you are a Canadian investor, very sorry. US dollar depreciated from about $1.5682 Cdn as of Oct 21, 2002 to $0.9637 Cdn as of Oct 19, 2007. Just the currency you lost 9.3% per annum. Therefore, if you exchanged your Canadian dollar on Oct 21, 2002 to buy one set of WMT and sold on Oct 19, 2007 and exchanged the money back to Canadian dollar, you lost 12.7% per annum over the last 5 years. A compounded total loss of 49%. About a half.
Well I'm not sure if you hold WMT for longer period you eventually can get back to breakeven, but I guess I am a normal human being that I can only live that long. How many 5 years do I have???
In a case that you invest in a big cap over a wrong period of time, you can still lose about half of your money in 5 years. You now see big cap is not a sure win.
Friday's closing price is $44.98, it means a 5-year annualized return of holding WMT is -4.4%. Assume you earn the 1% dividend each year it means you lose 3.4% per annum. If you are a Canadian investor, very sorry. US dollar depreciated from about $1.5682 Cdn as of Oct 21, 2002 to $0.9637 Cdn as of Oct 19, 2007. Just the currency you lost 9.3% per annum. Therefore, if you exchanged your Canadian dollar on Oct 21, 2002 to buy one set of WMT and sold on Oct 19, 2007 and exchanged the money back to Canadian dollar, you lost 12.7% per annum over the last 5 years. A compounded total loss of 49%. About a half.
Well I'm not sure if you hold WMT for longer period you eventually can get back to breakeven, but I guess I am a normal human being that I can only live that long. How many 5 years do I have???
In a case that you invest in a big cap over a wrong period of time, you can still lose about half of your money in 5 years. You now see big cap is not a sure win.
Black Friday (Stock crash 20th anniversary)
It is so boring to talk about the stock crash 20 years ago (the Black Monday), so I'll skip it. The only thing I want to say is, it's good to learn from history. But what had happened 20 years ago can hardly make me to believe there is any meaningful impact on Friday's drop.
Maybe I was wrong just using daily graph, I'll now start to change to use with weekly graph. I was just thinking should I keep 20-day, 50-day, 100-day and 200-day, or change to use 20-week, 50-week, 100-week and 200-week. Anyway, I think I need to try with other signaling technique to help it out.
I still think my way of looking at the graph make sense, it's just that daily graph may provide too many buy-in signals but less firm signals. While using weekly graph may provide less signal but more firm signals. After all, more trades don't mean better return. If less trade can provide better return I should try it.
So I tried using weekly graph for the 4 positions I have. After changing to weekly graph, I got some different messages.
TASR, the weekly priced candlestick broke through all 4 weekly EMA with higher volume by May to July 2007. Currently we have all 4 weekly EMA one higher than another, the preferred graph pattern I look for. I did not enter too badly at $15.30, but not very good as well. The 20-week EMA is around $14.50 for now, will be the first support.
CEDC, I think a good entry point is anyway near the 20-week EMA line, so in this case I entered this one badly at $50.05, as by the time I bought the 20-week EMA was about $42. In the meantime the first support is still around $42, so if I don't cut my loss now I may see a loss of more than 15%.
LOCM, my half trend following my speculated position. It doesn't even have a 200-week EMA. In the meantime it is holding right above the 100-week EMA. The 20-week and 50-week are below the 100-week but coming up. I am expecting it to take baby step to go up, just given the current market sentiment, the chance of sparkling up is not very high.
Finally EFUT, it's a total speculated position. It only has 20-week and 50-week EMAs. The 20-week is currently sitting at around $17.50. If I don't cut my loss at 20% now I'm risking another 10% to test that. I want to test that now than later. At least I'm not very old, I still have time to earn those money back. In the meantime proving myself right or wrong is important.
So you see, I hold onto all 4 positions, which may prove very stupid. But I want to test my way of thinking sooner than later. Good luck to me.
Maybe I was wrong just using daily graph, I'll now start to change to use with weekly graph. I was just thinking should I keep 20-day, 50-day, 100-day and 200-day, or change to use 20-week, 50-week, 100-week and 200-week. Anyway, I think I need to try with other signaling technique to help it out.
I still think my way of looking at the graph make sense, it's just that daily graph may provide too many buy-in signals but less firm signals. While using weekly graph may provide less signal but more firm signals. After all, more trades don't mean better return. If less trade can provide better return I should try it.
So I tried using weekly graph for the 4 positions I have. After changing to weekly graph, I got some different messages.
TASR, the weekly priced candlestick broke through all 4 weekly EMA with higher volume by May to July 2007. Currently we have all 4 weekly EMA one higher than another, the preferred graph pattern I look for. I did not enter too badly at $15.30, but not very good as well. The 20-week EMA is around $14.50 for now, will be the first support.
CEDC, I think a good entry point is anyway near the 20-week EMA line, so in this case I entered this one badly at $50.05, as by the time I bought the 20-week EMA was about $42. In the meantime the first support is still around $42, so if I don't cut my loss now I may see a loss of more than 15%.
LOCM, my half trend following my speculated position. It doesn't even have a 200-week EMA. In the meantime it is holding right above the 100-week EMA. The 20-week and 50-week are below the 100-week but coming up. I am expecting it to take baby step to go up, just given the current market sentiment, the chance of sparkling up is not very high.
Finally EFUT, it's a total speculated position. It only has 20-week and 50-week EMAs. The 20-week is currently sitting at around $17.50. If I don't cut my loss at 20% now I'm risking another 10% to test that. I want to test that now than later. At least I'm not very old, I still have time to earn those money back. In the meantime proving myself right or wrong is important.
