Friday, August 17, 2007

Trade Analysis

Another horror day on the SGX. What began with promise quickly vanished. @#$%. I was sitting on two stocks that were up by 4% in early morning but - in less than 20 minutes barrelled down to negative territory.

I'm all in. That's the sad part. Failed to plan adequately and my portfolio is down 30% - some of the smaller shares are down 50%. Hell some of the medium tier shares I own are down nearly 40% too like FerroChina.

Anyhow enough complaining- here's a trade I'm quite pleased with. HGO. Hillgrove Resources is an Australian mining company that situated close to Adelaide- that's good because distance can be a real killer expense. Fuel, Water, batteries, everything has to be trucked in. And if its in some gawdforsaken place, with no proper roads, its gonna cost dearly.

This is a good example of how studying the moving average can help you choose good buy and sell signals.

(I'm sorry that the MA colors are hard to see  but that's the aussie broker's computer system, can't change it.)

In March and April - HGO was forming a nice upward trend. I got in at 29 cents - but over a year ago. There were two major breakouts. The 2nd one happened as the moving averages were linking up - that usually send mixed signals - defensive traders might even have sold on that point. (I sold some of the shares at 35 cents at that point). But the short and medium term averages didn't go under the long term average (thats the lower moving trend line, so it can still be viewed as still ok.)

There was a strong breakout at the end of May - it hit a high of 70 cents- I was watching it when it happened. And I was overjoyed- I thought it would keep on going towards $1.00.

It didn't.

The trend started running of steam at the end of July. I sold all the shares at around that level between 58.5 - 53 cents. I did feel a pang of pain - cos I was now wishing I had sold some at the high 60 mark. But there's no place for emotions in this game.

Nor is there any place for hope. And if I had been holding it waiting for it to come back up to 70 cents... well, "Dream on." Look at it now 29 cents and falling like a rock.

As they say the trend is your friend- follow the trend - so see the moving day average descending downwards? Yah, bad sign. Don't buy.

Unfortunately, I did. I bought some back as it was drifting downward. Thankfully, I didn't buy  much - just about 20% of what I had previously sold. But it was a silly move.

Sure, the price is CHEAP. But you should be focused on the overall trend- not the price. In a downhill market- the price can go cheaper each day.

Repeat after me: The trend is your friend. I'll give a free lunch to anyone who repeats that to my face. But just once only :)

That's a powerful downward trend there. So god knows when it will end. Better to stay away - put the money in the bank and go scuba diving with white tip sharks- less risk that way :)

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