I am too busy researching MLX today to write anything here.
I don't have time.
I will write something here about it later.
But I am very happy with what I have found.
When the market craps out I know what to buy.
Tuesday, July 22, 2008
Monday, July 21, 2008
Return
Today was my first day back in the office after my holiday.
It seemed terribly uneventful even though it was the biggest rally in 4 month (a 150 point move
It could well be the bottom as it broke out of the down trend channel and closed above 5000 too.
Chart below. Hmmm...
I found it uneventful in the fact that - yes it is a massive up day, but it is still difficult to believe and trust that this is the bottom. This is only ONE up day after all...
So - Yes a big day, but it seems like an un-tradable rally.
This week is also massive, PPI came out today and was 1% vs 1.6% (!!!!). Basically this should reflect in Wednesdays CPI, and this has a good chance of being a lot weaker because of the PPI today. Hence - we could be looking at the beginning of a interest rate cut cycle (as opposed to tightening). I think this contributed quite strongly to todays rally.
Also a whole bunch of U.S banks report earnings this week. Apparently they have changed an accounting rule whereby a debt only becomes bad after 4 months as opposed to the old 3 month rule. Hence, earnings although negative will be less negative because it will be excluding one month less of bad debts. These guys really are desperate to make this crisis look more mild than it really is... even if it makes it look better on paper. These problems are not going away in a hurry.
For example, while I was on holiday, check out Freddie Mac and Fannie Mae, the U.S's government sponsored banks.
They look like they are about to go broke. Fannie Mae's sub prime exposure if written down the typical 20% minimum as has been the standard is twice the equity value of the firm. Freddie Mac is no better. In other words, these guys are broke, and it is only a matter of time. The possibility of a government bail out is keeping it afloat I would imagine... it certainly would make me hesitant to short it despite the fact its broke. Who knows, the government may just want to print them more money and use it to write away all their bad debts. Economic genuis *cough*.
I did get long ONE thing today, despite how uneventful today was. Yes, it was good old Sundance Resources. It caught my eye at 26.5 today as it was churning some massive volume at those levels. No matter how many times it came back offered it was continuously taken - between 10am and 2pm. This is what caught my eye initially. I pretty much knew if it broke through 26.5 it was off to the races. To what extent however I was not sure. We had geometric angles at 0.285. This however also failed miserably. It closed on a new high of 0.315, which is where I got long. (I feel more comfortable getting long on the close, even if i pay up, it is usually a sign that the next day will be strong.)
It surprised me because the news in itself is absolute crap. 1.2billion tons of terrible quality iron ore thats a million years away of ever being mined justifies an increase of marketcap of $150million? How stupid. Its hard to overlook at chart like this though...
Small-ish size and a very tight stop.
U.S is indicating up but its still an hour early.
Anyway - thats me out. Let's see what tomorrow brings.
Friday, July 18, 2008
Holiday
Well, I am back from holiday today.
I went to New Zealand for 11 days - so that explains the long silence here.
I had a lot of fun and I learnt how to snowboard.
It was a good time to leave the markets and clear my head. How am I going to trade this bear market?
I will be thinking this now over the next two days and I will post ideas as they come to me here.
It looks like I did not miss anything in the markets while I was gone.
The XJO broke to new lows, along with the rest of the world.
There appears to be no sign of a bottom yet.
I managed to clear my book of everything before I left on my trip. So - continuing on from the ARW trade, I sold the open (luckily), it got creamed 16% intra-day. I guess I learnt that when buying stocks on their highs make sure it has done a lot of volume through other important levels - otherwise the continuing rally will be weak if other holders have not had the opportunity to be churned through the buy side yet. It was a cheap lesson, about $200.
NSL came out of trading halt last week. Down 50% - ouch, thats got to hurt.
Note to self: It something runs and the news turns out to be some stupid merger - it is going to get smashed. Just like that other oil company a few months ago... the fact I can't remember the name does not help. Glad I never got involved in this one.
My agricultural favourites have been punished recently, namely RWD and MAK. I dumped POZ at 80 cents - which is good considering its back to 65 cents. The decision was based on an on close stop of 80 cents (very tight). It was to make sure I cleared my book before I left.
Some news on the Ag space:
"FORMER diamond tsar Joe Gutnick has teamed up with India's largest fertiliser supplier and investment icon George Soros in a proposed phosphate operation in northwest Queensland.
Under a deal announced yesterday in Brisbane, the Indian Farmers Fertiliser Cooperative, or IFFCO, will inject slightly over $100 million into Mr Gutnick's plan to ship phosphate from the company's four holdings around Mt Isa."
I really do wonder if the Georgina basin will become the next Pilbara for Phosphate? I am definetly keeping this theme in the back of my head for the longer term. If it happens I know exactly what to buy... I am totally prepared. This may be the trade that propels my capital to the next level.
I don't know what else to say, other than the fact that I am tired right now... I need to get back into the swing of things. I have had too much fun and not enough work. I feel totally blunt, if i was to trade today I would probably blow $30k being stupid. Usually I am sharp and nothing gets past me. I hope I get my killer instinct back for Monday.
Good thing that I only have to take a holiday once a year. I don't think I could handle twice a year.
Add on Note:
http://www.guardian.co.uk/business/feedarticle/7661139
NEW YORK, July 18 (Reuters) - Citigroup Inc, the largest U.S. bank, posted a smaller-than-expected quarterly loss on Friday despite $11.7 billion of write-downs and credit losses tied to deteriorating capital markets and the slumping economy.
The second-quarter net loss totaled $2.5 billion, or 54 cents per share, and compared with a year-earlier profit of $6.23 billion, or $1.24 per share. Shares rose 9.1 percent to $19.60 in pre-market trading.
"It appears the worst may be over in the subprime mess," said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey. "There appears to be a bandage on the wound."
Dear oh dear...
this really is going to get worse.
People are happy at a $2.5billion loss.
Even if its still smaller than expected, cant they see these banks are still making massive losses?
When will the penny drop?
I went to New Zealand for 11 days - so that explains the long silence here.
I had a lot of fun and I learnt how to snowboard.
It was a good time to leave the markets and clear my head. How am I going to trade this bear market?
I will be thinking this now over the next two days and I will post ideas as they come to me here.
It looks like I did not miss anything in the markets while I was gone.
