Friday, February 17, 2012

Greece Saga Continued

Just when yesterday news/events were titled towards a Greece default there was a change of news yesterday night which could see Greece getting the bailout funds approved on 20th Feb.  as such US and Europe markets rebound from low with US markets closing average +1% and Asian bourses all started in the positive.  Without any doubt the news have caused stock markets to flip-flop and thereby catching short-term and contra players off guard ( be it long or short position ).

Would advise not to speculate on what will be the outcome on 20th Feb and bet on it.  Should it swing in the opposite direction the risk and rewards will not be justify.  Rather focus on the implication of the outcome in a longer time frame.  As mentioned previously in January, cautiously optimistic about the stock market for this year and that remains status quo.

Many have questioned is the current rally a new bull market ? Should you convince last October was the market bottom then answer is YES it is a new bull trend

Many have also questioned should I sell my holding presumably bought last Oct till Jan this year, my advise is stay vested.  Many also waiting to get in but afraid will get caught.  When the time to re-enter is never a easy answer and what I could suggest is the following :-

Technical speaking, stock markets majority of the stocks are in overbought region.  When in overbought region it is not necessary it will immediate come down and it could stay there for prolong period before the descend.  One possible scenario is price stay range bound to consolidate and causing the overbought signal to come down.  Hence one could adopt "dollar-cost-averaging" method whenever there is pull back.  Note by using this method one has to plan carefully each time the quantity and the amount you should fork out and the time frame ( how long ) you want to collect given the constraint that retail investors have limited capital resources.  From a personal view, I could see market start pulling back from March till June.  Market can't move up in a straight line, somewhere down the road it. needs to take a breather.  That could be the period to "dollar-cost-averaging".   For those with the knowledge of TA, watch out for overbought, oversold signal ( RSI and Stochastic are some indicators which you could use ) to give you the signal to buy.  Others without the knowledge of TA, will have to look at the valuation ie at that specific price do you feel comfortable to buy in and also have plan that price after bought could drift lower and you have to stomach that.  From a layman term regarding valuation maybe you can relate to the price of kopi to it.  See in Singapore different price of kopi can be found ranging from $0.50, $0.60, $0.70, $0.80, $0.90, $1.00 to $1.10 across the island.  Some might be ok to just buy a kopi at $1.00 while some just willing to pay $0.60 for it.  Stock price is like that, depend which price range of the kopi you willing to pay for and that is the price you aim for it.  Another thing I need to stress is, look at fundamentally sound stocks only and not those in past weeks penny stocks without much fundamental and price jump up a lot due to speculation.  The rewards could be great but the risk carried along is high also should you get caught in the wrong end of the pricing.

Also suggest try not to speculate on any outcome this year and take a big bet on it, the risk is not worthy.  Take a longer time frame view to look at things and pen out all the possible outcomes and apply suitable strategy to each of them.

Lastly food for thoughts

One need patience to buy, after that need patience to wait to sell, in between ignore all the noises.

a cautiously optimistic and a new bull trend type of market need patience and holding power  to get the best rewards.

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