investment intelligence zone

understanding market dynamics

2009-06-24T12:13:00.000-07:00

Dramatic market action that is common at tops and bottoms is known as blow offs and selling climaxes.
Blow offs occur at tops, they usually occur after prices have moved higher over an extended period of time. At the end of the upward moves, prices rally sharply accompanied by a large increase in volume. Typically, all of those that were going to buy at this level have done so. Profit taking occurs and prices reverse, often suddenly, to the downside.
Selling climaxes are simply the opposite of blow offs. They occur at the market bottom after prices have been declining for an extended period of time. Bargain hunters then jump in buying, reversing the trend, and sending prices higher.
Through the years, investors have searched diligently for ways to identify important market bottoms. And the selling climax has been one of the major focuses of that search.
A selling climax is generally defined as that capitulation of investors near major market bottoms, in which stocks are dump or abandon. The selling is no longer based on perceived values but rather simply on the desire to get rid of stocks. Once everyone who wanted to sell stocks has sold, there is no one left to drive the prices lower. And the resultant deep discounts in equity prices produce the BARGAINS that stimulate the beginning of the next bull market.
The fundamental definition of a selling climax is a period of panic behaviour and panic is not a matter of activity but intensity.
The world capital market has been experiencing this phenomenon of selling climax, which initially started with the activity of profit takers who perceived that most of the stocks have reached their peak. The effect created, however, continued to drive the prices to their lowest low which is believed would gradually reverse into bullish market .

2008-12-14T17:47:00.001-08:00

EVALUATING GOOD STOCKS TO PICK

2008-12-10T08:45:00.000-08:00

Picking winning stocks involves understanding what makes one stock great and another stock ho-hum. It involves getting your hands dirty with financial ratios and looking at markets, but finding good investments is not as hard as you may think.

1,ROI(RETURN ON INVESTMENT) is a Leading Measure of Company's Efficiency

2,Picking Stocks begins with Assessment of Need

3,Following the Stock Market Herd Often Wrong Decision

4,Don't try to Time Bottom of Falling Stock Market

5,Understanding What Effects(what move the prices) Stock Prices

6,A Good Company with a low P/E(PRICE EARNING RATIO)

7,understand the cashflow statement explicitly

8,What is an Economic condition and Why should Stock Investors Care

2008-12-02T09:19:00.000-08:00

Stock Investment Strategies

2008-11-28T07:00:00.000-08:00

Investing without a stock investment strategy is like searching for a treasure without a map. The correct stock investment strategy should not only define your investment methods, but will allow you to achieve your financial goals within your specified timeframe.

Four factors that determine your stock investment strategy
To determine your stock investment strategy you first will need to know the following:
GOALS - The total amount of money you will need to accomplish your goals.
TIMEFRAME - The length of time until you need to achieve your goals.
RISK LEVEL - How much risk you are willing to take to achieve your goals.
RETURN LEVEL - What returns you are you expecting to achieve on your investments.
If you don't know what your financial goals are take a moment right now to write out where you want to be financially in the future. You may want to retire early, pay for college or just live more comfortably. Make sure to attach a dollar amount that indicates how much you need for that goal along with a timeframe you would like to achieve that goal. We all have important goals in our lives that we need to take into consideration when we create a stock investment strategy.

The amount of time that is available to achieve any goal is very important. Simply put if you don't have enough time to achieve your goal based on your current return then you will need to adjust your return, decrease your goal or make your timeframe longer. Having a shorter timeframe can put you into a different stock investment strategy than what you were initially thinking.

Certain goals can be very aggressive for a specific timeframe and that can lead to your risk level being higher than what you would like, but have to have in order to achieve those goals. There is a correlation to risk vs reward in investing and making sure that the higher risk can result in a reward high enough to justify a temporary setback with a losing stock investment.

The return level that is needed to achieve your goals based on your timeframe might not always be what your expecting. If your timeframe is shorter than what you would like to achieve your goal then your returns will have to compensate for the shortcoming. This can sometimes result in a higher risk level than one might be used to.

I have a great online calculator that you can access here investment tools that will help you understand the relationship between your goals, timeframe and returns that are required to reach your goals.