The XJO broke to new lows, along with the rest of the world.
There appears to be no sign of a bottom yet.
I managed to clear my book of everything before I left on my trip. So - continuing on from the ARW trade, I sold the open (luckily), it got creamed 16% intra-day. I guess I learnt that when buying stocks on their highs make sure it has done a lot of volume through other important levels - otherwise the continuing rally will be weak if other holders have not had the opportunity to be churned through the buy side yet. It was a cheap lesson, about $200.
NSL came out of trading halt last week. Down 50% - ouch, thats got to hurt.
Note to self: It something runs and the news turns out to be some stupid merger - it is going to get smashed. Just like that other oil company a few months ago... the fact I can't remember the name does not help. Glad I never got involved in this one.
My agricultural favourites have been punished recently, namely RWD and MAK. I dumped POZ at 80 cents - which is good considering its back to 65 cents. The decision was based on an on close stop of 80 cents (very tight). It was to make sure I cleared my book before I left.
Some news on the Ag space:
"FORMER diamond tsar Joe Gutnick has teamed up with India's largest fertiliser supplier and investment icon George Soros in a proposed phosphate operation in northwest Queensland.
Under a deal announced yesterday in Brisbane, the Indian Farmers Fertiliser Cooperative, or IFFCO, will inject slightly over $100 million into Mr Gutnick's plan to ship phosphate from the company's four holdings around Mt Isa."
I really do wonder if the Georgina basin will become the next Pilbara for Phosphate? I am definetly keeping this theme in the back of my head for the longer term. If it happens I know exactly what to buy... I am totally prepared. This may be the trade that propels my capital to the next level.
I don't know what else to say, other than the fact that I am tired right now... I need to get back into the swing of things. I have had too much fun and not enough work. I feel totally blunt, if i was to trade today I would probably blow $30k being stupid. Usually I am sharp and nothing gets past me. I hope I get my killer instinct back for Monday.
Good thing that I only have to take a holiday once a year. I don't think I could handle twice a year.
Add on Note:
http://www.guardian.co.uk/business/feedarticle/7661139
NEW YORK, July 18 (Reuters) - Citigroup Inc, the largest U.S. bank, posted a smaller-than-expected quarterly loss on Friday despite $11.7 billion of write-downs and credit losses tied to deteriorating capital markets and the slumping economy.
The second-quarter net loss totaled $2.5 billion, or 54 cents per share, and compared with a year-earlier profit of $6.23 billion, or $1.24 per share. Shares rose 9.1 percent to $19.60 in pre-market trading.
"It appears the worst may be over in the subprime mess," said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey. "There appears to be a bandage on the wound."
Dear oh dear...
this really is going to get worse.
People are happy at a $2.5billion loss.
Even if its still smaller than expected, cant they see these banks are still making massive losses?
When will the penny drop?
Friday, July 4, 2008
False Hope
I feel like the rally we have experienced today is just giving people false hope.
Some like to call it 'a dead cat bounce'. In other words, even though it is dead by the time it hits the ground it will still bounce shortly afterwards - that is right before it finally hits the ground once again -officially declared dead. This is what I think of the markets right now. If it was a bottom why didn't the short sellers cover in a fit of panic?? The buying would have been a lot stronger than what it was. It truly was a piss weak rally (like 70 points on the Dow). And it is the 4th of July and the U.S only had a half session - there is no trading tonight...
I didn't post yesterday because it felt quite uneventful. But it actually was significant - I guess I was just lazy not to post. I was all cash and it turned out to be the right decision, my colleague didn't capitulate at the bottom! I found that interesting. But perhaps he has capitulated "NEAR" the bottom? Hmmmm....
A lot of the stocks I followed were off 10-20%. Coal stocks in the U.S tanked 13% on average. I was getting lunch from my usual plaza and I ran into a broker I knew from years ago. He is a very nice man.
**I feel a poke on my shoulder**
Me: 'Wow, hey! How are you going??'
Him: 'I am great!'
Then, the first thing we said to each other, even after all these years...
Me: 'Did you see coal last night?'
Him: 'Yeah! All the majors off 13% on average.'
Me: 'So why did oil close higher on the same day?'
Him: 'That is exactly why it will go back up...'
Me: 'Do you think its a matter of people factoring in slower world growth? **Then I realise he is in a hurry** Oh well.. nice seeing you!
Him: "Take care!"
I wonder if coal will be like the uranium move... will it strangely dwindle to the downside despite the strong global fundamentals? I guess the impetus for uranium is a lot further in the future than coal. Is this just the hot money leaving temporarily? Anyway all our majors were off 10% plus in the coal sector - and they were buying BANKS!! Of all things... I guess the long resource-short bank trade is beginning to unwind.
Maybe high P/E coal stocks are a good thing to go short now???
I saw a few bargains pop up yesterday (namely MAK at $1.35) but I did not touch anything because the market looks dangerously placed. MAK traded out $1.65 today - but I am not overly concerned I missed that trade. I stuck to my game plan, I dont buy downtrends and I dont buy extreme weakness.
As I mentioned a few days ago - I have been holding a stock called POZ for about 3 days now. Well, it went up 26% today, and 15% the day before that.
I decided to trade it - I put some out on the offer and kept getting done. The bids kept creeping up. I fed them 10 and 20 thousand at a time. When it broke to new highs I was forced to buy them back - I decided that I CAN NOT be left out of this in the event it keeps running. I always made the mistake of selling early on other stocks - well not anymore, I have well and truly learnt that lesson. Markets DO overshoot, go with it.
I ended up pushing the market around from both directions. At the end of the day I was 15% of the volume traded (!!!) and I managed to pocket $10k of profits in the process. It was less than if I just stayed long in the first place from my original entry - but on the other hand I would have carried more intra-day risk if it failed to rally. I rebought everything on the close which also happened to be the high. Monday should bring more joy I figured - I will smash the open price which is likely to be an overly enthusiastic extension to the upside.
The thing that irked me about today though was my online trading account screwing up. It was saying that I was net short when I in fact thought I had balanced my account. Then my CHESS holdings went down. It took about 15 minutes of sitting waiting on the phone line for "customer support" to take my call. Meanwhile I was VERY scared at the thought of me being net short a hugely illiquid, speculative and upward momentum driven stock!