So you see, I hold onto all 4 positions, which may prove very stupid. But I want to test my way of thinking sooner than later. Good luck to me.
Thursday, October 18, 2007
Google reported earnings
Market continued to be weak but holding in tight range. The major indices either challenged or dipped below the 20-day EMA, how market reacts to very strong stock like Google's earning tomorrow will be very critical. In the meantime I still hold my view that diverging action maybe seen, that is, very strong stocks stay strong and any stock which is not very strong are all consider weak and stay under pressure (unless it reports a very good earning).
All my 4 positions are disappointed and failed to recover with the market. Since I don't think my 4 holdings are consider very strong, if market does not perform well I may trim my positions, but not guarantee.
Note that a few financial stocks already made new low, that is, even lower than the dip in mid-August, definitely not a good sign.
One stock that catches my eye (again after a long time) is NTES. the graph starts to looking good. In the last few days it showed a strong breakout of all 4 moving averages with high volume. Retreating back a bit to at least close to the 20-day EMA I will consider go for it.
All my 4 positions are disappointed and failed to recover with the market. Since I don't think my 4 holdings are consider very strong, if market does not perform well I may trim my positions, but not guarantee.
Note that a few financial stocks already made new low, that is, even lower than the dip in mid-August, definitely not a good sign.
One stock that catches my eye (again after a long time) is NTES. the graph starts to looking good. In the last few days it showed a strong breakout of all 4 moving averages with high volume. Retreating back a bit to at least close to the 20-day EMA I will consider go for it.
Wednesday, October 17, 2007
EBAY
TASR continued to show weakness..... dipped below 20-day EMA, though not with high volume but it's still a red flag. I still believe the 50-day EMA (currently about $15.90) should show some support, we'll see.
Both CEDC and EFUT they went up in the opening but eventually dragged down by the market. At least they are still in the shape I can consider holding.
LOCM's pattern today is similar to CEDC, but a bit better. Looking to see it improves day by day.
EBAY just reported earnings, beat expectation. Went up by $2, and volume mainly came from the last 15 minutes. Well there's always someone knows something earlier than others, can't do anything about it. After market went up but eventually came back down. We'll see tomorrow morning.
Market was a bit diverge today, Nasdaq went up in the morning due to good reports by Intel and Yahoo, went all the way back down in the afternoon, regained all the points by the end of the day. Intel and Yahoo managed to post an up-day, while IBM got pushed down more in the last 15 minutes (with large volume). It looks to me under this kind of market condition:
1. People are having diverge anticipations, not sure market as a whole should go up or down
2. Strong stocks probably can continue to be strong, while weak stocks could be pretty weak, so watch out on any weak stock, specially stocks that miss expectation while reporting
Have a question before I close here. What has happened to PTR today that worths another $50 billion in market cap???
Both CEDC and EFUT they went up in the opening but eventually dragged down by the market. At least they are still in the shape I can consider holding.
LOCM's pattern today is similar to CEDC, but a bit better. Looking to see it improves day by day.
EBAY just reported earnings, beat expectation. Went up by $2, and volume mainly came from the last 15 minutes. Well there's always someone knows something earlier than others, can't do anything about it. After market went up but eventually came back down. We'll see tomorrow morning.
Market was a bit diverge today, Nasdaq went up in the morning due to good reports by Intel and Yahoo, went all the way back down in the afternoon, regained all the points by the end of the day. Intel and Yahoo managed to post an up-day, while IBM got pushed down more in the last 15 minutes (with large volume). It looks to me under this kind of market condition:
1. People are having diverge anticipations, not sure market as a whole should go up or down
2. Strong stocks probably can continue to be strong, while weak stocks could be pretty weak, so watch out on any weak stock, specially stocks that miss expectation while reporting
Have a question before I close here. What has happened to PTR today that worths another $50 billion in market cap???
Tuesday, October 16, 2007
Tech earnings sound good after market today
Intel, IBM and Yahoo reported their earnings after market today. IBM dropped a bit after market but Intel and Yahoo went up. Well how they are being traded tomorrow will be quite informative. If they see downward pressure more than upward definitely is not good. I would say, stocks go up with good news is only good, not great. Well, better than going down....
TASR dropped relatively more than the market with lower than normal volume and stayed above 20-day EMA. Some people said it's due to option expiry this Friday and some managers are playing game on it. Well, today's action sure is not good, but a stock cannot always go up. I'm closely watching.
CEDC brought me good news, although it retreated a bit lately, at least it's now back above the 20-day EMA.
Both LOCM and EFUT still lagged with low volume. Nothing to say for now but will keep a close look at them, specially EFUT.
One name I really want to mention here is ERIC (Ericsson), it dived 23.5% today. It broke through all 4 EMA I use and it made a new 1-year low due to bad earnings. I want to mention it because just right before today, its graph looked pretty good. All 4 EMA were moving to the direction that can generate a buy to me. It taught me a lesson that do not bet right before earnings report even the graph is going that direction, let the earnings report confirm the trend first.
Well but what if I already own the stock? A bad earning report sure can break the trend suddenly and creates the gap risk I mentioned before. I think in this case you either sell before the earnings report or purchase an out-of-money put option. The put option should at least heal part of your pain.
TASR dropped relatively more than the market with lower than normal volume and stayed above 20-day EMA. Some people said it's due to option expiry this Friday and some managers are playing game on it. Well, today's action sure is not good, but a stock cannot always go up. I'm closely watching.
CEDC brought me good news, although it retreated a bit lately, at least it's now back above the 20-day EMA.
Both LOCM and EFUT still lagged with low volume. Nothing to say for now but will keep a close look at them, specially EFUT.
