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Share Investing Tips For 2013
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To the degree that someone like Roffey goes into I'd say probably, but many stocks are closely correlated with basic technicals. It's really a psychology thing - it's the proverbial self-fulfilling prophecy in that half the market believe in trading on technicals so they move the market accordingly. They're also pretty good tools in confirming trends. Using a single indicator as per my example is never a good idea (I could have been more clear on that). But if you're approaching a reverse head and shoulders pattern, are at the top end of the bollinger bands, notice a steady reversal through previous resistance levels, and identify trends in how the stocks previously performed in similar circumstances, then you can with some level of confidence have an expectation of where the stock is going to move. If you ignore all of these metrics then you're simply taking a shot in the dark and gambling imo.
This is why it is important to look at various charts to analyse a stock. If the 3 month, 6 months, and 1 year charts all trade in a pattern that you can easily identify, then you're probably on to something. For amateurs it is best to not dive in head-first, but to rather watch the stock for an entire month and place a few imaginary trades on paper. Paper-trades are a fantastic tool to confirm your strategy - people are forever looking for mock trading platforms when in fact all you need is a piece of paper, a pen, and a calculator.
What I'm trying to show is that you can invest or even trade with a fair degree of success by whatever method suits you, but understanding some basic technicals can help you to invest a little smarter. Such as looking at candle-stick charts. You can plot a linear progression of the bottom end of the candle-stick (shows the bottom end of the price) and depending on your charting software, can extrapolate that into a forecast. You can do the same for the top-end and easily identify a wedge pattern, for example. Once it begins to break through the resistance levels and a wedge pattern exists, it is safe to assume that there is downward pressure on the stock and you might want to look at getting out, or watching for it to bottom-out and get it. Also plot previous longer-term support and resistance levels which are certainly not hocus pocus. Understanding these helps you to determine where the stock is trading in relation to these - there might be massive support for the stock at the moment but historically it reaches a resistance level and reverses. If it breaks through the the trend is confirmed, that resistance level will more than likely become a new support level as well. Also don't forget to overlay the overall index and the index for the stock as well - see if it is moving with the market or whether it is moving the market. Plot a competitor as well. Plot the futures prices, particularly the JSE futures market if you have access to this data.
Although many of these are trading tools, they can to some extent to be extrapolated on to the investment environment as well. You can identify whether a stock is trading on the cheap and has done so historically. You can identify when such a stock breaks through previous resistance or support levels. You can with some confidence have an expectation of where the stock is likely to move in the short-term. You can monitor trading volumes and correlate these with volatility indicators to determine whether a stock matches your investment criteria (i.e. is there sufficient liquidity; is too volatile or is that what you're looking for? Is there a tapering off of volumes or an increase in volumes? etc) Does it trade cyclically? Are results being announced soon and if so, how is the stock performing beforehand? Do you want to be exposed to additional risk at this time? Look at how it is trading to determine that. Is there M&A activity in the industry as a whole or even in the company? What cautionary statements are out and why? Do they have a share buy-back scheme in place? Why? What is the intention? Are they clawing back control? Are they buying another company without diluting shareholder value? Are there board changes? What are the consensus estimates? Who are the expert analysts in the sector and what are they saying about the company?
I really could go on all day, but the bottom line is that becoming an expert in a few stocks is in my opinion a better strategy than trying to follow the wider market and chasing gains across the board. Importantly, you will understand why the stock is moving as it is. When you see a reversal pattern emerging, you can then dig deeper to understand why. Is this based on technical trading alone, or is there something else going on that you've missed? Similarly if it breaks through previous resistance levels. Why? Being a dart-throwing investor means you will not be able to answer these questions. Becoming an expert in a few means that you can. It also means that you might be happy to take a leveraged position using a derivative instrument later down the line, affording you the opportunity to go long and short on the stock and minimise capital outlay. The risks are higher but you'll have a deep understanding after months or even years of investing/trading the stock to the point where you actually feel comfortable in your positions. This means that you open the wider scope of your portfolio, allowing you to divest in other asset classes.
Bottom line is that chasing gains around the board will leave you a very unhappy investor imo. Everyone has an opinion. Not everyone as insight...
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Ou grote
Honorary Master
Agreed.
I Have read up on those charts before and looked at them, you can kinda create some on INET's igraph if you're bored enough.
I was that bored.
I could see that it'll be useful to someone when deciding when to buy shares, but I wouldn't put my money on it being 100% right.
When I think of them, the things that come to mind are "confirmation bias" and astrology.
Firstly, you never traded. You simply didn't. That much is absolutely evident. I wish you would stop punting yourself as an ex-trader because you really and truly are not.
