Monthly Archives: October 2012

What Kind of Trader Are You?

Here’s a brief description of the two methodologies used in analyzing stocks:

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Methods for Analysis:

1. Fundamentals – You look at the financial standing of the company, earnings, ratios, and other data found in the financial statements. You also look at how a certain company is performing relative to peers in its industry. You are also concerned with factors such as management, developments, acquisitions, mergers, and other aspects that affect how the company will fare in the future. All of this in mind, your main goal is to derive potential valuations for the company you’re analyzing, buying into what you deem to be undervalued, and selling what you deem to be overvalued.

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2. Technicals – You analyze charts and act upon certain signals composed of your preferred indicators. You watch out for potential shapes that form out on the chart, such as Cup and Handles, and Head and Shoulders–among many other patterns. You assess the sentiment of the market, and base your decisions on price movement, volume, moving averages, overbought/oversold conditions, buying & selling pressure, accumulation , momentum, support & resistance levels, waves and other tools. You seek to determine trends and ride them as long as your indicators say so. You are also on the guard for reversals, either in the form of short term bounces or channel breaks, in line with divergences in several indicators. You’re main concern is to capitalize on recognizable patterns formed by the unified emotions of the market players.

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There are some people who vie for a pure fundamentalist approach because they believe that company performance is the main driver of stock price. It doesn’t matter if they are down 20% in a position, as long as the company is performing well they will still continue to hold its stock in expectations that price will be aligned with the real value of the company. The day-to-day drama are irrelevant for the most hardcore fundamentalists because they know deep inside that they are holding something of good value. On the other hand, we also have pure technical players who solely focus on how the day-to-day price movements form various patterns in their charts. They buy whenever the charts look good based on their various technical parameters, even if the company has nothing of fundamental value inside it.

While there are lot’s of debates out there regarding what methodology to use, I can say that improving your knowledge and skills in any of these methodologies will definitely help you as an investor or a trader. Most professionals today utilize both of these methodologies in managing their portfolios. Playing the stock market is all about decision making–what to buy, what to sell, when to buy, when to sell. These methodologies give us information to act upon. Fundamentalists come up with their FVs, NAVs and other forms of valuations, chartists come up with their signals by looking at charts and capitalizing on patterns, breakouts, reversals, candles, and other technical indicators. 

My take is thisknowledge is power, right? If you know how to handle the information all around you, identifying which ones have potential and which are useless, then it would be nice to have a grasp that is as wide as possible. Why would you limit yourself to one methodology, if you can actually use both to improve your ways? The more knowledgeable you are, the better. Not only to help you make your decisions, but to help you stick with your decisions as well. In the basic sense, knowing what you’re doing will help you to keep composure, may you be an investor or a trader. I also believe that the more knowledgeable, skilled, and experienced you are the more conviction you have by building up self-confidence. I think in any endeavor, you must believe in yourself in order to be successful. I also think that aside from any methodology, the most important thing when venturing in the stock market is patience, knowing thyself, discipline, proper risk and portfolio management.

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Now let me share to you the various types of players I have encountered in the stock market:

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1. Loyalista – They tend to ride their favorite picks as long as they can till they’re either vastly rewarded by the market or proven wrong with tantamount losses. Sometimes due to their strong bias, their profits gets eaten when they should’ve taken profit. Otherwise, if it works for them they get baggers for their loyalty.

2. Abangers – They will let their money sleep in stocks that doesn’t have much attention, or is currently hated, as long as they believe in their reasons for buying into the stock. Almost the same as loyalista’s but these guys differ in a way that they’ll buy into speculatives if they want to. They don’t have favorites, they are just confident that their stocks will have their day in the future.

Does loyalty get rewarded?

3. Nakikiuso – They will buy into the “stars” of the market, may it be fundamental plays or speculatives, anything under the sun, as long as it catches the attention of the market. They buy into stocks that have strong attention. Basically this is majority of the crowd, while this is not bad, if you’re too late in a position entering in a peak–though it’s hard to identify in some cases–you’ll end up the loser.

Follow the Leader

4. Pauso – These guys have the bullets to suddenly hit their target stock and spark the attention of the market. This is a well-used tactic after accumulation, or just to make charts or price action look good to entice the crowd. These guys are the movers of the market, learn to identify if and to ride as early as these guys and you’ll be able to bag some profits. They use the ticker effectively to advertise their goods. =)

The Operators

5. Zombies – They tend to follow their idols in the form of gurus or mentors, sometimes without considering their own assessment. These are the seaweed of the market, they are fish feed, they do not put efforts to improve their profitability, they prefer to just blindly follow the footsteps of so-called gurus. Be wary though that there are smart zombies, that act like zombies in the first place, in order to garner an understanding of how their guru thinks, after which they can adapt and play well with the gurus.