One name I really want to mention here is ERIC (Ericsson), it dived 23.5% today. It broke through all 4 EMA I use and it made a new 1-year low due to bad earnings. I want to mention it because just right before today, its graph looked pretty good. All 4 EMA were moving to the direction that can generate a buy to me. It taught me a lesson that do not bet right before earnings report even the graph is going that direction, let the earnings report confirm the trend first.
Well but what if I already own the stock? A bad earning report sure can break the trend suddenly and creates the gap risk I mentioned before. I think in this case you either sell before the earnings report or purchase an out-of-money put option. The put option should at least heal part of your pain.
Monday, October 15, 2007
Update on Oct 15
Two things worth noting today.
1. SEC amended the rule of nake shorting. My understanding is if anyone is nake shorting for too long and not delivering is consider as illegal. I hope I interpret that correctly......
2. 3 major banks in US formed a rescue fund to help restoring global credit market. It sounds like they form a fund to purchase bad debt they made.....
With Citigroup reported $3b of loss in mortgage-back, major indices dropped since the opening and didn't come back. The question many people are probably thinking, is this a start or just 1-day?
I checked the SPY, QQQQ, DIA and IWM, the 4 ETFs representing the 4 indices, they all tested the 20-day EMA, so far they all hold above, but it worths to keep an eye on it specially when big firms report bad earnings. We'll see.
My 4 stocks of course did not do very well, with EFUT again testing the 200-day EMA (the highest one). With TASR and CEDC went down again, but not with significant volume. Especially TASR is still above all 4 EMAs I use.
One good thing is LOCM held pretty well, it indeed went up in the afternoon. In the mass selloff day and it can hold on to its gain it's not easy.
1. SEC amended the rule of nake shorting. My understanding is if anyone is nake shorting for too long and not delivering is consider as illegal. I hope I interpret that correctly......
2. 3 major banks in US formed a rescue fund to help restoring global credit market. It sounds like they form a fund to purchase bad debt they made.....
With Citigroup reported $3b of loss in mortgage-back, major indices dropped since the opening and didn't come back. The question many people are probably thinking, is this a start or just 1-day?
I checked the SPY, QQQQ, DIA and IWM, the 4 ETFs representing the 4 indices, they all tested the 20-day EMA, so far they all hold above, but it worths to keep an eye on it specially when big firms report bad earnings. We'll see.
My 4 stocks of course did not do very well, with EFUT again testing the 200-day EMA (the highest one). With TASR and CEDC went down again, but not with significant volume. Especially TASR is still above all 4 EMAs I use.
One good thing is LOCM held pretty well, it indeed went up in the afternoon. In the mass selloff day and it can hold on to its gain it's not easy.
Sunday, October 14, 2007
Behavior finance, risk and diversification
Diversification is an old story. Anyone wants to know what is diversification should read a textbook but not my blog.
Risk is a bit different. Many people define risk differently. I want to make things simple and straight forward. Risk should define as: given a limited period of time, the chance that you cannot recover to breakeven. This can range from a heteroscedastic random variable to a more normal random variable. Sorry I can't really tell you a correct answer.
Behavior finance studies the rationale (and irrationale) of how people make financial decisions. A very practical idea.
I want to give an idea combining all 3.
I trade stocks more than buy-and-hold. So if a stock drops by certain %, I rather close my position and save the money for the next opportunity (I have put aside some other savings for investment as well). To me, the biggest risk to me (that will make me sleep worse) is, the gap risk.
A stock may gap up or down due to news. The problem is, if I'm long and it gaps down by so much that surpass my cut-loss point, I feel so hesitated. You know, if it gradually drops to the cut-loss point I'm okay, but if it gaps down and bypass the cut-loss point I will feel so bad because I don't have the chance to cut loss at the point I set. But if I don't cut it I may lose more. If you had the same experience I think you will understand.
Therefore, here you come diversification. Since I don't know which stock may gap at any time, bet on more stocks at least will reduce the pain if any one stock gaps. So you see, diversification is very powerful, it helps to reduce your worrisome and make you sleep well.
Risk is a bit different. Many people define risk differently. I want to make things simple and straight forward. Risk should define as: given a limited period of time, the chance that you cannot recover to breakeven. This can range from a heteroscedastic random variable to a more normal random variable. Sorry I can't really tell you a correct answer.
Behavior finance studies the rationale (and irrationale) of how people make financial decisions. A very practical idea.
I want to give an idea combining all 3.
I trade stocks more than buy-and-hold. So if a stock drops by certain %, I rather close my position and save the money for the next opportunity (I have put aside some other savings for investment as well). To me, the biggest risk to me (that will make me sleep worse) is, the gap risk.
A stock may gap up or down due to news. The problem is, if I'm long and it gaps down by so much that surpass my cut-loss point, I feel so hesitated. You know, if it gradually drops to the cut-loss point I'm okay, but if it gaps down and bypass the cut-loss point I will feel so bad because I don't have the chance to cut loss at the point I set. But if I don't cut it I may lose more. If you had the same experience I think you will understand.
Therefore, here you come diversification. Since I don't know which stock may gap at any time, bet on more stocks at least will reduce the pain if any one stock gaps. So you see, diversification is very powerful, it helps to reduce your worrisome and make you sleep well.
Cut loss but let the profit runs
Anyone who doesn't just buy and hold probably heard this statement many times. Many people may also think this statement probably is easy to say than to do. We are human, it is normal.
To make this statement works the best you need to act more like a computer program than a human. I'm not here to tell you how to do it, I actually want to talk about how a person may see this statement over a decision-making cycle.
