Monday, December 28, 2009

Short term trade or the buy and hold strategy?

I got a comment on my post, and this is the question I also ask my self a lot of times.

What strategy is better? Short term trade or the buy and hold strategy?

I created this blog, as a journal on my action based on what I currently think. So that I can review it from time to time and learn from my mistakes.

In summary though, based from my experience short term is the best way to make a killing. But it requires a lot of work like analyzing company news, analyzing external factors (i.e. DJIA, Gold Prices, Unemployement Data), fundamental research, reading the charts, asking around people who knows the company well.

I don't have time for that type of work anymore, so I'm sticking to long term strategy. If ever I'll try to be a short term trader again, I might have to quit my job and make day trading as my day job. Also, long term strategy does not mean buy and forget, you should still set your Cut Loss levels.

Short Term :
I made a killing on MER before, that's short term. I just really knew that the stock will rise due to the turf wars (MVP vs SMC).

Long Term:
As for my long term, I made a fair profit on AC, MEG and SMDC.

Other long term picks such as SMB and CHIB still has not gave me what I expected.

As for my opinion, short term trading is really like Sniping, "One shot, One Kill". While long term trading is like using a .50 calibre "Point and Spray".

Both methods will give you frags; however, the other just requires more skill and patience but has a better return.

Tuesday, December 15, 2009

Consolidating Market : Is GOLD the catalyst?

For the past 3 months, I notice that the market is in consolidation (but trending slightly up) that is why my money is sleeping. There are no violent index swings; and worse the stocks that I pick are lazy bastards. I got really bored.

Below is the graph I got from, I compared both PSEi and DJIA. I noticed that we are actually on last years (2008) first half levels.

If you try to compare the 1st half of last year and now, you will notice that the current economic scenario is the same.

The first half of 2008, there are analyst that said that we are on the verge of collapse, and other economic analysts say that the idea of a collapse is absurd.

Fourth Quarter this year, after April 2009's low, we can see clearly that the worst is probably is over. There are news of good jobs figures in Australia and there are bad news like Dubai's debt crisis. See Stock News, Noise, Fear and Greed.

If you observe the bull and and bear market, there is always a catalyst.

In 2008 - Sub Prime Mortages and Collateralized Debt Obligation
In 1929 - Margin Trading and Easy Credit (i.e. installment plan, credit cards)
In 1999 (Dot Com Bubble) - Hyped-up (enourmous P/E tech stocks) and Options Trading

I cannot research the reasons for all market crashes, so just see this list List of market Crashes instead.

Thus, in order for the market to move from consolidation mode to bull mode, there must be a catalyst.

I'm paying close attention to bloomberg and other finance news websites and channels to analyze what the next catalyst is.

Chart from Kitco.

So far, all I can see that there is a violent activity in Gold. In 1 year it went up 47
% (in 6 months it went up 30%). However, is this enough? Currently no it is not, since in order for a catalyst to work, the middle class must participate.

I'll wait for Finance Institutions to offer Gold based consumer investment products, that offer a ridiculously high gain.

Thursday, December 3, 2009

Stock News, Noise, Fear and Greed

I usually start my day by checking the bloomberg website. Lately a lot of significant news happened that made me almost rethink my strategy. Since my last post, Murphy's Law on the Stock Market, I'm still holding, waiting, praying and believing.

1. Dubai Debt Crisis (BAD)
I need to keep my eye on this story, since if Dubai defaults (which is unlikely though) we'll see another 1999-2000 market dip, similar to what happened when Russia also refused to pay-off their debts.

2. Australia to continue to Increase Interest Rates (NEUTRAL)
Having been to Australia just a month ago, this news cannot be seen as something positive yet. I went to Australia to attend technical handover since a large company there decided to outsource, to be able to stay competitive. Thus, there still might be fear of losing jobs and thus, not being able to spend as much.

3. Bank of America to Repay $45B Bailout Loan (GOOD)
This is obviously great news. But I'm still waiting for a stock buyback disclosures from the Large Banks. Since, if the current stock price is relatively low, and they think that everything is all good right now, then why don't they buy back their stock?

4. Gold Prices at 1200+ and still trending up (BAD)
In Philippines Stock Market, this news made Mining Companies stock jump. However, I'm now fearing a Gold Price bubble. When this happens, it might trigger panic and sell-of.

Majority of my portfolio is in Finance and Property sector. As for my finance portfolio, I'm still not bullish enough to put in more money, at the same time I'm not to bearish to lock in my profits. I'm still sticking to my Target Price.

As for my Property Sector (BPO Rental, Condominiums) , I feel bullish given the trend that to cut on costs, a lot of 1st world corporations are outsourcing. Thus, the recession might have been good to the Philippine BPO industry.

However, I'm setting my stops when DJIA falls to 9400 and PSEi falls to 2500.

Ayala Corporation recently announced a stock buy back, I wonder what new developments are they doing for them to be confident in buying back their stocks at 295.