Is Mid Term Correction In Position?

Despite the global economy is recovering, correction will still often comes out to give discount to the stock price.  For the current correction, the market has it's recent to go down, which is the worry of the Europe's debts and Greece bankruptcy issues. 

So what do you think, to what extend the market will be corrected this time? KLCI's SMA100 is broken since last Friday. If you are a trend trader, you might not able to do anything for now. If you are a technical analysis trader, you may be trapped with the typical white hammer sat on top of SMA100 on last Monday. Well, I believe there will be no impact on mid to long term fundamental analysis trader, as the overall fundamental of global market is still positive.

As the market has been bullish since March 2009, would this be a mid term correction? Normally mid-term correction would last about 2-3 months. But since the bullish is too fast, perhaps the correction might be ended swiftly as well. Today, KLCI rebounded after lunch time, due to the Asian market rebounded. It seems like a positive sign to rebound with a look-alike white hammer, because they supposed to ended with gap due to the Dow index dropped below 10,000 points. Perhaps good news is around the corner?

Many people try to cut loss these few days. From the volume traded, it seems the sellers are getting lesser and buyers interests are still satisfied. Adding with the positive 4Q09 financial report from the local companies, it might not be that worse we think of.

Well, to make it a conclusion, we still have to see our big brother, US market color. Will it be better if we do Forex investment by selling EUR or GBP now? 

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10 Rules Invest Like Warren Buffet - Part II

How were the 1st 5 rules on my previous post, do they make sense to you? If they are, you may want to know the rests of them.

Rule $5 - Put in effort to do homework and find a target to achieve, but try not to set the target too high.

Mr. Warren carefully and precisely did his stock pick. He focused more on long term growing companies. After 20 years later, the company performance are still strong and stable. During 1973 and 1974, the stock market was collapsed. One of the US giant advertisement companies share price had down to 76 cents. During that time, Mr. Warren absorbing this company shares as much as he can, and then sold them for great profit after many years. Before he sold them, this stock annual return was 20%. What other investment in this world you can consistently obtain a annual return of 20% for many years? Don't forget, Mr. Warren bought the shares in bulk!

Technical analysis, anyone?

Rule $4 - Take it easy with the noise from the stock market and economy outlook. Always remember, we want to buy a career, but not a stock!

There is nobody can consistently predict the correct market movement and economy outlook, not even David Brain or Mr. Warren. If you only chose to buy stocks under certain economy condition, you will always need to do stock switching. Eventually you will encounter loss in one day.

To own a stock, you need to feel comfortable and have confident with it, be it behave unstable for one or two years. If you don't plan to hold a stock for 10 years, then you better don't hold it for even 10 minutes.

Rule $3 - You don't have to always recover your loss from the same stock

For novice traders, they will buy when the stock is falling, logically it is cheaper to own when it goes down. But this game is not play like we want. No matter what investment it is, we should set an affordable stop loss. If it really hit our stop loss, we can try to invest other potential stock. If we aware we are suffering from the loss, we can always choose to let go.

Rule $2 - If you always trade with hot tips, you will loss all your capital within a year.

To be honest, by the time you obtain the 'tips', the public should already obtained and acted on it. Mr. Warren always claimed that he likes to stay in Omaha City, because no one is supplying internal news to him over there. If we did our homework properly, we will having a high chance to make a good decision.

Have you ever read any book related to Mr.Warren?

Rule $1 - Diversification is only cater for those who don't know what they are doing.

Mr. Warren will only invest those companies which meet his requirements. And then he will buy and spend many years to hold it, just like Coca-Cola. Once he invested in that company, he know that he just need to wait, wait for his consistent return for many years.

Okay, here's are all the 10 rules the 2nd richest man in the world follow. Sound simple isn't it? Many people complaint that these rules don't apply with KLSE stocks. Well, if the company is growing, the stock price will definitely goes up. Else, you may want to invest in US stock?

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10 Rules Invest Like Warren Buffet

In fact, there are so many stock investors around the world, how many of them are really know how to invest in stock? I guess less than 10%? Well, perhaps less than 5%? I mean those people who consistently making profits from stock market.

Well, for most of the successful stock investors, they have a common traits, discipline and follow the rules. I believe this is very true, and Warren Buffet should raise his legs to support this phrase. Are you one of Warren Buffet followers? If you are not, and you wish to trade like Him, perhaps there are 10 important rules you should really take into consideration.

So many trading rules around, which one to remember?

Rule $10

If you think a good investor must be pro in accounting, you better be a waiter then.

To be a stock investor, what you need are only simple +, -, x, / and % calculations. You also need to gather every information about the company you want to invest, visit it if necessary, understand the business structure and how it brings revenue to the shareholders.

Rule $9

You won't have much profit to reap, if you only pick hot stock.

It's time to let it goes, if the particular stock price is up dramatically. And get ready to enter, if it drops heavily. Like Mr.Warren, he bought China Petroleum and continuously hold it for years when the company is on board.

China Petroleum insanely went up to new high during year 2007, where many investors are continue to sleep on it. At that time, Warren sold all his shares in hand at HKD12.4 per unit. After that, it did shoot up above HKD20. And finally, it significantly falls back to single digit price within a very short period.

Rule $8

Don't ever ask a barber whether it's time for you to cut your hair.

It make sense that we consult our trading problems with our financial consultant or broker. The truth is, we can simply find them out by ourselves. In short, financial consultant, broker, bank investor, lawyer, mechanic, doctor are all the same. They are solving people's problem to keep them survive. For the sake to survive, they will try their best to find out 'problem' from you. Does it make sense to you?

Rule $7

You want people to see you as the worst lover, in fact you are great or, you want people to treat you as a great lover, but you are lousy in reality?

The rule of thumb is to have your own thinking. You don't have to follow other's opinion or analyst's report. You don't even care about how people think of you. We only need to focus on the fact and truth without interruption from others.

Rule $6

When you are in a baseball game, you cannot just simply hit the ball without confident.

To be a pro in a baseball game, you must wait for an opportunity to hit the ball. It's the same like a stock investor, you must be patient to wait for your opportunity. If you cannot foresee the company future, don't invest it. If the company has not earn a single cent, it will be unlikely to make you a cent either.

Since there are about 10 rules, I tried my best to keep it simple and short. I'll continue the rest of the rules in my next post. Stay tune.

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Take Profit Prior to CNY?

Hi folks, Chinese New Year is around the corner. Have a short count, it has about 8 more trading days to go. So you must be thinking that most of the people will take profit before they go back hometown for celebration? Well, I believe it does make sense to me, because Chinese do celebrate CNY and it needs a lot of money to do so.

But let's come to think about it, the market is corrected quite bad these 2 weeks, are there many people really have much profit to take? And if they do, they should already withdrew on last 2 weeks ago (a month before CNY). This also make sense to me. To verify further, let's check the past years statistics as a guideline whether it will be a good buy before or after CNY.

From the graph above, it shows the historical performance of past 14 years, 1 month prior to CNY. It is gaining in 11 out of 14 years, or 79% on positive side.

From second graph above, it shows the historical performance of past 14 years, 1 month post CNY. It is only gaining in 8 out of 14 years, or 57% on positive side.
Based on the historical statistics above, perhaps it advices us to take profit on next Friday, and stop trading 1 month post CNY? Just kidding. To follow or not, it's all your choice.
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