Secondky, it's not my job to do your homework for you. All I'm trying to do is provide some guidance that I can frame into real-world scenarios, that speak to a wider strategy to adopt. I'm quite clear about technical analysis not being the be-all and end-all, but rather as a component of a strategy that entails becoming an expert in certain companies.
Personally I find your so called strategy to be incredibly dangerous. I believe that you lumping your family's future (your words, not mine) into a few stocks based on past performance is irresponsible. You seem to have the willingness to become a real investor but not the willingness to learn from others. I tried once to provide you with guidance on your portfolio and you fobbed me off and basically told me to get stuffed. You then refuse to admit your shortcomings every single time you are wrong about something, which is in every financial thread.
Some of the advice you give has merit, but it is masked in ten layers of bullschit as well, which is the issue. Your insistence for example that Vodacom is too volatile to be exposed to I just do not understand. While they might be traded irregularly, the company fundamentals are good. So advising that they're too volatile is simply not accurate. A value investor for example might find significant gains in Vodacom. See I have noticed that your strategy is to look for stocks that perform tremendously over previous periods and then you assume the same will hold true for the future. So a stock like Vodacom for example that often trades flat for periods is out for you. However that is not to say that there is no future gains to be had. See you don't have the wherewithall to determine this. Others might and you assume they're as thick as you when it comes to investing. I'd say that guys like supersunbird for example could really benefit in some guidance relating to a stock that trades wide, instead of hearing "too volatile". And in fact you're simply throwing the volatile word around to any stock that doesn't move in a linear progression upwards - that is not how it works.
Anyways, hopefully others will benefit from a little guidance in more misunderstood areas than "too volatile" "CML has a nice chart" "steer clear of <insert asset class or company>...
That's that self-fulfilling prophecy I was referring to. They are fantastic tools for investors and traders alike. While we plot intra-day charts the same principles apply on a wider scale to varying degrees of success. But that's why becoming an expert is so pivotal as you will slowly learn how to correctly plot a chart for your stock, instead of assuming that a 20 day moving average is required across the board.
Understanding price-points is important when you buy into a stock. You get into a stock and then watch it move south, then panic as an amateur and eventually pull out. When in fact if you understand the technical side and can correlate it properly, and identify trends and patterns, you will understand beforehand that this is a real possibility and rather hold out for a few weeks while it goes through the cycle. When it reaches realised support levels and begins to break through historical supports, confirmed with it trading in the "cheap range" and candle charts start showing a bottoming-out, well then you look at buying with some confidence and avoid the panic-stations scenario. Fundamentals, company performance and industry movements will dictate longer-term performance, but this way you're learning when to get in and when to get out.
Another example here - let's say you get in at R20.00 because you see the market moving upwards and your technical data supports this. How would you as an investor know when to get out without risking your gains? Well understanding support and resistance levels here can help you. If you're a long-term investor you probably wouldn't care, but if you're looking for value or swing trading a stock, or even investing over a shorter term, you can very easily deduce where the historical resistance levels are. So you place a trade with a limit order at just below previous resistance levels, thus locking in gains without too much risk. This is a decent lowish risk strategy. You could place no limit on the order and hope like hell that it bounces through resistance levels, but all you're doing is gambling. You have to ask yourself the question as to whether you want to be exposed to risk and at what level? If you're trading dividend yields then you might want to adopt a more bullish strategy. You might only make gains on 50% of your trades/orders but learning when to get out is important. A trailing stop-loss is vital in this scenario. So you minimise your downside risk and maximise your upside potential.
This is why I maintain that a decent trader operates off a lower risk base than most investors do. Your time in the market is minimal, you can capture spreads, identify arbitrage opportunities, trade on minimal risk in that you have access to level 2 data so you can see the live order book (although it's easy to fall victim to this when a block order is pulled) and you can trade the up and down side of the stock.
Anyways I have work to do. Hope this helps someone...
Ou grote
Honorary Master
Was wondering how these charts help you with holding companies like Remgro and Steinhoff?
Do they work on all shares?
There's still plenty of guesswork involved in those charts, no matter how much you analyse them.
RISKS Re-CORONATION
Market
The share price and earnings will clearly take a hit, albeit mitigated to some extent by the variable cost model, in any major downturn.
Underperformance
Underperformance by peers occurs frequently and it is still a given that an asset manager, who comes from nowhere to top of the log, is likely to head for the bottom soon afterwards. Coronation has however managed to maintain above-average performance consistently over time and, while this by no means eliminates the risk, it is thereby mitigated.
You say to stay clear of this sector. I copied and pasted the above from my broker's site.
