No major trend going that I got in early enough. I've been trying to stretch out my trading timeline and start to think more like a fund manager, but before I'm confident enough to risk real capital I've been using a trading simulation application to test my result.
Although I can't say that I thorough enjoy Andrew Horowitz's The Disciplined Investor podcast (I think he can be very condescending), which I do listen on a somewhat regular basis during my commute to work, I do like his methodology. He uses a Quanta-Funda-Techna method, which is looks at the quantitative first, then the fundamental (EPS, etc), and then the technical (charts), to screen for stocks. I personally use a similar style except I don't have a fancy term for it. In essence I look first at the big picture first, from there I identify the industries that are in play and whether it's strong or weak, from there I find the leaders and laggers of those industries. After I have narrow it down to at least a manageable list of stocks, I look less at its P/E ratio and what not, but I tend to value the IBD data more. P/E ratio... well, people make arguments for buying stocks w/ low ratios thinking it's undervalued or shorting high ratios b/c it's overvalued. Personally... I think it's a load of bull crap if you think like that. I tend to believe that stocks trades w/ a high P/E ratio for a reason. I use it more for a screening tool, but I wouldn't formulate my opinion over a stock over that simple ratio. One additional note though is that I would almost never buy a stock w/ a P/E ratio more than two times its growth rate.
I don't believe that us traders should "predict" the market. What we should do is observe what's happening in our environment for changes and catalysts, find potential trades from that and wait for confirmation. I've come to the realization that the market doesn't care what I think. I might think short or long a stock when the tape is telling me the opposite and the market slaps me w/ a big F-U!
Although I usually don't spot the up trend early enough and I don't like to chase them, what goes up usually comes back down. I guess I have to thank my experience w/ JSDA. It's possibly the easiest pattern to recognize. These growth stocks shoot up after a few blow out quarters and then the analysts start praising the companies, but once the earnings slow down and you start seeing the lower low and lower high pattern... get in and short. There are tons of examples, CROX went from 75 to 4. CEA: 120 back down to 20. ZNH: 90 to 16.
Lately I've been just floating out shares on this trading simulation platform and getting whacked left and right. My entries are usually terrible and honestly nothing is trending very well... at least the ones that I got into. But I've cleaned out everything in my fake portfolio and starting over. Recently the craze about oil gave you some good chance shorting oil and oil/energy related stocks on the way down. Two days ago the pop in XTO, DVN, APA, CLR and CNQ gave you a good short entry with a reasonable stop... except for some reason I thought it was going to break out and longed it to "hedge" against my other oil and energy short positions. Really don't understand what I was thinking. I guess I thought these stocks were beat up way too much.
JRCC at 45 looks like a pretty good short to me, although the chart is not as clean as I'd like. PCX is also not as clear, but I'll definitely short it when it breaks 50. CWEI has a cleaner lower high and lower low pattern, although this stock is kind of illiquid and the spread is bigger. I'm looking to get in around 88, 89 on the next spike. SPWR above 80 is a clear break out; although now I'm looking to get short close to this 100 level. LUFK still looks like it's in an up trend, I'm waiting for it to break down. ENER at 80 also looks like a good short. I'm also looking to short some metal and heavy construction stocks... MEA is this only one that I know off the top of my mind would be a good one, but we'll see what happens w/ X and CLF.
It sounds like I'm a bear and I'd have to say I'm slightly short biased b/c stocks tend to move down faster than they move up, but you need to be able to go both ways, too. When oil starts to break the trend, you could find stuff that would benefit from this... namely, the airline stocks that have been beaten up so much. I've sort of missed the train going long on them so I'm going to wait to see if I can get a good entry.
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4 comments:
Hi there....Yes, I think you may be confused if you believe that I am condescending. I am often agitated, not with you or investors, but the system and the "big boy investors" who manipulate it.
I would like to now what exactly I am doing that has you publishing this back handed compliment. If I offended, sorry. I am trying to teach/help/educate, so the condescending feeling is hopefully isolated. If not, I want should look at.
Thanks
Andrew
One more thing.. you mentined: He uses a Quanta-Funda-Techna method, which is looks at the quantitative first, then the fundamental (EPS, etc), and then the technical (charts), to screen for stocks.
Quanta is the screening/filtering and the techna is the charting. I hope that helps
Hey Andrew, I've been listening to your podcast for almost a year now after my father told me about it. I do want to give credit where credit's due. You have really knowledgeable guest on the show and you cover topics that people need to know. I think I pointed out the one negative thought I have about the show and neglected the nine positive things.
You nailed it on the head, it's a back handed compliment, or a double edge sword. It's like how some of my professors talked to me when I was a freshman in college; some of them are so brilliant, you can't help but feel stupid with or without conscious effort from their part. I can tell the passion in your voice, and that fervor feels like yelling or critcizing sometimes; as in "how can you be so stupid buying a POS stock like CROX!" That's why I said what I said. I don't think it's something you need to change; people love Cramer the same reason why some people hate him.
This industry truly is a joke sometimes, and they are run by supposedly the smartest guys that went to the best schools in the world. Anybody would be agitated if they knew the kind of manipuation that goes on and the government agencies that are supposed to look out for us seems to assist them in these transactions. I spent sometime w/ one of the Big 4 accounting firms and everytime I look at a company's earnings I can't help but to have some doubt. There just simply aren't enough disclosure.
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