Four questions that will narrow down your stock investment strategy search.
Before anyone can start looking at the different stock investment strategies that are available you should first know the answers to a couple simple questions.

1)How interested are you in becoming more active in stock investing? If you are not interested in becoming more active in stock investing then a simpler, more hands off approach, would be recommended. One of the most simple and effective hands off methods of stock investing would be to invest in the nigerian capital market and putting a set amount towards stock investing each month. On the other hand, if you want to actively manage your stock investing and pursue higher returns then there are many stock investment strategies that can be selected to best fit your interest level.

2) How much time do you have to manage your stock investments? Certain stock investment strategies require more time than others. Good stock investment strategy shouldn't take more than a few hours per month to implement. If you subscribe to an stock investment service you can lower that time down because they do the most time consuming part of the process the up front research. You can find a good stock investment strategy that can accomplish your goals and within your time that you can devote to managing your stock investments is the key.

3) Are you investing for income or for growth in stock value? In general, you can classify stocks as income stocks or growth stocks. Income stocks produce a dividend during a specific time period such as every quarter, which provides income on a consistent basis. Growth stocks might produce a dividend, but are mainly purchased for growth in stock price.

4) Are you going to invest in individual stocks or some type of fund? Selecting individual stocks will take a more time than just selecting a mutual fund or an index, but your efforts can be rewarded with greater returns. When you purchase a mutual fund or an index you are purchasing a large baskets of stocks that have been pre-selected for you. It does make it easier to diversify, but there is a downside to this theory. There might be stocks that are going through a down period, which will reduce your overall return.

Two basic methods of analyzing stocks
Now that we've touched on a few important questions to ask yourself we can get started with more details about the different stock investment strategies. Stock investment strategies can be split into two main methods: fundamental analysis and technical analysis.

Fundamental analysis is that the stock market can incorrectly price stocks, but eventually the correct price will be obtained through time. The focus is in finding these undervalued companies and purchase them. In turn, they sell the stock when the stock is fully-valued or even over-valued.

Technical analysis rely on charts and indicators that revolve around price and time such as moving averages, volume and relative strength of stocks just to name a few. There are way too many stock indicators to name them all here.

Each type of stock investment strategy analysis has it's advantages and disadvantages. There is no clear winner as to which method is the best. It boils down to your own belief more than the system. It's about what you feel is a valid reason to buy a stock. If you don't believe that a low PE ratio is a strong enough reason to buy a stock then you should not be using that type of system.

2008-11-12T11:00:00.000-08:00

2008-11-01T02:07:00.000-07:00

signs of rising stock price

2008-11-01T01:40:00.000-07:00

How to notice a stocks potential rise before anyone else. Charts, analysts advice, and a host of other methods are used and useful, but you want to notice the characteristics even before the big guns start to focus their attention on these stocks.

Let's consider what a chart can tell you. Simply stated, the highs, lows, and all points in between. But that's not the only things you need to look for. One example is a candlestick chart that can tell you where a stock started, ended, and traded all day, and what relevance this has to a stocks performance. There are charts that graph a stocks performance, and let you get a feel for where the stock may be heading.

While using charts you start to look for tell tale signs of movement, not just up or down, but a trend that is developing. The simplest way to check is to see if what is called a "head and shoulders" pattern has developed. What you want to see is something that actually looks like a head and shoulder pattern, whether right side up or upside down, the form is somewhat like a shoulder on either side of what looks like a head. More info about this is available on our website.

Other signs to look for, insider buying or selling. Although you can't always know why they do what they do, if they are all selling or buying there's a reason. Maybe they needed to make a house payment, or maybe there's a real upswing that they see coming, and are maximizing their profits. By the way, insider have to record their transactions according to trade laws, you won't have access to day to day trades, but usually you can be current to at least a month.

If there are new products coming on board, that could announce a price upswing soon. As well as the announcement or soon to be announced of successful trials, getting this information before anyone else could make you rich, richer than you ever thought possible. Before you let this opportunity pass by, you at least owe it to yourself to check out our offer.

Then too there is a 50 day moving average and a 200 day moving average, when you see the line staying above or below these trends you can have a glimpse into what is going on in the long term objectives of the stocks in question.