It turned out I was net long all along - which was a relief. It was still a worry that it shut itself down like that. The guy said it was because "I was trading too much and too often, your CHESS holding system couldn't handle it". LOL. This is the first time anyone ever told me this. Am I overtrading? Is this a sign of my overconfidence? Hmm...
I also got long ARW - check this chart out!!!
If this is not insider buying I will be amazed.
If not it is still a decent excuse of a company to be buying it. Agricultural inputs in and oil out (biodiesel). I have spoken to management in the past and they were honest to me. The reason it fell from grace in the first place was a stagnate oil price relative to agricultural commodities going through the roof. Well, as of late that formula has compeltely reversed. So the upside remains huge. Their net assets are basically trading at par of market capitalisation, and sales agreements have been signed before.
I grabbed $50,000 worth on close for a punt.
Oddly enough my colleague refused to go with the momentum (and he is meant to be the momentum trader!!). Maybe he is afraid of getting sucked into the false hope I mentioned at the beginning? My positions are small and I am quick on my feet in the event things go sour. Until then, I am chasing momentum on the small caps that are going against the market tide.
Oh yeah, and before I sign off, I finally was able to go to the bank to ask about a short account. Looks like I have to set it up as a margin account using the equity as collateral. Apparently I already have the capability to short on the day - but how useless is that??
Happy trading and tight stops.
Some like to call it 'a dead cat bounce'. In other words, even though it is dead by the time it hits the ground it will still bounce shortly afterwards - that is right before it finally hits the ground once again -officially declared dead. This is what I think of the markets right now. If it was a bottom why didn't the short sellers cover in a fit of panic?? The buying would have been a lot stronger than what it was. It truly was a piss weak rally (like 70 points on the Dow). And it is the 4th of July and the U.S only had a half session - there is no trading tonight...
I didn't post yesterday because it felt quite uneventful. But it actually was significant - I guess I was just lazy not to post. I was all cash and it turned out to be the right decision, my colleague didn't capitulate at the bottom! I found that interesting. But perhaps he has capitulated "NEAR" the bottom? Hmmmm....
A lot of the stocks I followed were off 10-20%. Coal stocks in the U.S tanked 13% on average. I was getting lunch from my usual plaza and I ran into a broker I knew from years ago. He is a very nice man.
**I feel a poke on my shoulder**
Me: 'Wow, hey! How are you going??'
Him: 'I am great!'
Then, the first thing we said to each other, even after all these years...
Me: 'Did you see coal last night?'
Him: 'Yeah! All the majors off 13% on average.'
Me: 'So why did oil close higher on the same day?'
Him: 'That is exactly why it will go back up...'
Me: 'Do you think its a matter of people factoring in slower world growth? **Then I realise he is in a hurry** Oh well.. nice seeing you!
Him: "Take care!"
I wonder if coal will be like the uranium move... will it strangely dwindle to the downside despite the strong global fundamentals? I guess the impetus for uranium is a lot further in the future than coal. Is this just the hot money leaving temporarily? Anyway all our majors were off 10% plus in the coal sector - and they were buying BANKS!! Of all things... I guess the long resource-short bank trade is beginning to unwind.
Maybe high P/E coal stocks are a good thing to go short now???
I saw a few bargains pop up yesterday (namely MAK at $1.35) but I did not touch anything because the market looks dangerously placed. MAK traded out $1.65 today - but I am not overly concerned I missed that trade. I stuck to my game plan, I dont buy downtrends and I dont buy extreme weakness.
As I mentioned a few days ago - I have been holding a stock called POZ for about 3 days now. Well, it went up 26% today, and 15% the day before that.
I decided to trade it - I put some out on the offer and kept getting done. The bids kept creeping up. I fed them 10 and 20 thousand at a time. When it broke to new highs I was forced to buy them back - I decided that I CAN NOT be left out of this in the event it keeps running. I always made the mistake of selling early on other stocks - well not anymore, I have well and truly learnt that lesson. Markets DO overshoot, go with it.
I ended up pushing the market around from both directions. At the end of the day I was 15% of the volume traded (!!!) and I managed to pocket $10k of profits in the process. It was less than if I just stayed long in the first place from my original entry - but on the other hand I would have carried more intra-day risk if it failed to rally. I rebought everything on the close which also happened to be the high. Monday should bring more joy I figured - I will smash the open price which is likely to be an overly enthusiastic extension to the upside.
The thing that irked me about today though was my online trading account screwing up. It was saying that I was net short when I in fact thought I had balanced my account. Then my CHESS holdings went down. It took about 15 minutes of sitting waiting on the phone line for "customer support" to take my call. Meanwhile I was VERY scared at the thought of me being net short a hugely illiquid, speculative and upward momentum driven stock!
It turned out I was net long all along - which was a relief. It was still a worry that it shut itself down like that. The guy said it was because "I was trading too much and too often, your CHESS holding system couldn't handle it". LOL. This is the first time anyone ever told me this. Am I overtrading? Is this a sign of my overconfidence? Hmm...
I also got long ARW - check this chart out!!!
If this is not insider buying I will be amazed.
If not it is still a decent excuse of a company to be buying it. Agricultural inputs in and oil out (biodiesel). I have spoken to management in the past and they were honest to me. The reason it fell from grace in the first place was a stagnate oil price relative to agricultural commodities going through the roof. Well, as of late that formula has compeltely reversed. So the upside remains huge. Their net assets are basically trading at par of market capitalisation, and sales agreements have been signed before.
I grabbed $50,000 worth on close for a punt.
Oddly enough my colleague refused to go with the momentum (and he is meant to be the momentum trader!!). Maybe he is afraid of getting sucked into the false hope I mentioned at the beginning? My positions are small and I am quick on my feet in the event things go sour. Until then, I am chasing momentum on the small caps that are going against the market tide.
Oh yeah, and before I sign off, I finally was able to go to the bank to ask about a short account. Looks like I have to set it up as a margin account using the equity as collateral. Apparently I already have the capability to short on the day - but how useless is that??
Happy trading and tight stops.
Wednesday, July 2, 2008
Capitulation
Today, a colleague I work with "capitulated".
For those that may not know, this means after experiencing a lot of pain day after day holding onto losing positions that just keep getting worse the person finally closes out these positions in order to relieve the pain.