If you are kind of a Warren Buffett fan, you probably know a company so well that you feel like you are part of the company. Yes, I mean you need to fall in love with the company, otherwise, you won't spend much time in analyzing the company. So, if the stock drops, you probably will buy more, but not cutting the loss. It's because if you buy at a certain price that means you believe this company worth that price, so if it drops more it just means the stock is more undervalued, so you will think the upside is even stronger. Of course you will let the profit runs, a Warren-Buffett-type investors don't think about selling anyway.
If you are a purely computer-driven trader, you probably have never spent time to analyze any company's balance sheets or income statements, because you don't think you need to. Your trades totally depend on the signals generated by the computer program. After many testing you may find the threshold of when to cut loss will work the best for you. It may work very well it may not, really depends.
Now here comes the in-between-person. This person thinks he knows something about certain companies but he doesn't think he wants to hold forever. Based on his rough valuation he thinks he knows how much a company should worth, so he entered into the position and promises himself to cut loss if it doesn't work out. If the stock does drop and reaches the cut loss point, he hesitates. He will question himself about his own valuation, tries to read more news to find out what is wrong. He is not sure that if he should add more position (because it's more undervalued) or cut the loss (that's what he believes the discipline should be). He maybe lucky enough that when he is hesitating the stock goes back up. He maybe unlucky and sees his stock drops more and now he is even more hesitated.
I think it is quite important that you know who you are......
To make this statement works the best you need to act more like a computer program than a human. I'm not here to tell you how to do it, I actually want to talk about how a person may see this statement over a decision-making cycle.
If you are kind of a Warren Buffett fan, you probably know a company so well that you feel like you are part of the company. Yes, I mean you need to fall in love with the company, otherwise, you won't spend much time in analyzing the company. So, if the stock drops, you probably will buy more, but not cutting the loss. It's because if you buy at a certain price that means you believe this company worth that price, so if it drops more it just means the stock is more undervalued, so you will think the upside is even stronger. Of course you will let the profit runs, a Warren-Buffett-type investors don't think about selling anyway.
If you are a purely computer-driven trader, you probably have never spent time to analyze any company's balance sheets or income statements, because you don't think you need to. Your trades totally depend on the signals generated by the computer program. After many testing you may find the threshold of when to cut loss will work the best for you. It may work very well it may not, really depends.
Now here comes the in-between-person. This person thinks he knows something about certain companies but he doesn't think he wants to hold forever. Based on his rough valuation he thinks he knows how much a company should worth, so he entered into the position and promises himself to cut loss if it doesn't work out. If the stock does drop and reaches the cut loss point, he hesitates. He will question himself about his own valuation, tries to read more news to find out what is wrong. He is not sure that if he should add more position (because it's more undervalued) or cut the loss (that's what he believes the discipline should be). He maybe lucky enough that when he is hesitating the stock goes back up. He maybe unlucky and sees his stock drops more and now he is even more hesitated.
I think it is quite important that you know who you are......
Timing
I remember by near end of August reading a piece of news that someone at Morgan Stanley stood up and said he predicted correctly about the blown up of sub-prime mortgages problem. ahhhh, well, excuse me.... the news said he predicted that since 2005.
We all know the blown up really started to happen by end of 2006 (when HSBC reported loss in the business and largely increased reserve), if not more seriously in August 2007.
The gentleman was (finally) right about his prediction, but don't you think he has the timing wrong? And I think it is quite wrong. I have real examples too. Somebody told me by end of last year that Hong Kong Hang Seng Index was too high (by that time it's about 19,000), it should drop a few thousand points. If you check the index backward you will see the index did not drop below 19,000 up-to-date. In fact, it is now sitting at 29,000. This person is deadly wrong.
If you tell me some stocks someday will drop in price by whatever reason, it is not enough. You need to tell me when will it drop as well. And the best, by how much and how long. I know that is a bit too picky and greedy, but if the timing is totally wrong it can cost me all my hard earn money.
Now Hang Seng is sitting at 29,000. People ask me again - it's crazy, what do you think? I'm not good at predicting how far should it go. If you are a simply buy-and-hold-forever, it doesn't matter to you because you are not going to sell anyway. If you focus on riding the trend then you simply react to what is happening base on your strategy, but not to predict when the trend is going to end.
We all know the blown up really started to happen by end of 2006 (when HSBC reported loss in the business and largely increased reserve), if not more seriously in August 2007.
The gentleman was (finally) right about his prediction, but don't you think he has the timing wrong? And I think it is quite wrong. I have real examples too. Somebody told me by end of last year that Hong Kong Hang Seng Index was too high (by that time it's about 19,000), it should drop a few thousand points. If you check the index backward you will see the index did not drop below 19,000 up-to-date. In fact, it is now sitting at 29,000. This person is deadly wrong.
If you tell me some stocks someday will drop in price by whatever reason, it is not enough. You need to tell me when will it drop as well. And the best, by how much and how long. I know that is a bit too picky and greedy, but if the timing is totally wrong it can cost me all my hard earn money.
Now Hang Seng is sitting at 29,000. People ask me again - it's crazy, what do you think? I'm not good at predicting how far should it go. If you are a simply buy-and-hold-forever, it doesn't matter to you because you are not going to sell anyway. If you focus on riding the trend then you simply react to what is happening base on your strategy, but not to predict when the trend is going to end.
Friday, October 12, 2007
LOCM
Market stabilized a bit today. I liquidated my CTRP as said yesterday at $49.71, taking a 4.4% loss. Don't feel good about the result but at least I didn't do stupid thing when the massive selloff happened yesterday.
