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.
Tuesday, October 30, 2007
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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