Catching a Falling Knife ( or Falling Safe )

Re: Catching a Falling Knife ( or Falling Safe )

Postby Chinaman » Mon Jul 09, 2012 12:25 am

kennynah wrote:so if you lose all these times, why do you still play?

how to say? .......ok, got spare cash leh, bank FD paying peanuts....so tikum some dividend stocks, hoping to get 5% dividend, but always loss in capital...e.g. brown babcock, macook reit, FSL, cambridge, etc, etc....

Hehe, but these 2 yrs got sifu...so skill improve little bit liao.....anyway my average dividend is around $1k per month.
from these:
SPH
Singtel
singpost
suntec reit
cambridge
Sia Engrg
First reit
Aim reit
....somemore....under-water stockssss
Preference share from..Hyflux 6%, DBS 4.7%, ocbc 5.1%, Genting 5.1%, CapMallBond 3.8%,etc.
...hehe, stop contd next chapter.
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Re: Catching a Falling Knife ( or Falling Safe )

Postby kennynah » Mon Jul 09, 2012 1:18 am

not bad lah...got some dividend every month... can buy chicken rice for lunch and a cup of kopi-o 8-)
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Re: Catching a Falling Knife ( or Falling Safe )

Postby winston » Mon Jul 09, 2012 6:26 am

kennynah wrote:so if you lose all these times, why do you still play?


Maybe because you dont see the losses straight away ie. you only realize the losses after a few years. So you continue to play and hope that it will turn-around.

On the other hand, if you go to RWS or MBS, you see the losses straight away, so you stop playing very quickly :lol: :P
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Re: Catching a Falling Knife ( or Falling Safe )

Postby winston » Mon Feb 03, 2014 7:42 am

How to Buy on the Dips by Chris Rowe

No investor wants to cut his hands trying to “catch a falling dagger,” but everyone wants to buy a bargain. Here’s a very simple strategy that will help ensure you’re buying “on the dips,” and not just being foolish.

The strategy has an incredible batting average, as you’ll see in the charts below. You simply buy when the daily Relative Strength Index (RSI) moves to a “buy” signal.

The RSI indicates the price momentum of a stock or a market relative to its own recent past. The indicator is very popular and is on just about every charting service (free or paid) I have ever seen.

We’ll use the S&P 500 to illustrate. The RSI data is seen in the bottom portion of each chart below. The RSI buy signal is reached when the RSI moves from below to back above the “30-line.” (It’s not enough for the RSI to simply be below 30; it must move back above the 30-line to be a buy signal.)

http://www.investmentu.com/2014/January ... -dips.html
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Re: Catching a Falling Knife ( or Falling Safe )

Postby winston » Tue Apr 28, 2015 8:18 pm

How to "Catch a Falling Knife" for Big Profits By Jeff Clark

Most traders are familiar with the cliché Wall Street warning not to "catch a falling knife."

You see, buying into a stock that is falling sharply is generally a bad idea. While picking the bottom of a stock can lead to massive gains… if you buy at the wrong time, it can lead to big losses. And, frankly, most of the time… that's what happens.

But there are times when the knife is so close to the ground – where the risk of further loss is minimal, and where the potential gains are so enormous – that it makes sense to reach out and grab it.

Today, I'm going to show you how to find these setups…

Let's start by looking at an example. Take a look at this chart of Lululemon Athletica (LULU), the sports apparel manufacturer known best for its line of yoga clothes…

Please Enable Images to See this

Back in December 2013, LULU shares dropped nearly 20% overnight (point 1 on the chart) in reaction to some bad news from the company. Now, it doesn't matter what the actual news was. The important thing to recognize here is that this was NOT a good time to buy shares of LULU. Bad news is usually NOT a one-time event. There's almost always a second shoe to drop.

So if you want to profit from "falling knives," the first rule to follow is to never buy a stock on the first decline from bad news. There's usually more trouble to come.

Sure enough, after a brief period of consolidation from mid-December 2013 to mid-January 2014, LULU once again tumbled 20% (point 2 on the chart) in reaction to bad news.

This bring us to our second rule… After the second shoe has dropped, traders can start looking to buy – if the technical condition supports a bottom.

I like to look at the Moving Average Convergence Divergence (MACD) momentum indicator to get an idea of where a stock is likely headed next.

The MACD indicator helps to gauge the overall strength of a trend. For example, if a stock is dropping to new lows and the MACD indicator is hitting new lows as well, then the downtrend is strong and likely to continue.

On the other hand, if the stock is dropping to new lows but the MACD indicator is rising, this "positive divergence" is likely an early warning sign that the trend is ready to reverse.

In the above chart, when LULU dropped to a new low in early February 2014, the MACD indicator also dropped to a new low – confirming the downtrend in the stock.

No matter how attractive the stock might look at this point, traders should avoid the temptation to buy it if the technical condition doesn't support a bottom. There's still more room to fall and at least one more shoe to drop.

That's what happened in June 2014. Once again, LULU announced bad news and the stock fell 15% in one day (point 3).

But notice the different action in the MACD indicator at this point. As LULU was dropping to a new low, the MACD was trending higher. This is the sort of positive divergence that reduces the risk of catching a falling knife.