Other holdings are kind of doing what I anticipated, they all recovered certain percentages, with CEDC still a bit below the 20-day EMA.
In the afternoon I got into LOCM (Local.com) at $6.87. Looking at the graph it displayed the kind of pattern I'm looking for. If I have to criticize that maybe; it is not near its all-time high. In the meantime it's more like a turnaround, like TASR. But you never know because TASR is still working quite well (I'm still up about 15% since I bought 2 weeks ago).
Before getting into more position let's sit back and think about my current holdings.
Let's start from TASR, the longest position so far, currently at a gain of 15%, I expect it will edge up slightly next week with normal volume. Any abnormal move will trigger me to think about the position again. With earnings report coming in Oct 24, a well-defined plan is needed to cut loss if it happens.
For CEDC, it's staying below 20-day EMA which is not as good as TASR, at least it didn't test the 50-day EMA at all over the last 4 days while it is below the 20-day EMA. No significant volume as well so maybe it is just taking a rest. I'm currently sitting at a 5.4% loss and if it starts testing the 50-day EMA with higher volume, I'll have to let it go.
Turning to EFUT, the speculated post. I expect it will go back up at least bit by bit next week, with possibility of gapping up. I won't be surprise if it stays below $25 but above $22 for a few more days with low volume. It is a speculated position so anything can happen, but again my maximum pain is $20.
Finally the new post LOCM. I actually take it as a half trend following and half speculated. What I mean is I'll go with my trend following strategy (that is, cut loss but not profit in too short a term), but I'm not surprise it may produce unexpected gap (up or down) on its way.
Other holdings are kind of doing what I anticipated, they all recovered certain percentages, with CEDC still a bit below the 20-day EMA.
In the afternoon I got into LOCM (Local.com) at $6.87. Looking at the graph it displayed the kind of pattern I'm looking for. If I have to criticize that maybe; it is not near its all-time high. In the meantime it's more like a turnaround, like TASR. But you never know because TASR is still working quite well (I'm still up about 15% since I bought 2 weeks ago).
Before getting into more position let's sit back and think about my current holdings.
Let's start from TASR, the longest position so far, currently at a gain of 15%, I expect it will edge up slightly next week with normal volume. Any abnormal move will trigger me to think about the position again. With earnings report coming in Oct 24, a well-defined plan is needed to cut loss if it happens.
For CEDC, it's staying below 20-day EMA which is not as good as TASR, at least it didn't test the 50-day EMA at all over the last 4 days while it is below the 20-day EMA. No significant volume as well so maybe it is just taking a rest. I'm currently sitting at a 5.4% loss and if it starts testing the 50-day EMA with higher volume, I'll have to let it go.
Turning to EFUT, the speculated post. I expect it will go back up at least bit by bit next week, with possibility of gapping up. I won't be surprise if it stays below $25 but above $22 for a few more days with low volume. It is a speculated position so anything can happen, but again my maximum pain is $20.
Finally the new post LOCM. I actually take it as a half trend following and half speculated. What I mean is I'll go with my trend following strategy (that is, cut loss but not profit in too short a term), but I'm not surprise it may produce unexpected gap (up or down) on its way.
Thursday, October 11, 2007
Market turns around
Market went wild today afternoon, declined suddenly. The news attributed the decline to statements made by European central bank official of price risk (namely, inflation risk). I'm not sure if inflation is (always) a risk, i believe risk and opportunity is two sides of the same coin.
Checking my holdings all day (mainly 3 trend-following type and 1 speculated type), they all dropped. Let me go through them one by one.
TASR did not drop below 20-day EMA, in fact, the decline stopped before it challenged the 20-day EMA, as well, with only a normal daily volume, which is a good sign of holding well. My profit shrank and i think to protect the profit, i'll move out if tomorrow it drops below the 20-day EMA with large volume.
CTRP is the worst of today. It dropped more than 12% at one point, only to recover to lose 8% with higher than normal volume. it dropped below the 20-day EMA and didn't come back out, not even close to the 20-day EMA. it did drop below the 50-day EMA at one point and quickly came back up, it looks like the support is now at 50-day EMA. I'm already sitting at a loss of about 8%, given that i'm fully invest in the meantime and it dropped with higher volume, i think i will set my stop loss at a 10% loss. How sad, it was supposed to be a strong position.
CEDC moved out pretty well in the morning, only to see it went back down to close at negative, but not by much with normal daily volume. As well, CEDC did drop slower than the market, as the market started to see red by about 2pm, CEDC only started to see red by 3pm. As well it didn't test the 50-day EMA (given that it was already below the 20-day EMA). I'm already sitting at a loss of 8%. With the insignificant volume and decline I think I want to keep it longer, unless it dropped more on high volume tomorrow.
The only speculated position is EFUT that I established yesterday. It was holding at around $25 in the morning, it dropped a bit but not significant. The stock then dropped with the market, but still not with significant volume (compared to the blast off since mid-Sept). The stock ended up right above the 200-day EMA, the highest EMA among the 4 I use. Since it is a speculated post, I already expected it will be quite fluctuate. I just didn't expect that it fluctuated due to what European Centre Bank has said. I think a 20% drop will be my maximum, which is about $20 (right at the 20-day EMA now).
Tomorrow will be interesting.
Checking my holdings all day (mainly 3 trend-following type and 1 speculated type), they all dropped. Let me go through them one by one.
TASR did not drop below 20-day EMA, in fact, the decline stopped before it challenged the 20-day EMA, as well, with only a normal daily volume, which is a good sign of holding well. My profit shrank and i think to protect the profit, i'll move out if tomorrow it drops below the 20-day EMA with large volume.