It can be quite liberating to throw in the towel and let it all go. The positive reinforcement a person gets from the ease of pain makes them feel like it was the right decision to relieve themselves of their positions.
The reason why I think it is significant is because it usually means the market has bottomed.
I also found it interesting because I found myself selling a lot of crappy positions I had held.
Whether its the bottom or not today will be telling.
What did I do today...?
Well, firstly I dumped IGC (the stock I got long yesterday on the close). It was at a miniscule profit (whoopdy-do). It was basically a scratch trade because the SPI was coming off and the buyers were not queuing up after yesterdays impressive rally. It led to the right decision ultimately so I am happy sticking to my trading plan (which is selling on open if there is no excitement).
It was also interesting to note that RCH, OMH and MUR also did nothing today - so I was fortunate to have passed them up. Overall - it was a success as I avoided putting myself in a bad situation.
RWD - a stock I sincerely believe in, was also smashed today. RWD is a potash stock. In fact it is the only stock in Australia that has a listed potash JORC. I am very bullish potash. Although this is the case RWD may have logistical problems because it is in the middle of Western Australia. Hence transportation of product may be difficult. Nonetheless these deep brine salt lakes (in this case Lake Dissapointment) are very rare to find in the world. Compass Minerals (a Canadian company) has a startling similar resource and is valued with a market capitalisation of over A$2billion. RWD is being priced at just over $100million. The difference in this case is that Compass is already producing - however the scope for RWD given this appears to be bright.
I was fortunate enough to bail on RWD just before the smashing. A relatively big sell order for the market depth appeared before the open which was well below the market. I figured he had some sort of agenda (perhaps insider?) to offer it so well below the market. Moreover he looked legit as he was not pulling his offer in the final minutes of the match. So I went below him in the final seconds of matching and scratched my trade before the open. Overall, it was good execution, and I am pleased with myself.
I scrapped more CWK. Perhaps it was my own personal "capitulation". I realised yesterday and today that I bought far too many as it continued to fall (a cardinal sin I now understand and appreciate). I will remember to not add to my longs as its falling unless it was predetermined and that amount I am adding is bearable if the position continues to turn sour. Because of this mistake I took a far larger loss than I should have. It has ruined my past 2 months work. Tuition can be very expensive in the markets, but I will try my best to make the most of it. In summary, although the fundamentals for CWK are very attractive I had far too many for the type of buy it was intended to be (a pure fundamental play). I can always buy them back if market sentiment turns favourable again, but for now I prefer the cash combined with a lesson hard learnt to boot.
Finally, I cut some POZ at a small profit. I figured I better reduce my position since I think the market is about to turn very sour. No matter how hard the fundies tried to rally our markets they always come back to offer it - it is very concerning. Although it is generally a mistake to sell out for such small profits I was taking market risk into consideration rather than the desire to take my profits off the table (which is also a cardinal sin).
I still have POZ and CWK as I believe in their fundamentals, just a much more reasonable size for a market that has a large possibility of crashing.
Right now I am 85% cash.
This is what the market looks like right now. It was interesting what my colleague proposed:
"You know it is always funny to look back at previous market crashes and see this big nice rounding top right before the splat. Then you ask yourself 'why was anyone stupid enough to be long in that market when it was so obvious it was going to crash?' A child could look at it and tell you it was going down. Its definetly not rocket science."
The scary thing is I think he is right. Perhaps some traders (including myself) are being way too complex about the whole thing. Quite simply, it looks like the markets have a good chance of capitulating/crashing/seriously falling from here.
I am happy that my position in cash reflects my beliefs at this stage. I have learnt not to become too attached to my positions. Another cardinal sin is for a trader to let his positions dictate what his oppinions are and not letting his oppinions dictate his position. I am glad I have overcome this as it was a problem in the past. It disallows someone from thinking objectively about the situation.
I also went to my brokers outlet to ask if I can open up a short account. I dont think I will be able to profit from being long only in the future what is now obviously a bear market. They were closed as I arrived after 4pm... lazy paper pushes. Well I am a lazy paper pusher that finishes at 4pm as well so I can't really say that - we are the same breed.
I went for a long walk around the city after this passing up the earlier bus contemplating what happened today and what the future may hold for the markets. The images I conjured were up very bleak indeed.
Whether this is the bottom or not will be very interesting for me. I will watch and learn as much as I can.
Be careful out there and stick to your stops.
For those that may not know, this means after experiencing a lot of pain day after day holding onto losing positions that just keep getting worse the person finally closes out these positions in order to relieve the pain.
It can be quite liberating to throw in the towel and let it all go. The positive reinforcement a person gets from the ease of pain makes them feel like it was the right decision to relieve themselves of their positions.
The reason why I think it is significant is because it usually means the market has bottomed.
I also found it interesting because I found myself selling a lot of crappy positions I had held.
Whether its the bottom or not today will be telling.
What did I do today...?
Well, firstly I dumped IGC (the stock I got long yesterday on the close). It was at a miniscule profit (whoopdy-do). It was basically a scratch trade because the SPI was coming off and the buyers were not queuing up after yesterdays impressive rally. It led to the right decision ultimately so I am happy sticking to my trading plan (which is selling on open if there is no excitement).
It was also interesting to note that RCH, OMH and MUR also did nothing today - so I was fortunate to have passed them up. Overall - it was a success as I avoided putting myself in a bad situation.
RWD - a stock I sincerely believe in, was also smashed today. RWD is a potash stock. In fact it is the only stock in Australia that has a listed potash JORC. I am very bullish potash. Although this is the case RWD may have logistical problems because it is in the middle of Western Australia. Hence transportation of product may be difficult. Nonetheless these deep brine salt lakes (in this case Lake Dissapointment) are very rare to find in the world. Compass Minerals (a Canadian company) has a startling similar resource and is valued with a market capitalisation of over A$2billion. RWD is being priced at just over $100million. The difference in this case is that Compass is already producing - however the scope for RWD given this appears to be bright.
I was fortunate enough to bail on RWD just before the smashing. A relatively big sell order for the market depth appeared before the open which was well below the market. I figured he had some sort of agenda (perhaps insider?) to offer it so well below the market. Moreover he looked legit as he was not pulling his offer in the final minutes of the match. So I went below him in the final seconds of matching and scratched my trade before the open. Overall, it was good execution, and I am pleased with myself.