Are You One of Us?

6. Swayed Investor – They will preach about how great the value of a certain company is and how they are in it for the long-term, but then after a few storms they’ll lose their guts, eat their words, and cut. Sometimes it does them good, sometimes it does them bad. Either these investors learned to use technical parameters and are able to identify weakness, or they just can’t handle the losses that old school investors don’t mind while their position hasn’t blossomed yet.

Hypocritical

8. Iron Man – These guys are hard to move, once they have a proposition in mind they will continue with that proposition no matter what. These are the solid investors who do not care if their stock is losing 30% or more, they’ll just add because they BELIEVE.

7. AI – Purely mechanical traders who pose no questions when it comes to their technical signals. This can be an effective way of trading if you really understand the deepest concepts of Technical Analysis and have learned how to adjust your parameters so that it can fit in the current setting of the market.

No EMOTIONS

8. Simple Investor – These are the traditional peeps saving their monthly income and putting it into fundamentally well companies, majority of the investing public is in this criteria.

9. Sophisticated Investor – Investors who have learned to utilize technical tools to help them choose which fundamental stocks to buy, and when to enter and to exit. They buy when a stock is in an uptrend and sell in a downtrend.

Slowly but surely..

9. Traditional Technician – These technicians tend to buy/sell when there’s confirmation on basic indicators commonly used by the crowd. At times it’s effective if there is a huge follow through in terms of the proposed direction of their signals making them able to bag a decent amount of profit. There are also times that these regular signals are already late, making you move with the crowd.

10. Sophisticated Technician – These technicians have already garnered a deeper understanding in the art of Technical Analysis. Due to their expertise they have adjusted themselves and their indicators as to know when to specifically buy/sell in a stock. Beyond the basic indicators, patterns and concepts used by regular TA practitioners they are able to come up with their own modified versions of the usual. They are always a few steps ahead of the crowd.

Display lang ung screens… hehe

11. The Story Teller – These guys talk about their stocks in forums, FB groups, and twitter to hopefully pump up people to buy what their holding. Haha! Sometimes these will lead you to danger, sometimes it will lead you to profits. Know which one to believe, and of course, use your own discretion!

12. All Talk – These guys talk too much, and yet do so little. They portray or believe they are something, but beyond their babble, they are nothing.

Talk is CHEAP

13. Anti-Crowd – They buy in red, sell in green, easy to say, hard to do, especially if you’re alone. Also, instead of buying into breakouts they sell the breakouts. Basically they do the opposite of the what the crowd does. This style fits range bound markets well.

Think Opposite

14. Crowd-Mentality – Follows the norms, or the views of the crowd, at times it is rewarding because unified actions lead to self-fulfilling manifestations, just don’t get left behind 🙂

They’re all the same.

15. Bold and Daring – They know when they see opportunities, they are not afraid to go all in. Sometimes due to their explosive nature, they literally explode with their red portfolios if they’re not careful, or they explode in happiness if they hit a jackpot.

Stand Against the Crowd

16. Don’t Hurt Me (DHM) – These guys are afraid of admitting mistakes therefore avoid cutting losses, in effect they get stuck with bigger losses, or it takes some time before their holdings are able to recover. They are fueled by the notion of HOPE.

Don’t hurt the Little Baby.

17. Charity Fund – These guys act on their impulses and fail to formulate a plan, leading to many impulsive changes in positions, which are detrimental to one’s portfolio. I call them charity fund because it’s like their chipping in money to the other market players due to their inconsistency.

Are you here to make money or what?

18. Insatiable – These guys are able to gain a moderate amount of profit, but due to their greed, end up with small profits instead, or much worse losses.

Greed is Good Eh?

19. Conservative – These guys go in and out of the market with tight stops while targeting conservative amounts of profit. Profit is profit for them, no matter how small it is.

Easy to Please

20. The Dreamers – These guys put wider stops because they have the notion that the setbacks that they are encountering are just temporary, they’re eyes are set on a target, a vision.

Dare to Dream

21. Bouncers – Buys at extremely oversold price points, and sells the immediate bounce.

Bounce Baby.. Bounce

22. Perfectionists – Aims to buy at the bottom, sell at the top. They want their trades to come out as perfect as possible They are unwilling to accept mistakes. This attitude is dangerous if you are full of yourself and prideful.

And lastly,

23. The Masters – whatever methodology they use, they have mastered their own system, they are able to trade with comfort, they have achieved the inner peace of trading.

