Timing, Strategies

Timing

Some readers who received short updates to their mail boxes have asked about the timing issue.

So if you see a chart that is two three years in the making, any conclusions drawn suggest it wont happen overnight as it takes about 1/3 to ½ of the time for the trend to materialize.

On some occasions the call is for a much shorter period and then it does not suggest a continuation of the trend.

For example, my calls are below:

• 2012.1.19  - hsi will get above 21000 very shortly and will meet heavy resistance at 21600/800
• 2012.2.21  - options suggest hsi will go south towards 20000
• 2012.4.08 – Dow and A50 [2 year chart] rally will be difficult

Very shortly means it will get there in 10-15 business days, no continuation of trend.

Options in Hong Kong expire monthly thus it will take no longer than two months to get there, also no continuation of trend in this case.

A two year or more chart may take close to 1 year to materialize.

Strategies

Many of us have not formed basic strategies on entries and exits as well as stop loss and profit taking scenarios.

Most try to get lucky and purchase the whole lot at one tranche. Always ask yourself once the stock falls 7-12% from your average costs whether it is worth keeping them.

Entry - To protect your capital, always buy on dips and buy in tranches like 40% at an initial drop of 1000 points then 20% for each 500 points drop. This is a total drop of 2500 points to have accumulated 100% of your preferred stock. You can choose a 3000/4000 points or a wider horizon scenario.

Avoid buying at or close to top of a J curve.

By the same token, you should sell at or close to the top of a J curve

Exit – identify whether it is a big move upwards by looking at the chart first, if there is a well formed rounded bottom over 6 months or more, then you can wait for a 10% gain to sell 40% and another 20% for each 3-5% gain extra on top.

Some people preferred monthly or quarterly average buying, still the stock should not be like PCCW or some stocks that can decline 50% in a short while although it is difficult from the outset to know whether it will decline this much. Alertness to the macro environment at the time is necessary not to be in the wrong sectors. There are a number of factors or a checklist to be established over time to avoid undisciplined behavior.