Which brings me to a final point and observation, and it's a plain principle to follow..."the trend is your friend", violate this concept and your just gambling not investing

John Landry.

making money in the current financial meltdown

2008-11-01T01:30:00.000-07:00

The science of money making in investment

2008-10-31T14:37:00.000-07:00

Yesterday's technical look at ProShares Ultra Financials (UYG) didn't help much, as it showed a slightly bullish bias going into a day that saw the market sell off again to the tune of -9% for the S&P 500.It's important to distinguish your time frames when trying to profit from this market. If you're looking to pull money from it each day or week, then tight stops are essential, per my Tuesday article on UYG and ratcheting stops higher to lock in gains. The leveraged ETFs are moving so much each day that they're like money machines if you watch them closely and catch just a small part of a trend -- or a big trend like Monday's surge higher for the longs or yesterday's plunge lower for the shorts.Here's how that can look when done right. On Monday, you would have seen UYG bouncing off support at $10 after surging upward from $8 Friday. You wouldn't care about missing the 25% run from $8 to $10 (unless you already owned it on Friday when it was bouncing along $8, but let's be conservative and say you didn't). You just pick up whatever number of shares you want at $10.05, put a stop on them at -5% or $9.55, then move the stop up as the shares rise. By the end of Monday, UYG was at $11.25 and you would either have sold to avoid overnight surprises or set your alarm to start Tuesday with the market to keep on top of it.The Tuesday pre-market made it obvious that UYG was set to move higher again, and indeed it did. That was stop ratcheting time, which worked to get traders out of UYG at around $12 for a 20% gain.Long-term investors, on the other hand, should approach bargain prices differently. The jury is still out on how severe a recession we face, whether government moves will stave off a systemic financial meltdown, and so on. Everybody is saying they're going to wait and see. The truth is, though, that the jury is always out. There's never a clear signal in the market. It's always uncertain.Which is why moving gradually makes sense. One thing we can all agree on is that the risk in the stock market is less today than it was a month ago. You read that right. Prices are lower. Money put into shares now will appreciate more than money put in a month ago. If stocks fall farther, money put in now will not have fallen as far at the bottom as money that was put in a month ago. That's lower risk.But we all know that it sure doesn't feel lower. It feels like risk is at an all-time high, that the last place you'd want your money is in the nutty stock market where all recent comparisons go back to the Great Depression. One thing to remember about the Great Depression, however, is that it was a pretty good time to buy stocks -- but not all at once because there were several bear market bounces and then more legs down before it based and rose.So, the long-term investor recognizing that these days are pretty good for putting money to work in stocks, should divide his or her capital into chunks and dollar-cost average into broad indexes, either leveraged or plain. The volatility will continue, and that's why moving gradually will remove some of the stress. Look at ProShares Ultra S&P 500 (SSO), for example. If you'd begun moving capital into it when I wrote on Oct. 8 that you should "get your greedy hat out," you would have paid around $30 for it the next day. On Monday, it closed at $35.50 to give you a quick 18% gain. Now, it's back down to $29. So what? You don't need that money now. Let it ride. If the worst prediction I've read comes to pass, we'll see the S&P 500 fall another 30% from yesterday's close. That would take SSO down 60% from $29 to less than $12. It would likely happen in the next six months or so, which means that the smart long-term dollar-cost averager would divide capital into six chunks, one for each month. The first chunk went in at $30, maybe the second one goes in at $25, the third at $20, the fourth at $15, the fifth at $10, and the sixth at $15 as the market finally starts its way back up. Here's how that would look if each chunk were $10k:
333 shares at $30
400 shares at $25
500 shares at $20
667 shares at $15
1,000 shares at $10
667 shares at $15
The $60k invested would buy a total of 3,567 shares at a cost basis of $16.82.
The S&P 500 would be at around 700 at the end of this six-month scenario. Its slow climb back to the 1,400 level -- where it was just last May -- would see the investor's $60k become $180k.
Those are the two ways to approach this market, and neither is particularly stressful. Choose which kind of investor you are, and put the plan in action.
If neither appeals to you, then do absolutely nothing and feel no regret for it. There's no law saying you have to invest in stocks just because so much is going on in the market. Cash is cash, it's great to have, and I'll bet you could put some of it to fine use on holiday shopping lists.