Wednesday 22 February 2012

Laid low


Laid low by a cold for the past couple of days.  Since Monday was a holiday in the US the interesting action happened yesterday.

The DJI remained above the resistance level that was established by a price peak back in May last year.  But the movement in the market remains steady and subdued on a day to day basis. It is amazing how hard I find it to pick up on a change in the mood of the market and respond appropriately. I have completely failed to respond to the smooth upward trend which emerged in December, hugely to my cost in missed opportunity. I now am fearful that my response is too late. This feeling is not helped by the fact that my share picks have been poor. So, even now that the market is still bowling along my returns are dismal.

No point in bleating about this. I am making some money and these periods when nothing you do goes right happen from time to time. It's just a case of being strong and holding on for the moment when luck returns. In the mean time you just keep going and checking to see whether perhaps there is something you have missed and could be doing better.

In the mean time I have taken profits on PG and VZ in the US, both meagre. In the UK on WEIR, decent.
I have filled my boots with HK shares 3360 410 1128 1068 and 2342 - so far so good. These were purchased on the basis of decent quality shares that had been beaten down.

I am also in the process of buying battered shares in the US that I plan to hold for a week. More news about these in my next post.

I have had two comments and have been delighted to reply to each one. Ian recommended MA crossovers as a method for getting in and out of shares. I tested Unilever and found that they were too slow as signals for getting in and out.

Dave wants an understanding of this trading business and I have recommended two books:
Jim Slater's The Zulu Principle and Richard Koch's Selecting shares that perform.





5 comments:

terry said...

Hi Paul,perhaps if you used/tried a moving avarage cross over system say 6/21day or 20/50day this and jump on at the crossover point ,this may help to be jumping on at the right time, may be somthing you want to test out.
Terry.

paulus said...

Terry
Thanks very much for your comment. Much appreciated. Have you tried the MA crossover system? What luck have you had?

I did a test using Unilever as my example. Going back to last July I tried out the shorter period first. It yielded 8 trades 2 winners and 6 losers. Net loss for the test (assuming 100 shares were bought and sold each time ie average investment £2067) net loss £168.

If I had only taken the long trades there would have been 4 trades 1 winner and 3 losers net loss £105.

Using the 20 and 50 day MAs generated 4 trades 1 winner and 3 losers net loss £45.

Taking only the long trades there would have been 2 , both losers. Net loss £53.

Judging by eye the reason for the poor performance was that the signals always came late.

Do you find these results surprising? I don't. I think moving averages are good for judging where a share is moving but they give poor, slow signals. I almost always have a 200 day MA on my chart to give a sense of place.

For picking shares I prefer methods that have a big element of fundamentals included in the mix.

On the other hand in Hong Kong, using back testing, I have discovered that the engulfing bullish candle pattern is a good predictor of price movement. It happens rarely but yesterday several shares came up with the pattern.

If you would like to see how I get on the shares I purchased were 1211 and 857. If it hadn't been for a glitch at my stock broker I would also have bought two of the following 3968, 2883 and 1066. I have yet to decide whether to buy them tonight.

All the best and thanks again for your comment and support. A bit lonely this blogging business.

Anonymous said...

Paul,
Hope you are feeling better.
I am trying to learn this trading business by reading your blog.
Dave

paulus said...

Dave


Hope you are going to other sources as well. I have my own peculiar style which I have honed over the years. It suits me but there are other approaches that fit other people's requirements better.

When I started I found Richard Koch's book Selecting shares that perform helped me to understand my own psychology and its fit with the many different styles of investing.

Once I had settled on my style − which comes down to seeking out undervalued shares - I got a lot of help from Jim Slater's The Zulu Principle.

I don't know how long you have been following the blog. In the early days I had, for me, a very atypical approach. I was doing everything I could to understand where the market was going because I feared a collapse. I still think a big fall will come but there MAY now be several months of respite and I am back to picking shares.

I was too slow in getting back into shares and missed the best part of the run. But I still have hopes that I will catch up. So you see that my approach is far from perfect.

Thanks so much for your interest. Keep following because I will let you know what I am doing. If nothing else you can learn from my mistakes. I recommend nothing.

If you have other questions or comments please get in touch again.

Paul

PS I have put links to the two books on the main post. They won't fit under the comments section.

terry said...

Hi paul,interesting to hear you say you always use a 200 ma,based on that i looked at unilever chart using a 200 day ma and for longer term six months back to sept 2011 to now the shares went up from 1940 to 2190 in jan this year and then went down to 1990 in feb 2012 if using a stoploss to follow upwards as it went up this would have been a good trade,the charts i used is a freebe chart as ihave not subscibed to any software package yet,
interested to see what you think.
Terry.