Learn From the Best

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As for me, I am just a mere student of the market, I am guilty of some the negative trades found in some of the players that I have observed, but I am learning… learning.. learning.. everyday.. That is what is important. Find the right balance. Do what works for you, but be open for IMPROVEMENTS.

 

 

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Shoot for the Stars

*Late post, I’ll just post this for reference. Made some changes in my port. To be updated later.*

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We have lot’s of stocks shooting up to the stars

Next week will be exciting for us market enthusiasts. We have COAL on tuesday, and we have APM’s next episodes too. There seems to be something in APM.

Funny thing about the market is that when they see a certain theme, they try to replicate it on other indirectly related stocks. Example would be during the run up of PXP, other traders would hit on OV, OPM and other oil plays. Now that we have APM going crazy .020 to .150+ , traders are also hitting penny stocks such as EG .020 to .060‘ish (for what ever news it has), or AR .005 to .0055+, I don’t really know if there’s something in these stocks but their fun to watch, and to play with. If played well these stocks can easily give you +50% of your money just moderate your greed. Then there’s YEHEY. haha. opening at 2.50 then going to as high as 4.50? It just shows that people don’t really care, their at a RISK on mode. Lots of traders are on the prowl looking for quick ways to make a buck. More fish in the sea for the sharks.

If you want to play these stocks you have to prop your mind that there’s a high probability for you to lose money. The earlier you are the better. If you were able to catch its early moves then good for you as you can place wider stops and just watch where the stock will go. Just like in the case of APM. Those who bought at .020… already made 700% if they just held their positions.. wow. imagine making your 100k to 700k in a span of 2 weeks.

At often times after a huge run up, say a 100% move, people will have the notion that “this shit is risky”, but then we get our arses surprised, only to find out that there’s still an upside to the play. No price is high if there are lots of willing buyers out there. 🙂

Here’s an update of my portfolio:
Positions:

1. ACR – Tight range, just lying above 50 day ema, volume diminishing in line with price fade, every time volume spikes, there’s a sudden run up in the price, STS shows buy signal, small position, just watching developments in the future. tested 1.50 levels 2 times already, upon correction you can see that it’s forming bases at slightly higher levels.

2. ANS – sell signal, going down, haha got .25 divs per share though, haha might just hold this if it doesn’t go below my entry of 4.80.

3. AT (Sold)- break of downard channel with matching volume, bit late on entry, it’s ok, small portion might dispatch it, soon just a test buy, take note of the paid in capital to get rid of their deficits, and the change in par value from 10.00 to 8.00

4. COAT – Company buy back continues, creeping upwards slowly and raising it’s 52 week high, volume building up, been accumulated for quite some time, would like to add on this one in time for D&L 4th qtr IPO. D&L is it’s mother company. At this price range–2.80 to 2.9, I’m reminded of PIP when it was just moving steadily in the said range, and people weren’t taking notice of it.

5. EEI – Reached 9.00 already, wow, haha too bad I only have a small allocation on this one, been eye-ing it since 6.50 levels. that’s the problem if you don’t have patience you keep cutting you’re positions only to find it rallying after you’ve cut. If only I had more patience.  Watching price action, might trim my holdings on this one soon.

6. FOOD – at it’s all time 52-week high, with good volume, if you’ve noticed there are only 3 days in the two year chart that showed volume surpassing the 20m mark, the last were temporary tops, hmm. I wonder how this one would fare? If things go well, it might be on its way to challenge its all time high of 2.00. Take note of the foreign deals they’ve been bagging plus it may garner some upside with the MILF peace deal.

7. Rock Star Stock – Charts look nice, volume picking up, cup formed, then what? Tis has been said that the Rock Star will be the antagonist of the coming days. We’ll see if it proves itself. Mwahahaha….. >:)

8. LPZ (Sold)- Hovering near the 50 day ema, one day it looks strong, another day it sucks. HAHA. This should be a good hold till the election hype, since my entry is at 5.18, I feel it’s quite safe. I might trim on the position of it shows further weakness.

9. MEG (Sold 2/3, wrong move)- 2.50 target been reached, let’s see if it holds the said level. If it’s really strong it shouldn’t go below 2.40 or worst at 2.35–these are just my own support levels. Fundamentals still intact. Still trading at a cheap level compared to industry leader ALI. Main beneficiary of the BPO boom in our country–If I’m not mistaken they have about 30 to 40% of the office spaces in manila. Their expanding in Cebu as well, another critical area in the future. If it successfully holds current levels next target would be 2.80. Imagine where it is now, compared to the time where no one was buying it during 1.60s.. 🙂 Just shows that some of the best times to buy is when everyone is selling. 