CTRP is the worst of today. It dropped more than 12% at one point, only to recover to lose 8% with higher than normal volume. it dropped below the 20-day EMA and didn't come back out, not even close to the 20-day EMA. it did drop below the 50-day EMA at one point and quickly came back up, it looks like the support is now at 50-day EMA. I'm already sitting at a loss of about 8%, given that i'm fully invest in the meantime and it dropped with higher volume, i think i will set my stop loss at a 10% loss. How sad, it was supposed to be a strong position.
CEDC moved out pretty well in the morning, only to see it went back down to close at negative, but not by much with normal daily volume. As well, CEDC did drop slower than the market, as the market started to see red by about 2pm, CEDC only started to see red by 3pm. As well it didn't test the 50-day EMA (given that it was already below the 20-day EMA). I'm already sitting at a loss of 8%. With the insignificant volume and decline I think I want to keep it longer, unless it dropped more on high volume tomorrow.
The only speculated position is EFUT that I established yesterday. It was holding at around $25 in the morning, it dropped a bit but not significant. The stock then dropped with the market, but still not with significant volume (compared to the blast off since mid-Sept). The stock ended up right above the 200-day EMA, the highest EMA among the 4 I use. Since it is a speculated post, I already expected it will be quite fluctuate. I just didn't expect that it fluctuated due to what European Centre Bank has said. I think a 20% drop will be my maximum, which is about $20 (right at the 20-day EMA now).
Tomorrow will be interesting.
Wednesday, October 10, 2007
EFUT
All my positions went down today. TASR was down by more than 4%, but still looks okay to hold. CTRP was holding well almost throughout the whole day except the last hour, it went back down to end negatively...... CEDC as well couldn't hold an early gain and retreated even earlier than CTRP. as i said in my last post; too bad i missed EDU as it advanced to a new high today. If i have got into it at $61.75 as i tried last Thursday, i should be sitting at almost a 10% gain.....
when market drops, i don't mind seeing the stocks drop with the market, but a strong stock should:
1. drop relatively less than the market (that could depends on things like beta in CAPM)
2. have volume of the dropping day relatively lower than an averaged up-day
3. drop but still stays above the 20-day EMA (well, i only consider a stock as strong if it stays above the 20-day, 50-day, 100-day and 200-day EMA, one above each other)
4. drop slower than the market
Before the end of today i got into EFUT (Efuture), one of the China hype these days. This is also a test to my own method of timing the risky hype over a short time interval. i think it holds around $15 pretty well and i want to give my method a try. i did try to develop this method quite a while ago so this is actually not the first time i see pattern demonstrated like EFUT. i am not holding the post for long, win or lose, just wondering should i hold it over the weekend if it is not moving tomorrow and Friday.......
We'll see.
when market drops, i don't mind seeing the stocks drop with the market, but a strong stock should:
1. drop relatively less than the market (that could depends on things like beta in CAPM)
2. have volume of the dropping day relatively lower than an averaged up-day
3. drop but still stays above the 20-day EMA (well, i only consider a stock as strong if it stays above the 20-day, 50-day, 100-day and 200-day EMA, one above each other)
4. drop slower than the market
Before the end of today i got into EFUT (Efuture), one of the China hype these days. This is also a test to my own method of timing the risky hype over a short time interval. i think it holds around $15 pretty well and i want to give my method a try. i did try to develop this method quite a while ago so this is actually not the first time i see pattern demonstrated like EFUT. i am not holding the post for long, win or lose, just wondering should i hold it over the weekend if it is not moving tomorrow and Friday.......
We'll see.
Tuesday, October 9, 2007
TASR, CTRP and CEDC
Taser is doing quite well, since I bought about 2 weeks ago at $15.23, i am already sitting at a net profit of 21%. This trade could be one of the good example of my own graphical method. in the meantime the stock still positively reacts to good news or no news, not very fluctuate, volume is around 3-month average but not too high. all these are good sign of pattern of going higher in the short term. i'll keep the position as long as it is above the 20-day EMA.
Ctrip.com is doing okay, hanging there. i bought it last Thursday at $51.40 and i'm about breakeven including the commission. it just broke through to new high which is good. As well, CTRP is not volatile as other infamous Chinese stocks. Fundamentally it is not bad and the stock performance is relatively stable. I rather go for more stable stock than volatile stock. i'll keep the position as long as it is above the 20-day EMA.
Central Europe Distn is a bit disappointing. i bought it last Thursday at $50.05 and it's now at $47.54, a more than 6% net loss already. As well it is already sitting at below the 20-day EMA, but still above the 50-day EMA. The market actually lifts up more due to hope of more rate cut in the afternoon. CEDC recovered a bit from a larger loss but not very much. the uptrend may probably ends for now. If the position does not go back up above 20-day EMA in a few days or it drops more than a total of 10% anytime from now i will sell.
If i have to sell CEDC i'm not worry about opportunities, there are still a few i am keeping my eyes on: FMCN, EDU (i missed on last Thursday as my buy order of $61.75 didn't get fill), DSX....etc
gotta learn to leave a losing position and get into other opportunities.
Ctrip.com is doing okay, hanging there. i bought it last Thursday at $51.40 and i'm about breakeven including the commission. it just broke through to new high which is good. As well, CTRP is not volatile as other infamous Chinese stocks. Fundamentally it is not bad and the stock performance is relatively stable. I rather go for more stable stock than volatile stock. i'll keep the position as long as it is above the 20-day EMA.