I scrapped more CWK. Perhaps it was my own personal "capitulation". I realised yesterday and today that I bought far too many as it continued to fall (a cardinal sin I now understand and appreciate). I will remember to not add to my longs as its falling unless it was predetermined and that amount I am adding is bearable if the position continues to turn sour. Because of this mistake I took a far larger loss than I should have. It has ruined my past 2 months work. Tuition can be very expensive in the markets, but I will try my best to make the most of it. In summary, although the fundamentals for CWK are very attractive I had far too many for the type of buy it was intended to be (a pure fundamental play). I can always buy them back if market sentiment turns favourable again, but for now I prefer the cash combined with a lesson hard learnt to boot.
Finally, I cut some POZ at a small profit. I figured I better reduce my position since I think the market is about to turn very sour. No matter how hard the fundies tried to rally our markets they always come back to offer it - it is very concerning. Although it is generally a mistake to sell out for such small profits I was taking market risk into consideration rather than the desire to take my profits off the table (which is also a cardinal sin).
I still have POZ and CWK as I believe in their fundamentals, just a much more reasonable size for a market that has a large possibility of crashing.
Right now I am 85% cash.
This is what the market looks like right now. It was interesting what my colleague proposed:
"You know it is always funny to look back at previous market crashes and see this big nice rounding top right before the splat. Then you ask yourself 'why was anyone stupid enough to be long in that market when it was so obvious it was going to crash?' A child could look at it and tell you it was going down. Its definetly not rocket science."
The scary thing is I think he is right. Perhaps some traders (including myself) are being way too complex about the whole thing. Quite simply, it looks like the markets have a good chance of capitulating/crashing/seriously falling from here.
I am happy that my position in cash reflects my beliefs at this stage. I have learnt not to become too attached to my positions. Another cardinal sin is for a trader to let his positions dictate what his oppinions are and not letting his oppinions dictate his position. I am glad I have overcome this as it was a problem in the past. It disallows someone from thinking objectively about the situation.
I also went to my brokers outlet to ask if I can open up a short account. I dont think I will be able to profit from being long only in the future what is now obviously a bear market. They were closed as I arrived after 4pm... lazy paper pushes. Well I am a lazy paper pusher that finishes at 4pm as well so I can't really say that - we are the same breed.
I went for a long walk around the city after this passing up the earlier bus contemplating what happened today and what the future may hold for the markets. The images I conjured were up very bleak indeed.
Whether this is the bottom or not will be very interesting for me. I will watch and learn as much as I can.
Be careful out there and stick to your stops.
Tuesday, July 1, 2008
Trading Plan
Oh one more thing... my trading plan for 08/09
Here for my own reference lol - I wouldn't expect others to actually read this O_O
Trading Plan
Strategy: Long speculative Australian equities
Advantages:
- Strength in underlying Australian miners: coal, oil, iron ore, phosphate, potash, gold and possibly uranium looking bullish for 08/09 – Australian miners to benefit.
- Equities are not leveraged – safer in the current more volatile environment.
- Speculative stocks allow massive gains as they are leveraged to exploration success – hence able to achieve higher than normal growth. Ideal as capital gains are favoured over income at this stage.
- Amateurs are generally in speculative stocks, hence there is less competition.
- Australia offers a great place for fund money in a weak U.S dollar / high inflation environment.
- Long only – infinite gain possibility and limited losses (as opposed to shorts).
Disadvantages:
- Illiquidity and slippage on small stocks are large.
- Insider trading and bad management in small stocks.
- Speculative stocks are generally hit harder in downturns.
- Australia may not be completely decoupled from U.S/global downturns.
- Australia’s growth may slow as China slows. Less commodities demanded.
- Unable to benefit from a generally falling market (no shorting available.)
Absolute max allowed to any one position: 15% of account. Exception for pyramiding!!
Tactics
Note: tactics my change during the stocks life depending on market action – for example a pure fundamental long may become a strong hybrid if the market breaks upwards.
Pure Fundamental Long:
- Make it a relatively small position (5% of account allowed). Being too long and you will become a weak long – i.e. shaken out by weakness (which is most likely inevitable).
- Ideal entry in long dated out of the money call options.
- No Stop.
- Avoid strong downtrends if possible. Side ways is acceptable.
- Do not add as it falls. No averaging down permitted (unless already pre-determined. However it can not go beyond the max allowed).
- Must be bullish sector, strong management, very bullish DCF’s with low technical problems.
- Low market cap / with high cash / high management ownership preferred.
- Buy in quiet periods preferable – like sideways and low volume.
- Very confident in business prospects.
- Hold indefinitely until fundamentals change and or it becomes fully priced. (Note: Add if it becomes a Strong Hybrid).
Pure Technical Long:
- Medium size (10% of account allowed). This is because the stop is very tight, hence amount risked is at an acceptable level.
- Buy on close. Must be closing near its high on significant volume.
- Very tight stop – the idea is to sell the open. If it gaps up sell half on open and sell rest during the day (if it fails to continue making highs intra-day). If it opens down hit the bid – no excuses.
- Preferable if the sector is also bullish – would add to strength – but not necessary.
- Can be any stock – but the smaller the better (tend to over-react more on open).
- Also preferable if accompanied with news.
Pure Hype Trade:
- A relatively “normal” announcement comes out but there is a lot of “hype” in this sector. A lot of dubious but high target claims are made. Or there is an undefined large “discovery” of some sort in the hyped commodity.
- Usually an unheard of penny dreadful.
- If the market is slow to react to the announcement get long 5%-7.5% of account max.
- WARNING: If the hype trade becomes saturated from the open STAY OUT. Open price is likely to be the high!!!
- Be sure to liquidate before the end of the day.
- If it is not moving soon after you bought it hit the bid you have misjudged where the hype is – get out!
- The less movement before the news the stronger it will be.
- If you miss it or see it later than others DO NOT touch it. You will likely be buying the high, the easy money has gone.
- DO NOT get greedy!! Take the money if enough is on the table. This may be very quick money… but only temporary
- DO NOT even CONTEMPLATE adding to this as it falls – or you will be raped without a doubt!
