AAR & TOL 01 (May 08 - Oct 08)

[millionairemind]

802,

With regards to Armstrong's spike up in huge volume ytd and no follow up this morning... do you think it is another pump and dump operation by the house traders or BBs?

If there is no follow up buying within the next couple of days, most stocks will simply drop by gravity..

Our mkt is so small and easily manipulated. Say there are traders on the T3B or TMT or TNT for that matter system who trade breakouts.. (I never attended T3B/TMT, so not advertising for them ), would they have gone in and buy them due to strong volume breakout and then get caught??

Will the BBs be able to engineer just the type of breakouts that the stock trading system like T3B would have notified its members to trade???

Just TOL..

mm

[iam802]

Yes, definitely a high chance for them to manipulate.

Since the trading volume is less than 100k before such 'pumps'.

Does not take a lot to drive it up.

Yet another reminder, to avoid (speculating) stocks with little volume.

[kennynah]

802,

With regards to Armstrong's spike up in huge volume ytd and no follow up this morning... do you think it is another pump and dump operation by the house traders or BBs?

If there is no follow up buying within the next couple of days, most stocks will simply drop by gravity..

Our mkt is so small and easily manipulated. Say there are traders on the T3B or TMT or TNT for that matter system who trade breakouts.. (I never attended T3B/TMT, so not advertising for them ), would they have gone in and buy them due to strong volume breakout and then get caught??

Will the BBs be able to engineer just the type of breakouts that the stock trading system like T3B would have notified its members to trade???

Just TOL..

mm

MM : quite imaginative indeed...hahaha...

[winston]

After Action Review

If you don't take a windfall profits, somebody else will

I have a stock that went up a lot in the past week. However, the PE is still only 8 and growth is expected to be 40% this year. Moreover, there was news that there would be new regulations that would be very beneficial to them.

Anyway, this morning, I put in a Trailing Stop Loss for half my position. For the other half, I figure that I will monitor it mentally.

Out of the blues, the waves of profit-taking came. I was stopped out for half my position and the other half just kept on going down and I did not manage to sell in time..

What did I do right and will continue to do ?
Always use a mechanical Trailing Stop Loss. A mental Trailing Stop-Loss may not be adequate, especially when the stock has gone up a lot in a very short time ( > 50% in 7 days )

What did I do wrong and should avoid doing ?
I was greedy. The stock has gone up a lot in a week. I should have taken my windfall profit. In addition, I should have put in a mechanical Stop Loss for the entire position instead of just half my position. As when there is a reversal, you would not be able to react in time...

Now that it has drop 11% today, it may be time to buy the rebound as the fundamentals are intact.

[iam802]

I got the same problem today as well.

Lost half the profits because the stock establish new high and I think there are some profit takings going on.

Sigh... from kopi-c become kopi-o.

----

EDIT: Should add a take profit strategy at 20% gain. (Maybe)

Going to take time off to read O'Neil's teaching again.

[kennynah]

What did I do right and will continue to do ? [/b]
Always use a mechanical Trailing Stop Loss. A mental Trailing Stop-Loss may not be adequate, especially when the stock has gone up a lot in a very short time ( > 50% in 7 days )

bro w: you cant win them all....you still win in thsi instance, nonetheless...

just an an exercise...if this stock had options (assuming american style), then this is a possible position to take, which ensures locking in profits and still offers unlimited upside potential....

supposing your stock price was at $5

Buy a front month Put at $4.50 strike (so that should the price suddenly plummet, the PUT will profit from ~$4.50 downwards)

and

Sell a front month Call at $6 strike (to largely fund your $4.50 Put premium. given that stock has risen aggressively recently, this Call option implied volatility would have risen, hence, i suspect that the OTM $6 Call would be expensive...worthy of a sell) >> this means that only when the stock price rise close to $6 that you would begin to start losing money on your Short $6 Call position... but one can really just close off that Short Call position...

W : i hope this example, gives clarity to our earlier discussion on the difference between "short" a warrant and "writing" an option... although both are technically "sell", in the former, you do NOT receive money for this trade. for the latter, you actually receive money into your account.

[winston]

W : i hope this example, gives clarity to our earlier discussion on the difference between "short" a warrant and "writing" an option...

Hi k, thanks for the kind reply. Unfortunately, there are no options in SGX and HKEX and I have to rely on more primitive tools

Yes, I recall our discussion on shorting warrants. I understand what you meant about writing options.

In Singapore, they use to allow people to short warrants. That is not allowed anywhere else in the world. The strategy of shorting warrants comes from a book called, "Fortune's Formula" by William Poundstone.

It is a very nice book about using Scientific Betting System to beat the Casinos and Wall Street. It goes into detail, the history of Edward Thorp, Michael Milken, Robert Merton, Myron Scholes, Claude Shannon etc.. Long book but I enjoyed every page of it..

[kennynah]

Hi W : oh yes...thorp was originally a professional blackjack gambler at casino until he became a trader...

[winston]

TOL:-

Many years ago, I read that the stock will crash when the baby boomers retire and withdraw their money from the stock markets.

Now that the first batch of the baby boomers are retiring, have they been withdrawing their money from the stockmarkets ?

So the stockmarket may be hit with a double-whammy:-
1) Retiring baby boomers who are continuosly withdrawing their money from the stockmarkets
2) Allocation of more money to Commodities, which is now regarded as an acceptable Asset Class

[winston]

TOL:-

There's plenty of money on the sidelines. Where would they flow to:-

1) Equities? Maybe, especially when some markets have corrected quite a lot already eg. China, Vietnam etc. What is the strong catalyst ?

2) Commodities ? They have gone up a lot already. So maybe they may wait for the correction before going back in.

3) Bonds ? Maybe good to buy bonds in places where their interest rates would be dropping. Where ? How ?

4) Foreign currencies ? NZ, Australia, Euro, Loonie

5) Remain as cash ? Baby boomers retiring..

6) Finally, that cash can also be used to short Equities, short Commodities, short British Pound etc.