Wednesday, 29 September 2010

Advice from the guru and lessons learnt

In the Money Week (TV show on Channel 8), the stocks guru Mr Hu Li Yang mentioned that if a stock you chose drops while overall stocks in the market are rising, that would imply your stock is 'sick' and you should be alarmed by this signal.

I do not agree with all of his statements, one of which is about buying up and selling down. If the statement he made above is true then I have to re-look at two of my stocks, which failed to break their resistances since I bought many months back, despite the market doing better than then. I should know better than to buy on gut instinct and reading some optimistic posts about the company. I regretted not following my gut instinct that time about Genting SP when it dropped to 0.80+ the commentaries were all against it rating it's support at 0.60. Suddenly it emerged as a multi-bagger stock. I wondered if any guru would have guess it can hit a whooping $2. After a period of over-chase, it's price is finally cooling off - closed today at 1.90 with 197,451,000 in volume. I wonder what will be it's new support price in the days to come...

The 2nd lesson I have learnt (from MIIF) is not to chase a rising stock and be PATIENT. Once again, I failed to buy at the support level.

While looking at TA (technical analysis), one should also be aware of market sentiments and human psychology because there is NO SUCH THING as a rational market. The technical charts are just guides (some people believe in using those to gauge entry and exit prices) but what will become of a stock in the future is hard to trendline. Moreover, how a stock performs would depend on the macro-environment, which is the market / industry outlook, and the micro-environment, which is how the company manages and runs its business.

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