Weak Hybrid
- This trade is better than a pure technical long and pure fundamental long. This is because market is confirming the “fundamentals” via technicals (i.e. it is not one sided).
- Fundamentals are ‘acceptable’, sector is bullish and it looks like it may be breaking upwards or coming into support.
- Use a predetermined stop with medium position size (7.5% of account allowed).
- Take profit at pre-determined resistance unless it becomes a Pure Technical Buy (closes near high on volume).
Strong Hybrid
- This is the trade that makes your year.
- Strong fundamentals, strong sector, strong technical’s.
- Initial parcel may be 12.5% of account. Enter on strong technicals. (Note: this may be a strong pure fundamental buy that is becoming recognised).
- If it continues to rise average up on close (pyramid). May go to 20% of account max!!
- Continue buying as it rises – so long as technical’s remain bullish.
- Once your last purchase is out of the money stop adding to the position.
- Use technical’s as your exit guide. Give it the benefit of the doubt to the upside if valuations are still compelling.
- A 100% net gain will become your free carry level (i.e. sell half at that level – no choice!!!).
General Trading Rules (reflected in tactics).
- No ASX200 stock – PERIOD. Refuse to trade against professionals.
- Do not buy into downtrends. It must break upwards on volume before entry is permitted. The only exception would be a pure fundamental entry on small size and no stop or a hype trade – but even then this is discouraged – sideways is better.
- Do not go too overweight any particular stock. Although this leads to larger rewards the possibility of going broke increases dramatically.
- Record every transaction in a monthly journal and a specific journal depending on whether its:- - Pure fundamental- Pure technical- Pure hype- Weak hybrid- Strong hybrid
- Never trade tax money
- Keep all expenses recorded and organised
- Do not average down unless your pre-determined entry (most likely pure fundamental entry) has dictated that
- Do not put good money after bad. Don’t add to a losing position.
- Pyramid up.
- If you think a stock is reasonable keep an eye on it and monitor it. Trading opportunities may arise.
- Have a pre-determined stop loss at all times.
- Analyse your wins and losses.
- Never be afraid to take a small loss.
- Follow your system at all times if you believe the expectancy is positive.
- Look at ways to minimise tax.
- Ensure commissions are their lowest whilst maintaining a minimum requirement of service.
- Wealth preservation is your number one objective.
- Only trade if there is a legitimate opportunity.
- Remain unemotional and detached when trading.
- Correct mistakes as soon as they become evident.
- Be bold with your profits and cowardly with your losses.
- Remember that every now and again the impossible can and will happen.
- Be reactive when deciding when to buy and sell… not predictive.
- Never over bet, but don’t over diversify either. 5-10 positions is ideal.
- Read the news every morning.
- Do not get long without stops in a bear market unless you are absolutely convinced (pure fundamental long).
- Always take responsibility for your wins and losses
- Trade the market you see and not the market you hope for. Base decisions on reality.
- Wealth is acquired over time – be patient.
- Follow your gut when you have to. This is NOT the same as emotional trading.
- Determine whether trading is trending or range bound.
- Base position sizing of a predetermined amount you are willing to risk given the circumstances of the trade. The more reliable the signals the more you can risk for example.
- A smaller position is much stronger than a large one.
- Never trade out of frustration, anger, desperation, or any other form of emotion.
Most importantly…
- DISCIPLINE IN APPLYING THE ABOVE IS THE ONLY DIFFERENCE BETWEEN YOUR ULTIMATE SUCCESS OR FAILURE. PSYCHOLOGY IS EVERYTHING. KEEP A STRONG MENTAL STATE WHILST TRADING.
Here for my own reference lol - I wouldn't expect others to actually read this O_O
Trading Plan
Strategy: Long speculative Australian equities
Advantages:
- Strength in underlying Australian miners: coal, oil, iron ore, phosphate, potash, gold and possibly uranium looking bullish for 08/09 – Australian miners to benefit.
- Equities are not leveraged – safer in the current more volatile environment.
- Speculative stocks allow massive gains as they are leveraged to exploration success – hence able to achieve higher than normal growth. Ideal as capital gains are favoured over income at this stage.
- Amateurs are generally in speculative stocks, hence there is less competition.
- Australia offers a great place for fund money in a weak U.S dollar / high inflation environment.
- Long only – infinite gain possibility and limited losses (as opposed to shorts).
Disadvantages:
- Illiquidity and slippage on small stocks are large.
- Insider trading and bad management in small stocks.
- Speculative stocks are generally hit harder in downturns.
- Australia may not be completely decoupled from U.S/global downturns.
- Australia’s growth may slow as China slows. Less commodities demanded.
- Unable to benefit from a generally falling market (no shorting available.)
Absolute max allowed to any one position: 15% of account. Exception for pyramiding!!
Tactics
Note: tactics my change during the stocks life depending on market action – for example a pure fundamental long may become a strong hybrid if the market breaks upwards.
Pure Fundamental Long:
- Make it a relatively small position (5% of account allowed). Being too long and you will become a weak long – i.e. shaken out by weakness (which is most likely inevitable).
- Ideal entry in long dated out of the money call options.
- No Stop.
- Avoid strong downtrends if possible. Side ways is acceptable.
- Do not add as it falls. No averaging down permitted (unless already pre-determined. However it can not go beyond the max allowed).
- Must be bullish sector, strong management, very bullish DCF’s with low technical problems.
- Low market cap / with high cash / high management ownership preferred.
- Buy in quiet periods preferable – like sideways and low volume.
- Very confident in business prospects.
- Hold indefinitely until fundamentals change and or it becomes fully priced. (Note: Add if it becomes a Strong Hybrid).
Pure Technical Long:
- Medium size (10% of account allowed). This is because the stop is very tight, hence amount risked is at an acceptable level.
- Buy on close. Must be closing near its high on significant volume.
- Very tight stop – the idea is to sell the open. If it gaps up sell half on open and sell rest during the day (if it fails to continue making highs intra-day). If it opens down hit the bid – no excuses.
- Preferable if the sector is also bullish – would add to strength – but not necessary.
- Can be any stock – but the smaller the better (tend to over-react more on open).
- Also preferable if accompanied with news.
Pure Hype Trade:
- A relatively “normal” announcement comes out but there is a lot of “hype” in this sector. A lot of dubious but high target claims are made. Or there is an undefined large “discovery” of some sort in the hyped commodity.