Central Europe Distn is a bit disappointing. i bought it last Thursday at $50.05 and it's now at $47.54, a more than 6% net loss already. As well it is already sitting at below the 20-day EMA, but still above the 50-day EMA. The market actually lifts up more due to hope of more rate cut in the afternoon. CEDC recovered a bit from a larger loss but not very much. the uptrend may probably ends for now. If the position does not go back up above 20-day EMA in a few days or it drops more than a total of 10% anytime from now i will sell.
If i have to sell CEDC i'm not worry about opportunities, there are still a few i am keeping my eyes on: FMCN, EDU (i missed on last Thursday as my buy order of $61.75 didn't get fill), DSX....etc
gotta learn to leave a losing position and get into other opportunities.
Monday, October 8, 2007
Apple (AAPL)
Apple definitely is one of the hot stocks these years. It is a very interesting turn-around story. We saw so many news and analysis covering Apple almost everyday. I personally didn't purchase any Apple's product as I don't think I need them, but I never ignore the opportunity to invest in company that provide chance of profitability.
I am not going to talk about fundamentals of Apple in here, you definitely can find more analysis somewhere else than from me. I am totally not good at fundamental analysis anyway. I look for a way to earn profit by investing in stocks, conducting thorough fundamental analysis is one way, but not the only way.
Apple survived the August selloff graphically well. And later it rallied with the market and made new highs. Unless its earnings report on Oct 22 is disappointing, otherwise the uptrend is still here.
Looking at the recent price movement it sounds like people are expecting very good earnings (and forecasts), good entry area should be around 20-day EMA (as end of today it's $150). The ratio between 20-day EMA and 200-day EMA is not very bad (about 30%). I don't know when the trend will end (and how it will end), but if the price moves up after the earnings, the trend should at least continue for some time.
Just for a longer term idea. Given that Apple is already having a market cap of over $140 billion, I guess it will take longer for Apple to double its size, unless it can show a significant increase in product lines and profit margin. I am not saying that it is impossible, but from a trend-following point of view, there should be better opportunity other than Apple that can provide a faster growth in price appreciation.
So, you can always keep your eye open to find the next winner.
I am not going to talk about fundamentals of Apple in here, you definitely can find more analysis somewhere else than from me. I am totally not good at fundamental analysis anyway. I look for a way to earn profit by investing in stocks, conducting thorough fundamental analysis is one way, but not the only way.
Apple survived the August selloff graphically well. And later it rallied with the market and made new highs. Unless its earnings report on Oct 22 is disappointing, otherwise the uptrend is still here.
Looking at the recent price movement it sounds like people are expecting very good earnings (and forecasts), good entry area should be around 20-day EMA (as end of today it's $150). The ratio between 20-day EMA and 200-day EMA is not very bad (about 30%). I don't know when the trend will end (and how it will end), but if the price moves up after the earnings, the trend should at least continue for some time.
Just for a longer term idea. Given that Apple is already having a market cap of over $140 billion, I guess it will take longer for Apple to double its size, unless it can show a significant increase in product lines and profit margin. I am not saying that it is impossible, but from a trend-following point of view, there should be better opportunity other than Apple that can provide a faster growth in price appreciation.
So, you can always keep your eye open to find the next winner.
Sunday, October 7, 2007
Target Price - revisit
Just read an article about how accurate (x-month) target prices determined by analysts are. The article says the percentage of accuracy is pretty low. Well I'm not sure how the experiment or survey was done, but I guess the analysis of the conclusion is a bit incomplete, and I want to comment in here.
The article only talked about the percentage of accuracy, but did not give an explanation of the reason behind the inaccurate price prediction, probably the survey did not contain that kind of information. I'm sure many on-the-job analysts who have read this article may feel bitter about the conclusion.
To my guess, there was problem in the survey. It is like telling me who ever has a low score in the classroom is a stupid student, but ignored the reason why he scored low. The survey neither tells me something very important nor solving the problem.
The world and economy are dynamic. Things change every minute (if not second). Target price prediction can only be so good as of the day the analyst conducted the analysis. Situations and conditions may already have changed after he made the prediction. If so, not allowing the analyst to revise his prediction from time to time as condition changes and claim he is wrong after certain time has passed is simply not a fair measure.
On the other hand, I guess no single analyst bothers to post his/her updated price target everyday (unless you are his/her precious client). I guess even if they do I don't bother to check everyday.
So, how should we measure the accuracy of their price (and as well, corporate earnings) predictions? Tough question. As an investor (not the analysts' employers), I care less about their accuracies. As I said in the last blog, it is how the investors who hold the majority of money react to the price target announcement that is more important. After all, it is "YOU MAKE MONEY" that is most important to you.
Price/earnings target predictions represent only a little piece of the conclusion, I guess people are paying too much attention to the one single number from the analysis. There should be many information and analysis you could probably get from the research reports, why focus only on one single number???
The article only talked about the percentage of accuracy, but did not give an explanation of the reason behind the inaccurate price prediction, probably the survey did not contain that kind of information. I'm sure many on-the-job analysts who have read this article may feel bitter about the conclusion.
To my guess, there was problem in the survey. It is like telling me who ever has a low score in the classroom is a stupid student, but ignored the reason why he scored low. The survey neither tells me something very important nor solving the problem.
The world and economy are dynamic. Things change every minute (if not second). Target price prediction can only be so good as of the day the analyst conducted the analysis. Situations and conditions may already have changed after he made the prediction. If so, not allowing the analyst to revise his prediction from time to time as condition changes and claim he is wrong after certain time has passed is simply not a fair measure.
On the other hand, I guess no single analyst bothers to post his/her updated price target everyday (unless you are his/her precious client). I guess even if they do I don't bother to check everyday.
