Investment Strategies 01 (Nov 08 - May 10)

[kennynah]

actually, reasons aplenty for market to go for a deep correction from recent rally, rather than for it going further up imo... here i am referring not to a day to day trading gyations during this period.

the USD is a very clear indication of whether US products/services are in good demand. it is obviously not, as USD is continuously being hammered down.... becos if the world had a huge demand for US products/services, we would all need to buy USD causing this Dollar Index to go up...but if you look at dollar index now, you will notice it is at the bottom with no indication whatsoever that it has bottomed out..

if it was institutional accumulation, volume indicator across all major US indexes would have shown their footprints... but there again, no evidence as yet to support this idea... it is not good enough with a day's rise in price and accompanying volume surpassing the previous day...it has to be at least consistently higher than the past 3 month's average for a few sessions...

but having said all this.. by the time things are all clear...great opportunities would have been gone... others would have seized them...just like in early Mar09... iwill be the first to admit, i didnt see it coming then...and so, i dont get paid... trading/investing is really all about spotting "it" earlier and daringly taking the trade faster than the next guy....

[Aspellian]

There is only one side of the market, and it is not the bull side or bear side, but the RIGHT side.
Markets are never wrong, opinions are.

[kennynah]

hahaha.... thanks for the textbook reminder... always very good to consume a teaspoon dosage of cod livermore

[kennynah]

There is only one side of the market, and it is not the bull side or bear side, but the RIGHT side.
Markets are never wrong, opinions are.

anyways... respectfully, i've always wanted to say my piece about this above adage, especially the last statement.

market movements are all about the consolidated opinions of market participants.... what else propels markets to move? certainly not by automated program trading alone...and even if it is program trading driven, these programs are developed based on a set of opinionated rules created by man...that is, these programs are as good as having a person executing those trades, except that the latter would not be as efficient in execution....

so if the consolidated opinions are wrong, then by inference, the entire market is wrong....which is ridiculous.

perhaps, it would be more accurate to suggest that an individual opinion can be very wrong vis-a-vis the market opinion...

so, it really surprises me that we can all be so sucked into regurgitating what we read ... to this end, i am sure a real culprit myself on several occasions...

again, not intending to offend anyone who stick by this age old adage... so, please dont get all worked up, ok

[winston]

Market has been stronger than expectation..

Buying on dips has been the right strategy. Barring a huge drop, buying on dips could be the right way to go.

At the same time, market players are getting nervous. When the correction comes, it could be very swift.

I'm not so smart to be able to tell what will happen so I will continue with my bottoms up approach ie. nothing to buy

[kennynah]

either bet one way or the other...or sand aside if really unsure where market is heading... say like no say like dat hor... so rhetorical statement...

but technically, a Bull trend is in play... how else to read the charts at this point? so, one should follow what the market says, which is a disciplined way of trading ... trust one's tools...otherwise, if we also second guess, then it will paralyze us eventually....

[winston]

whole world?

Hmmm.... maybe it's better to be with the crowd. The whole world cant be wrong. And if they are wrong, it does not feel too bad. At least people wont say you are stupid.

However, you would be branded an idiot, if you go against the crowd and is wrong ...

[Aspellian]

whole world?

Hmmm.... maybe it's better to be with the crowd. The whole world cant be wrong. And if they are wrong, it does not feel too bad. At least people wont say you are stupid.

However, you would be branded an idiot, if you go against the crowd and is wrong ...

Markets are never wrong, opinions are.

A) if market cheong when its the worst of times and end of the world of capitalism (eg. 13th Mar 09) and you follow behind, you will be fine.
B) if market cheong when GIANT H&S is taking shape and will kill all Longs/Rallies (eg. 13th Jul), and you follow behind, you will be fine.
C) if market turned downtrend and you still think it will cheong, and you go against it and buy on dips and average, you will be trampled.

During A), I bleeding and have forgotten about the knowledge that was presented to me years ago - thinking it was a load of crap.
During B), I have the knowledge but not the understanding - did not think about loading up the truck and no faith
During C), I will be ready when it happens.

[blid2def]

"Markets are never wrong, opinions are" == rhetoric used by college lecturers to bed their students.

[winston]

Time to start a thread on Selling

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Your Stock Just Went Way Up, Now What? by Marc Lichtenfeld

Highlights in this issue:
What to do when you're sitting on a winner.
Four benefits to locking in profits.
How to play with the "house's" money.


So your stock just went way up, now what do you do? We often hear from concerned investors who aren't sure whether to hold on or sell it all after a huge gain.

For example, I'm used to explosive gains in the biotech world, but I've never seen a moonshot quite like this one...

Shares of Vanda Pharmaceuticals (Nasdaq: VNDA) rocketed up by 625% on news that the company's schizophrenia drug, Fanapt, was FDA-approved. Earlier, the stock had opened at $9.99, having closed at $1.08 per share on Wednesday night - that's a massive 825% spike.

Even for a biotech veteran like me, a one-day percentage move like this is unprecedented.

When you reel in a big winner, you need to know when to dash off with the money. We recommend investors use trailing stops to help the lock in profits and prevent losses, but there is another strategy you can use when you see one of your holdings take off on you.

Popping the Champagne on Small-Cap Biotechs

All investing carries inherent risks, even more so when we deal with small-caps and volatile biotech stocks. We want to lower that risk whenever possible. However, that doesn't mean we avoid risk all together - on the contrary.

It means that any position we enter should have significant upside potential to offset that risk. The more risk... the more profit potential I need to recommend the stock.

Sometimes, good news is already priced into a stock. In the case of Vanda Pharmacueticals, it clearly wasn't. The reason why VNDA shares were so explosive is because virtually no one expected Fanapt to get the green light.

No doubt some VNDA investors were popping champagne corks, following the small-cap biotech's liftoff. It's probably made their year.

Others, however, are still trying to recoup their losses from the stock - even after today's monumental surge. That's because two years ago, VNDA was trading around $25.

Many investors who use trailing stops also pull money off the table when they feel a stock has moved up considerably - It could have helped VNDA shareholders two years ago.

Taking some money off the table when you're up is another way to lock in your gains and "sell high." Unfortunately, many investors don't.

Four Benefits of Locking In Profits

I'm a big proponent of taking partial profits on a winning position when appropriate. If a small-cap biotech stock is up significantly, locking in some gains serves four purposes:

Returns Investment Capital: While remaining in the position, I now have capital to put into other opportunities.

Helps Weather The Downside: If I still believe in the company and the investment, taking partial profits allows me to give the stock more room to fluctuate, as I'm no longer concerned with losing my original investment. It makes it possible to loosen up my trailing stops.

Participate In Upside: Having secured my original investment, I can now allow my winners to run. That's where truly large gains happen.

Removes Emotion from your Decisions: An unemotional investor is a smart investor. Knowing that you're playing with "the house's money" can allow you to make decisions based off your risk tolerance and investment horizon, not emotion.

Recently, when I recommended that subscribers take partial profits in a top-performing stock, I received a ton of email asking why... particularly when I expect the stock to go significantly higher.

I emphasized the reasons above - that taking some profits lowers our level of risk, while still allowing us to go for the home run.

I'll give you another specific example...

In my small-cap healthcare service, Access, we took 65% gains in half our position in SIGA Technologies (Nasdaq: SIGA). That's allowed us to let the stock run to current levels, which are now 158% above our entry price. It also allowed us to use that money for a number of other winners.

So while VNDA blasted its way higher, remember that it's a perfect example of how volatile the market can be - and how things don't always happen the way you expect.

One of the best ways to make sure that volatility doesn't negatively impact your portfolio is to play with the house's money whenever possible.