- Usually an unheard of penny dreadful.
- If the market is slow to react to the announcement get long 5%-7.5% of account max.
- WARNING: If the hype trade becomes saturated from the open STAY OUT. Open price is likely to be the high!!!
- Be sure to liquidate before the end of the day.
- If it is not moving soon after you bought it hit the bid you have misjudged where the hype is – get out!
- The less movement before the news the stronger it will be.
- If you miss it or see it later than others DO NOT touch it. You will likely be buying the high, the easy money has gone.
- DO NOT get greedy!! Take the money if enough is on the table. This may be very quick money… but only temporary
- DO NOT even CONTEMPLATE adding to this as it falls – or you will be raped without a doubt!
Weak Hybrid
- This trade is better than a pure technical long and pure fundamental long. This is because market is confirming the “fundamentals” via technicals (i.e. it is not one sided).
- Fundamentals are ‘acceptable’, sector is bullish and it looks like it may be breaking upwards or coming into support.
- Use a predetermined stop with medium position size (7.5% of account allowed).
- Take profit at pre-determined resistance unless it becomes a Pure Technical Buy (closes near high on volume).
Strong Hybrid
- This is the trade that makes your year.
- Strong fundamentals, strong sector, strong technical’s.
- Initial parcel may be 12.5% of account. Enter on strong technicals. (Note: this may be a strong pure fundamental buy that is becoming recognised).
- If it continues to rise average up on close (pyramid). May go to 20% of account max!!
- Continue buying as it rises – so long as technical’s remain bullish.
- Once your last purchase is out of the money stop adding to the position.
- Use technical’s as your exit guide. Give it the benefit of the doubt to the upside if valuations are still compelling.
- A 100% net gain will become your free carry level (i.e. sell half at that level – no choice!!!).
General Trading Rules (reflected in tactics).
- No ASX200 stock – PERIOD. Refuse to trade against professionals.
- Do not buy into downtrends. It must break upwards on volume before entry is permitted. The only exception would be a pure fundamental entry on small size and no stop or a hype trade – but even then this is discouraged – sideways is better.
- Do not go too overweight any particular stock. Although this leads to larger rewards the possibility of going broke increases dramatically.
- Record every transaction in a monthly journal and a specific journal depending on whether its:- - Pure fundamental- Pure technical- Pure hype- Weak hybrid- Strong hybrid
- Never trade tax money
- Keep all expenses recorded and organised
- Do not average down unless your pre-determined entry (most likely pure fundamental entry) has dictated that
- Do not put good money after bad. Don’t add to a losing position.
- Pyramid up.
- If you think a stock is reasonable keep an eye on it and monitor it. Trading opportunities may arise.
- Have a pre-determined stop loss at all times.
- Analyse your wins and losses.
- Never be afraid to take a small loss.
- Follow your system at all times if you believe the expectancy is positive.
- Look at ways to minimise tax.
- Ensure commissions are their lowest whilst maintaining a minimum requirement of service.
- Wealth preservation is your number one objective.
- Only trade if there is a legitimate opportunity.
- Remain unemotional and detached when trading.
- Correct mistakes as soon as they become evident.
- Be bold with your profits and cowardly with your losses.
- Remember that every now and again the impossible can and will happen.
- Be reactive when deciding when to buy and sell… not predictive.
- Never over bet, but don’t over diversify either. 5-10 positions is ideal.
- Read the news every morning.
- Do not get long without stops in a bear market unless you are absolutely convinced (pure fundamental long).
- Always take responsibility for your wins and losses
- Trade the market you see and not the market you hope for. Base decisions on reality.
- Wealth is acquired over time – be patient.
- Follow your gut when you have to. This is NOT the same as emotional trading.
- Determine whether trading is trending or range bound.
- Base position sizing of a predetermined amount you are willing to risk given the circumstances of the trade. The more reliable the signals the more you can risk for example.
- A smaller position is much stronger than a large one.
- Never trade out of frustration, anger, desperation, or any other form of emotion.
Most importantly…
- DISCIPLINE IN APPLYING THE ABOVE IS THE ONLY DIFFERENCE BETWEEN YOUR ULTIMATE SUCCESS OR FAILURE. PSYCHOLOGY IS EVERYTHING. KEEP A STRONG MENTAL STATE WHILST TRADING.
First post
This is my first post.
The purpose of this blog is to keep track of daily occurences that happen in the market. I trade Australian equities mostly from the speculative end and I reside in Sydney. I am 21 and have been trading for a year. So far so good.
It is the beginning of the financial year so all the tax loss selling and crap from last year has cleared the deck. The markets have fallen 15% the past year. The technical definition of a bear market is 20% off its highs... well it has done that too. Apparently its the worst fall the markets have experienced since the early 1980's?
'Is this really as bad as a bear market gets?'
'Well, lets see if you can still say that in 3-4 years from now - because thats how long it could last.'
Anyway - today's trading
The problem was I got long intra-day. The fundamentals on POS were not completely compelling. As I understand it has ties to Andrew Twiggy Forrest (now Australia's richest man). And they secured $50million in financing. Anyway - I got long at 1.47 only to see it hit big resistance at 1.50. I scratched out at 1.47 after I realised that I should not have got long in the first place. Why not buy when its closing on its high as opposed to intra-day when you carry extra and unnecessary risk?? Brokerage down the toilet but I correct my mistake as soon as it became evident - so I was happy with that. And in the end, as opposed to being up 15% on the day POS finished up a measly 2% on the day - which does not instill me with much confidence.
At 12 a company called "Phosphate Australia" (a.k.a POZ) listed today too. It has great similarities to MineMakers (MAK) which made me a lot of money the previous year. Not only are their resource estimates similar (MAK's Wonarah deposit is 72MT @ 23% and POZ HighPlains has a Target 80MT @ 20%), they are also in the same Georgina basin in the Northern Tertitory!! Bell Potter floated it at 20 cents... trading opened at 56 cents.
Things I like about POZ:
- JORC is a gimme and will be in the same league as MAK in that regard. 80mt at 20% P205 should be fine with the drill results they had in their prospectus
- There is low overburden ranging from 10-40 meters - very similar to MAK
- Historic drill results show nice continuity and decent economic intervals
- Bullish sector (fertilizer inputs)
- They have a large range of other tenements in the basin. This may also leads to a possible spin off. Exploration upside is promising from a grass roots perspective. They have all the land surrounding Wonarah to the North and East AND South...!!