So, how should we measure the accuracy of their price (and as well, corporate earnings) predictions? Tough question. As an investor (not the analysts' employers), I care less about their accuracies. As I said in the last blog, it is how the investors who hold the majority of money react to the price target announcement that is more important. After all, it is "YOU MAKE MONEY" that is most important to you.
Price/earnings target predictions represent only a little piece of the conclusion, I guess people are paying too much attention to the one single number from the analysis. There should be many information and analysis you could probably get from the research reports, why focus only on one single number???
Google (GOOG) - towards $700?
On Friday there was news that some analysts raised the target price of Google to $700 per share, while Google was trading a little below $600.
Theoretically, the target price by analysts should served as a reference point over a certain period of time (e.g. 12 months), but exactly how important is target price in reality?
It is actually not the target price itself but how investors react to the target price. How institutional investors react to the target price is more important than how small guys react to it. I neither saw too much of a craziness about the upward-revised price target nor a meaningful selloff on Friday, which is good for investors who like stocks with less volatility.
Over a certain length of time, it is not about who is right and who is wrong on the stock, but who has more power to take the stock to wherever he wants to take.
I don't know if Google will reach $700 soon, what I saw was a few things:
1. Google (graphically) survived in August selloff, its 20-day EMA did not go below the 50-day EMA, a very strong graphical pattern
2. It rallied with the market from beginning of September
3. It also made new highs recently
In the meantime its 20-day EMA is about 12% higher than its 200-day EMA. Given a company's size now as big as Google it is not unreasonable. It seems like if market continues to perform well, Google should go with the market. The potential return from here may not be very high but the probability of a significant gap down is also lower compared to some smaller cap companies. Going short against a stock that just made new high is also too dangerous.
So, at a price of near $600, Google is still worth to put under the radar. If I have the money I'll try a position when it gets to the 20-day EMA (currently around $560). Just my guess.
Theoretically, the target price by analysts should served as a reference point over a certain period of time (e.g. 12 months), but exactly how important is target price in reality?
It is actually not the target price itself but how investors react to the target price. How institutional investors react to the target price is more important than how small guys react to it. I neither saw too much of a craziness about the upward-revised price target nor a meaningful selloff on Friday, which is good for investors who like stocks with less volatility.
Over a certain length of time, it is not about who is right and who is wrong on the stock, but who has more power to take the stock to wherever he wants to take.
I don't know if Google will reach $700 soon, what I saw was a few things:
1. Google (graphically) survived in August selloff, its 20-day EMA did not go below the 50-day EMA, a very strong graphical pattern
2. It rallied with the market from beginning of September
3. It also made new highs recently
In the meantime its 20-day EMA is about 12% higher than its 200-day EMA. Given a company's size now as big as Google it is not unreasonable. It seems like if market continues to perform well, Google should go with the market. The potential return from here may not be very high but the probability of a significant gap down is also lower compared to some smaller cap companies. Going short against a stock that just made new high is also too dangerous.
So, at a price of near $600, Google is still worth to put under the radar. If I have the money I'll try a position when it gets to the 20-day EMA (currently around $560). Just my guess.
Friday, October 5, 2007
Research In Motion (RIMM)
RIMM went up by almost $13 USD today, made a new high of $113.37. I overheard from the colleagues talking about it this afternoon. A few of them thought it is crazy.
Well, why is it crazy? I guess not everyone understands why stock goes up or down, so it's normal that some people will think the upward movement today is crazy. But stocks go up, stocks go down, need not be surprised.
I didn't read into whole lot of detail about RIMM's earnings report today. Investors already told me what they think. They think RIMM worths more or they won't buy at a price of above $100. Two months ago (when it split 3 to1) I already heard people saying that RIMM was expensive, only to see it went up 50% more. I think people here have to learn it; good stocks keep going up and bad stocks lag.
I was a little disappointed about myself not buying into RIMM two months ago. As RIMM held very well even after the large decline of market due to subprime burst in mid-August. When I mean it held very well, I mean the stock quickly recovered from the decline and went back to stay above the 20-day EMA. As well, it also fulfilled other criteria I use. The other criteria I use include the following:
20-day EMA > 50-day EMA > 100-day EMA > 200-day EMA
20-day EMA is about 40% higher than the 200-day EMA, the ratio was becoming a bit high but still okay, but a bit lower would be even better
After today's increase I'll still keep RIMM under my radar, but I'll not buy in for now as the 20/200-day EMA ratio is a little over 50% already, a bit too high
Well, why is it crazy? I guess not everyone understands why stock goes up or down, so it's normal that some people will think the upward movement today is crazy. But stocks go up, stocks go down, need not be surprised.
I didn't read into whole lot of detail about RIMM's earnings report today. Investors already told me what they think. They think RIMM worths more or they won't buy at a price of above $100. Two months ago (when it split 3 to1) I already heard people saying that RIMM was expensive, only to see it went up 50% more. I think people here have to learn it; good stocks keep going up and bad stocks lag.
I was a little disappointed about myself not buying into RIMM two months ago. As RIMM held very well even after the large decline of market due to subprime burst in mid-August. When I mean it held very well, I mean the stock quickly recovered from the decline and went back to stay above the 20-day EMA. As well, it also fulfilled other criteria I use. The other criteria I use include the following:
20-day EMA > 50-day EMA > 100-day EMA > 200-day EMA
20-day EMA is about 40% higher than the 200-day EMA, the ratio was becoming a bit high but still okay, but a bit lower would be even better
After today's increase I'll still keep RIMM under my radar, but I'll not buy in for now as the 20/200-day EMA ratio is a little over 50% already, a bit too high
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