10. PIP – Correcting after reaching near the 5.00 mark. I don’t think the show is over for this stock. Might zero cost after it breaks the 5.00 level or I can just leave it be, let’s see how this goes. Maybe it’s just me but I think it’ll go beyond 6.00? maybe next year? Don’t be captivated by my imaginations OK? I’m just depicting my own scenarios. Watch for a break of the 5.00 mark first. The more crazed the buying to the 5.00 mark the better, as this is where you’ll see the conviction of the funds buying into the stock. Don’t be mislead by the RSI. Strong trends usually linger in overbought conditions for quite some time.

11. Baby Stock – base forming, sudden volume, good thing it hasn’t rallied yet. Judging how crazy our market is acting and how daring traders are when it comes to speculatives, it seems that this has some potential in the weeks to come. Hopefully I can add more.

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What I got rid of:

1. AC – even though I like it, I believe this stock is not for short term commitments, I’ll just get back, if I can.

2. APM – wow.. If I didn’t do anything my initial capital of 120k would already be 360k by this time.. oh well. I’m watching this for some potential plays next week. Damn it’s hard to watch the market when you have other responsibilities going on simultaneously during market hours, that’s why I avoid quick trades if I can’t be on the watch.

3. MPI – movements are too tight, although it’s a good company, I think I’ll just go in when I have the luxury to let some funds sleep in here or better yet, when there are confirmatory signals. Although its wise to hold fundamentally strong companies, I value opportunity cost as well.

4. VLL – entry was a bit off, didn’t go as planned, seemed to lose some steam, still has potential though.

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As you can see I’m holding quite a number of stocks in my port, reason for this is that I buy an initial position if I see signals or clues in the stock. If it confirms itself then I add up more like about 30k to 50k + depending on how it moves. If it’s wrong then I can just cut the initial position without fret.

I’m about to reach my benchmark target of PHP 1,000,000. My port reached a high of about 949k during the unified tops of my holdings last week. It was a bit held back due to my EG trade I bought at .062 and .063 since the .060 levels was holding, I didn’t watch my position and took a nap when I saw it hovering at .068. Woke up seeing it at .059 so I immediately cut, no questions there, as it failed to hold my said cut loss point.

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For my next blog update, I’ll be writing about “knowing what kind of trader you are“, and I’ll be sharing some insights regarding my own approach in trading. I’ve been reading it in lots of books, seeing it in many sites, and hearing it from various traders–including my mentors. One should master thyself. I agree when they say that it’s not whether your methodology is better than the others. There are far too many personal aspects affecting our trading/investing decisions such as our attitude & aptitude towards the market, self-discipline, diligence, ability to see and act on opportunities, skills, composure, risk tolerance, etc. One need not to compare, copy (though I highly appreciate learning from people who are more experienced and have superior knowledge and skill on the market), or hate on other people’s approach in the market, after all, our main goal here is to make money right? 😀

~Seize the Day

Hi everyone! It’s been a while since I last updated my blog as I was quite busy focusing on other endeavors, plus I found nothing interesting to write about just till now.

The last two weeks was definitely something as we saw our index go to new highs, but the real star of the show was APM, gaining about 300% in a span of 2 weeks. Wow another KABOOM stock this year adding up to the names MAKE, PXP, TDY, CAL, ORE, NI, DIZ, etc etc.. having watched all of the price action in these stocks, I feel like I have developed a feel for opportunities like this–or I may just have been lucky hehe. These rare moments, if well played, can definitely boost one’s portfolio immensely. Anyway, I’m thankful that I got lucky to ride APM, even though it was a bit late, profit is profit.

I bet the insiders are laughing their asses off with their immense profits, or are they? Not sure if the play here is finished but I can see that it was well distributed. The recent move in APM showed us that people are willing to buy into something that is deemed to be of immense value even if there’s no assurance yet. I remember DIZ‘s story.. hahaha. some people valuing it at 100 per share? Wow… Just wow. I wonder where they are now? Don’t be surprised with the irrationality of the market, from time to time, there will be stocks flying on a speculative basis alone.

Learn to ride the market’s emotions and sentiments. Know the players of the market. Watch the price action. Curb your greed. 

There are times when the crowd will feel scared to buy into something that hasn’t proven itself yet, eg. TDY at 5.00+, DIZ at 16+, APM at .30 to 40+, CAL at 10+, MAKE at 6+, etc. often times traders see stocks that seem scary because they don’t know the reason for its rise. With reason or not, one important thing to look at is the volume. You may not know why it is moving, but you’ll definitely see the degree of activity in the stock. After a long sleep, why would a stock suddenly spike in volume? Based on my observation, most of these double your money (or more) stocks still rise after its initial movements. Reason for this is that more and more speculators try to come up with an explanation, more and more stories are created, thus fueling the curiosity of the crowd. No one can get it perfect when it comes to moments like these. No guts, no glory.