- 10 mill cash now is decent-
- DCF's bullish - same as MAK's but higher CAPEX for rail/slurry and lower OPEX for the same reason.
- Management look decent... the Chairman found railway for UMC (which is now a monster!)
- No traces of contaminants have been reported i.e. uranium
- Large management ownership.. they will definetly want to push this!
Question marks I had for POZ
- There is no schedule to production, Hmmmm.
- Transportation plans. Although it looks do-able via rail to port 300km away or via road then truck like MAK it all remains unknown. Either way should be fine. Maybe slurry with Century is possible...? But I doubt they would have this additional capacity to hand to POZ for peanuts... its probably better for them to go it alone.
Production looks like it is realistically 3-4 years away... MAK is much closer to production.
Anyway - I am long from open price after buying and selling and mucking around! Keeping them as a Pure Fundamental Long.
It managed to close at 0.59, up 195% on the day (lol).
Finally I got long IGC. I was tossing up between RCH (molybdenum in Indonesia - yes a lot of people have a problem saying this word. It took me a lot of practice lol), AJL (coal seam gas), OMH (a manganese producer) and finally IGC (plantium). RCH looked bid but they started offering into it, I figured the gap would fill. AJL and OMH looked fine but I was planning on selling on open, and the impetus was obviously there. IGC fit the bill as it finished on volume AND on its high at a price it never traded at the whole day! Buyers look like they are scrambling to get in.
Oh and I dumped half my coalworks at a loss (Yes I thought about my losses last... quite natural for humans I think!! its unpleasent so it goes to the back of my mind). I figures I was way too overweight on them considering they are doing NOTHING. I can always buy them back. I kept the other half because I still think they are undervalued.
Happy trading and tight stops
The purpose of this blog is to keep track of daily occurences that happen in the market. I trade Australian equities mostly from the speculative end and I reside in Sydney. I am 21 and have been trading for a year. So far so good.
It is the beginning of the financial year so all the tax loss selling and crap from last year has cleared the deck. The markets have fallen 15% the past year. The technical definition of a bear market is 20% off its highs... well it has done that too. Apparently its the worst fall the markets have experienced since the early 1980's?
So I was talking to my fellow traders:
'Is this really as bad as a bear market gets?'
'Well... yeah this is pretty bad if you can't tell. We have not even had two up days in a row for the past month.'
'But I think I can still profit being long only in this type of market... I have been last year anyway. I thought a bear market would be much more difficult than this!!'
'Well, lets see if you can still say that in 3-4 years from now - because thats how long it could last.'
'Fair enough'.
So I guess a little perspective from them was good - considering I am young this is and will be the first bear market someone of my age has experienced yet...
So I guess a little perspective from them was good - considering I am young this is and will be the first bear market someone of my age has experienced yet...
Anyway - today's trading
The problem was I got long intra-day. The fundamentals on POS were not completely compelling. As I understand it has ties to Andrew Twiggy Forrest (now Australia's richest man). And they secured $50million in financing. Anyway - I got long at 1.47 only to see it hit big resistance at 1.50. I scratched out at 1.47 after I realised that I should not have got long in the first place. Why not buy when its closing on its high as opposed to intra-day when you carry extra and unnecessary risk?? Brokerage down the toilet but I correct my mistake as soon as it became evident - so I was happy with that. And in the end, as opposed to being up 15% on the day POS finished up a measly 2% on the day - which does not instill me with much confidence.
At 12 a company called "Phosphate Australia" (a.k.a POZ) listed today too. It has great similarities to MineMakers (MAK) which made me a lot of money the previous year. Not only are their resource estimates similar (MAK's Wonarah deposit is 72MT @ 23% and POZ HighPlains has a Target 80MT @ 20%), they are also in the same Georgina basin in the Northern Tertitory!! Bell Potter floated it at 20 cents... trading opened at 56 cents.
Things I like about POZ:
- JORC is a gimme and will be in the same league as MAK in that regard. 80mt at 20% P205 should be fine with the drill results they had in their prospectus
- There is low overburden ranging from 10-40 meters - very similar to MAK
- Historic drill results show nice continuity and decent economic intervals
- Bullish sector (fertilizer inputs)
- They have a large range of other tenements in the basin. This may also leads to a possible spin off. Exploration upside is promising from a grass roots perspective. They have all the land surrounding Wonarah to the North and East AND South...!!
- 10 mill cash now is decent-
- DCF's bullish - same as MAK's but higher CAPEX for rail/slurry and lower OPEX for the same reason.
- Management look decent... the Chairman found railway for UMC (which is now a monster!)
- No traces of contaminants have been reported i.e. uranium
- Large management ownership.. they will definetly want to push this!
Question marks I had for POZ
- There is no schedule to production, Hmmmm.
- Transportation plans. Although it looks do-able via rail to port 300km away or via road then truck like MAK it all remains unknown. Either way should be fine. Maybe slurry with Century is possible...? But I doubt they would have this additional capacity to hand to POZ for peanuts... its probably better for them to go it alone.
Production looks like it is realistically 3-4 years away... MAK is much closer to production.
Anyway - I am long from open price after buying and selling and mucking around! Keeping them as a Pure Fundamental Long.
It managed to close at 0.59, up 195% on the day (lol).
Finally I got long IGC. I was tossing up between RCH (molybdenum in Indonesia - yes a lot of people have a problem saying this word. It took me a lot of practice lol), AJL (coal seam gas), OMH (a manganese producer) and finally IGC (plantium). RCH looked bid but they started offering into it, I figured the gap would fill. AJL and OMH looked fine but I was planning on selling on open, and the impetus was obviously there. IGC fit the bill as it finished on volume AND on its high at a price it never traded at the whole day! Buyers look like they are scrambling to get in.
Oh and I dumped half my coalworks at a loss (Yes I thought about my losses last... quite natural for humans I think!! its unpleasent so it goes to the back of my mind). I figures I was way too overweight on them considering they are doing NOTHING. I can always buy them back. I kept the other half because I still think they are undervalued.
Happy trading and tight stops
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