At this point, we had a stock that had fallen hard three times on bad news. It was trading for half the price it traded at six months earlier. And a key technical indicator was signaling that the trend was ready to reverse. This was a low-risk area for traders to buy.

And just look at what happened next…

Please Enable Images to See this

As you can see, LULU's June 2014 low marked the bottom for the stock. But LULU didn't mount a sustainable rally right away. Instead, the stock chopped around for a few months in a relatively tight trading range. Then, it exploded higher. Anybody who caught the falling knife last June is now sitting on around a 75% gain – in just 10 months.

To sum up, if you want to profit from a falling stock – there are two important things to remember.

1. Never buy a stock on the first decline from bad news.

2. Only buy a stock when the technical condition of the stock supports a bottom.

If you follow these two rules, you can set yourself up to make big profits with low risk from falling knives.

Source: www.growthstockwire.com
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Re: Catching a Falling Knife ( or Falling Safe )

Postby winston » Sat Feb 06, 2016 5:50 pm

Are You Buying a Bargain Or Catching a Falling Knife?

By Charles Mizrahi

Source: Guru Focus

http://www.thetradingreport.com/2016/02 ... ing-knife/
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Re: Catching a Falling Knife ( or Falling Safe )

Postby winston » Sat May 13, 2017 2:00 pm

The rules for breakdowns:

by Jim Cramer

1. When you give a big order to a trader, say, to sell 300,000 Allergan (AGN) today, that trader will work the order and with the last bit of stock, knock AGN down, so the average that he got for you is better than the last sale. That's why it is so perilous to come in right here and start buying.

2. When a stock breaks down hard, it usually means that there are so many sellers, that the orders can't get done and buyers can't be found.

3. The company itself is helpless. Sure a CEO can buy stock and that can mean something. But you won't know it when it happens, it will come later.

4. The analysts know this and they are reluctant to defend--to come out of their foxhole--until the selling is finished. So there's plenty of time, even if you think there's a bargain.

5. There can always be a deviation to this scenario, but they are few and far between.

Source: The Street

https://www.thestreet.com/story/1413335 ... -blog.html
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Re: Catching a Falling Knife ( or Falling Safe )

Postby winston » Thu Sep 07, 2017 7:20 am

These Stocks Are Still Sell Candidates

By Cory Mitchell

A beaten-down stock lures in a lot of people who think, "It needs to bounce at some point."

Bottom picking can be a dangerous game, especially without strict risk management rules that stipulate exactly when to throw in the towel. (That goes for all trading, not just bottom picking).

When a beaten-down stock rallies off a low, that can be especially alluring, as it may give the appearance of a reversal.

But more often than not, it is better to trust the trend.

If the trend is down, it is often wise not to buy into the stock, and traders may be better off selling or shorting the shares instead.

It is important to keep the trend in mind. If the trend is down, it may be alluring to try to bottom pick. While this tactic may occasionally work, most traders are better off selling or shorting on the short-term rallies instead of buying them (during a downtrend).

Since downtrends tend to make lower lows, as long as the downtrend is intact, there is usually more room on the downside than on the upside.

However, trends do reverse. If a rally in a downtrend is big enough to erase the prior major down wave, that draws the downtrend into question.

If the price then makes a higher swing low, an uptrend may be under way, and it is a better time to buy.


Source: Investopedia

http://www.investopedia.com/news/these- ... yptr=yahoo
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Re: Catching a Falling Knife ( or Falling Safe )

Postby winston » Sat Sep 09, 2017 9:47 am

Oversold

Unfortunately for us, a bell doesn’t ring at the magical point when a stock is trading at levels well below the value of the company. There are a variety of tools and metrics that are employed in this task.

Technical analysis also has its own laundry list of measurements. The problem with all the above is the fact that oversold stocks generally become even more oversold. Selling begets selling, and panic and emotions wipe out rational thoughts.

I look at potentially oversold stocks by assessing what sparked the selling in the first place. My confidence level for stocks after a large decline in value needs to be built on at least 52 weeks of positive execution and evidence that key issues have either been resolved or are on the verge of being resolved by management.

Source: Charles Payne, Investor Place
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Re: Catching a Falling Knife ( or Falling Safe )

Postby winston » Sat Sep 09, 2017 9:49 am

Over Shorted

Shorting stocks is a method of benefiting from a decline in share price. This is about big bets on big drops.

There are times when shorting a stock is like shooting a fish in a barrel, but unlike going long, there is unlimited risk as stocks can move up more than 100%.

Deep-pocketed professional investors who short stocks make it personal. They aren’t happy with the shorted stock dropping 10% or even 50%. Instead, their goal is to see total destruction. Their cut throat reputation sparks shareholders to panic sell while at the same time attracting additional shorts.

But just as shorts are looking for gigantic wins, they are reluctant to take losses. In fact, it’s been said on Wall Street that “shorts go out on their shields.

Just look at these statistics:
$23 billion in Alibaba (BABA) is short and the stock is up 95% this year
As much as $11 billion was shorted in Tesla (TSLA), which is up 66% in 2017

Shorts usually have more luck in small- and mid-cap names, but as they continue to crush more and more, they’ve been forced to content with bigger game that fights back. This is where the opportunity arises.

Source: Charles Payne, Investor Place
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