When the market shows irrationality, step aside and try to be rational. This doesn’t mean that you should immediately shy away from the opportunity just because you have failed to identify sufficient fundamentals to support the price move. Just think of a stock as a “commodity”, and apply the basic principles of supply and demand. In short term bursts, the crowd doesn’t care at all, they will buy into any story that will “supposedly” lead them to their dreams. Emotions make the market fun and alive. Always think out of the box, destroy the box if you can. Be one step ahead of the crowd. 

Anyway, I think I’ve talked too much. Sorry, Insomniac mode I woke up at 2:30 AM lol and now, it’s almost 6:00 am.

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Here’s an update of my port on Oct 09, 2012– before APM went down:

Got lucky with APM lol. During it’s first ceiling I knew there was something, I was really thinking of going all in, or at least putting a bigger allocation, but I decided not too. Sold some tranches of APM at .090, but that was just a small portion of what I was holding, after reaching .10 the stock was sold down for a while and then came the halt (the OA Frozen thing) what ever that is. I think that stopped the buying momentum lol, it gave people time to think; “oohh wait a minute.. why the hell would I buy at .10…..?“. I was able to sell the rest at .077, lost some profits but it’s alright, profit is profit 🙂

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Here’s my port as of Oct 12, 2012:

1. ACR – Wait and see, certain developments interesting. It was mentioned by some of my idols. Bought initial position

2. ANS – Speculative and pure chart based play, I just bought a small position, digging deeper to back up my decision on whether to add or not.

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3. COAT – I like the charts broke it’s 52 week high of 2.75, and is now trending above that area. Lot’s of buy back disclosures from the company. I wonder what’s their plan. Volume seems to be building up. Looking forward to add more. From what I’ve gathered, this company is owned by D&L (http://www.dnl.com.ph/) which will have their IPO this 4th qtr, hmmm… Coincidence?

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4. EEI – nothing much to say here. same story. good stock. just holding. looking for opportunity to add. I feel stupid though for not holding this way back then when I had a bigger position in it at near 6.50. Shows that one should not be swayed by the short term fluctuations of the market, focus on the big picture. 

5. ELI – test buy. interested with the SRO thingy lol

6. GERI – this used to be my major holding, decided to dispatch it as it was performing weakly compared to blues and other plays. Strong selling pressure near 2.00’s, will have to wait for better signals to buy back into this baby. =)

7. GMA7/GMAP – Potential bounce psychological support at 8.00, building up position. May be “deemed” as an election play in the near future. =)

8. LPZ – just holding, almost all of its babies are getting attention. Charts look sucky but I think it should hold well. Giving it some more time. otherwise, cut if it shows further weakness
9. MEG – successfully broke the 2.33 level, after trying for quite some time. Willing to add more, if it shows positive action. MEG owns many office bldgs, it’s a beneficiary to our growing BPO industry, lot’s of new projects as well. It’s hovering near it’s 52 week highs. If we’re really bullish it should trend back and break 2.50, onward to a longer term target of 2.80+

10. PIP – as planned just holding till whenever. This still has lot’s of upside. This stock will help me practice my “investor” patience. I won’t sell this unless there’s a super crazy ass crisis out there, which of course I won’t be able to anticipate.  If you’ve been observing they have been bagging exclusivity contracts with mall developers (Star Mall and Robinson’s, if I’m not mistaken), these contracts will definitely be huge for the company as they try to reinforce their position in the market. I also tried their coco water product hahaha I kinda like the taste 🙂

11.VLL – for some crazy reason, I just feel like there’s potential in this stock. Just give it patience, trading at low a low PER compared to the market. I like the charts. Their starting to work on their malls, this’ll add value to the stock especially if their malls are a hit. Their housing projects are also strategically located near future infrastructure projects. Once these infra projects are developed there might be more people interested in living near these areas. Anyway, I’ve read a detailed report on this, I’ll just edit/add info in the future.

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That’s for my portfolio update. As you can see I’m testing out positions on lot’s of potential plays in the future. Definitely, not all of them will bloom but if they do I’ll try to build up my position in them if they show positive signs =)

Goodluck with trading everyone!

Please feel free to ask share your comments, insights, and suggestions. You may also ask me questions through the blog or in my FB page. Thanks!

Sometimes, it pays to be CRAZY.