I have been in Coronation for years and know it's personality by now. I can predict it with 90% accuracy. Read the CML thread on page 3 on ShareChat (Orca)
Yes. I don't use charts but use fundamentals and future prospects, management and PE Ratio. CML's assets under management increased by 62% in the last half of 2012 and results thereof will only show during 2013. The reason I did not mention CML at first is that it has a PE of 19. This is a bit high but the forward PE is 14. This share will therefore continue to shoot the lights out.
And yes. I know that some stocks thrive on high PE's but I steer clear of them.
Just to correct my previous post.
PNC and MTA gained 500% over the past 3 years. Not 4.
CML gained 400% over the past 3 years.
This will be higher with divies reinvested.
Market
The share price and earnings will clearly take a hit, albeit mitigated to some extent by the variable cost model, in any major downturn.
Underperformance
Underperformance by peers occurs frequently and it is still a given that an asset manager, who comes from nowhere to top of the log, is likely to head for the bottom soon afterwards. Coronation has however managed to maintain above-average performance consistently over time and, while this by no means eliminates the risk, it is thereby mitigated.
You say to stay clear of this sector. I copied and pasted the above from my broker's site.
I have been in Coronation for years and know it's personality by now. I can predict it with 90% accuracy. Read the CML thread on page 3 on ShareChat (Orca)
Yes. I don't use charts but use fundamentals and future prospects, management and PE Ratio. CML's assets under management increased by 62% in the last half of 2012 and results thereof will only show during 2013. The reason I did not mention CML at first is that it has a PE of 19. This is a bit high but the forward PE is 14. This share will therefore continue to shoot the lights out.
And yes. I know that some stocks thrive on high PE's but I steer clear of them.
Just to correct my previous post.
PNC and MTA gained 500% over the past 3 years. Not 4.
CML gained 400% over the past 3 years.
This will be higher with divies reinvested.
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Ou grote
Honorary Master
Was looking at the Unit trust returns this morning and Coronation seem to be slipping a bit....
Similarly, but at the end of the day you're exposed more to the fundamentals of a Remgro so more weighting is placed on them from a long term perspective. They still trade according to the psychology of the market though - there's no escaping that. But when you're trading, you're looking at indicators to an extent but more so at the level 2 data, so you can see the depth of the order book. It's kinda like reading the matrix. To an amateur these numbers make no sense but to a seasoned trader, watching the live trades you can identify entry and exit points, support and resistance levels and volatility with this data alone - you then confirm with your charting with a quick glance, look at the index movement, confirm the spread is right and then make a call right there and then. You then play the market a bit. Put in a few fake trades and pull them before they're executed to help move the market in your direction. You can even identify your counterparty with level 2 data if you know the asset you're dealing in. Like you can identify a market maker's block order, but that's not to say the market will move up. Various factors come in to play here now and they could be driving the price down. That's when you sit and capture a few spreads from idiots playing at this point, but you tend to steer clear here.
Wait, wtf were we talking about again?
Oh right, holding companies. TL;DR - yeah the same principles apply but you'll use various metrics specific to the company. Remember that I don't trade equities. I invest in equities but trade other asset classes...
I didn't say this whatsoever! :wtf:
Either you cannot read, or you do not understand what I am talking about...
Ou grote
Honorary Master
Ja-Nee, trading ain't for me.
Remgro is my favourite share, so if you here something bad let me know.
Going direct to market means you can capture the spread which is a fairly low risk strategy if you know what you're doing. Good fun, but a bit pricey if that's all you're interested in. As for having an ear to the market, well I'm busy with other projects now so hardly get a chance to look at the markets outside of what we're busy with...
Anyways, hopefully others will benefit from a little guidance in more misunderstood areas than "too volatile" "CML has a nice chart" "steer clear of <insert asset class or company>...
Was "Asset Managers" a hint to put in those brackets?
Ou grote
Honorary Master
I was looking at the last 6 months, and most of Coronation's are on a downward trend.
You know what investors are like, they chase performance.
Coronation make money out of fees...
Anyway, just saying...
Ou grote
Honorary Master
I believe that their are little men in little rooms wearing John Lennon type glasses who are smarter than me and do that type of shlt for a living, so I don't take them on.
I was referring to the advice that you constantly give. And asset class is not asset manager - they are two completely different things. Sometimes I wonder how you remember to breathe frequently...:wtf:
supersunbird
Honorary Master
Beg to differ.
Admittedly, this is over longer term (5 years), not short term (1 year and under).
Never thought I'd back marco up, but you're talking performance and he's talking consistency and risk management awards. To be honest the awards are just marketing gimmicks for the asset managers imo...
supersunbird
Honorary Master
He's talking both...
And the real award is performance imo.
EDIT: And thanks, I'm learning about some new things (with the help of google too) in your long posts above.
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