Monthly Review- January 2010

This month has been a rollercoaster ride. At the beginning of the month, we saw the capricon effect taking place. My portfolio grew and it was exhilarating. However, this also brought out the greed in me. As described in my previous posts, prices of Golden Agri and PEC have both rose above my target price, but due to the boom and my greediness, I held on in hope to reap more profits.

Little did I know, things took an unexpected turn and due to issues from US and China, stocks plunge and a major correction occurred. Although I was late in realizing profits, nevertheless I did, and hence managed to pocket some profits before a more damaging dive occurred.

However, another mistake was committed. Amidst the volatility and uncertainty, I plunge back into the stock market and again committing the same mistake of chasing stock prices instead of sticking to my determined buy price. True enough, it is going to be another lesson to learn for myself. Prices continue to drop way below my buying price and I ran out of extra cash to purchase the stocks at really good prices, resulting in my newly bought stocks to be in the red. All I can do now is wait, wait for the uncertainty in the air to clear, and hope that the Chinese New Year around the corner will bring about a new year rally to boost the market and bring my current portfolio into the green again!

My Current Portfolio:

Lessons learnt: In times of correction, wait for at least 6 days before plunging back into the stock market to buy. Always stay disciplined and stick to the determined buy price. Check all indices and technical indicators to confirm its trend as much as possible before buying. Whenever in doubt, skip the purchase. It is always better to miss the chance of profiting rather than rush into it and get stuck in a loss.

PEC (23rd Dec 09 to 22nd Jan 10)

PEC was bought after sound fundamental and technical analysis. My efforts paid off as 2 days after I bought it at $0.655, the stock soared from a low of $0.64 to a high of $0.83. As I had confidence in its business (especially when PEC just announced that they had clinched a deal in Malaysia that is worth more than their market capitalization), I held on to the stock on faith that it can rise to a higher price.

However, the announcement by China on the reins in bank lendings caused all stocks to drop. PEC was rather resilient to the news and showed a strong support at about $0.78. However as time goes by, investors of PEC gave in and caused the stock to slide to $0.76 on 22nd Jan 2010.

From a technical point of view, stock price has fallen below the moving average of the bollinger band and STI dropped below the support of 2800 at the same time. Both indicators caused some panic in me. In fear that if I hold on longer, this might end up having the same fate as that of Golden Agri, that is to end up with lower profits, I decided to just realize my 15% profits now and then and just stay on the sidelines momentarily. A note to make is that after I sold it, prices rebounded back to $0.77 at the end of trading day.

My thoughts at that time: I am afraid that PEC may end up like Golden Agri, where I realized my profits only after much was "returned", hence I made the decision to end it there and then.

Lessons learnt: Make use of the principles of limit and stop losses to retain my profits. More importantly, always stick to the original plan!

Golden Agri (22nd Dec 09 to 22nd Jan 10)

This is my first realized trade after I broke even. I bought Golden Agri on 22nd Dec 2009 at $0.485. I bought it at this price because I believe that previously it has retracted many times from the resistance of $0.50, and with the bullish sentiment at this point of time it has a very high chance of pushing through the resistance and achieve higher highs. In addition to a weakening USD and hence rising commodity prices, I suppose that is highly likely. Indeed it has.

Golden Agri rose all the way to an all year high of $0.645. It has hit my target price by then, which was a 20% return (in actual fact, I am having a 30% return at this time) but due to greed, I held on to it, thinking that since it was advancing to newer highs everyday with such large transaction volume, a reverse in trend would be indicated with a dropping volume with further rise in price. In reality, there was already 2 other strong indicators to signal a sell, that is the RSI and Oscillator. Both signals a very overbought situation and a price reversal is on its way, but apparently I was very blinded by greed.
Prices dropped the next day after China announced plans to rein lendings by banks. Again, i did not realize my profits due to my belief that Golden Agri could advance further. However, things did not go the way I thought. Prices tumbled day after day, but I still held on because I thought I should just hold on to it and tide through the correction period.
My belief fell apart on 22nd Jan 2010 when prices dropped to $0.525 in the afternoon and STI fell below the strong support of 2800. This pressed the panic button in me as I fear that it will drop to my buying price. Hence I just sold it and realize my mere 6% profits instead of the supposed 30%. A note to make is that after I sold it, prices rebounded back to $0.545 at the end of the trading day.
My thoughts at that time: I do not know what is going to happen for the rest of the day and I feel very unsafe. Since I am still profiting, I shall just sell it to realize my profits, though I should give myself a tight slap for not realizing my supposed larger profits earlier.
Lessons learnt: A plan is very crucial before starting a trade, and sticking to the plan is of even utmost importance. Once target is reached, just sell and move on. At least by then, what was intended had been achieved.

My First Post - Introduction To A New Start After I Broke Even

I started my path of investing since July 2009. It started well (thinking back, I suppose I was just lucky), and I believe that made me over-confident. However, it did not take long for disaster to strike.
Soon enough, I bought a stock in August 2009 without doing any fundamental nor technical analysis. Without any stop-loss in place, having the "stocks will rebound and everything will be fine again" mentality and unwilling to admit that a failed trade was done, I held on to the stock as the price dropped daily, till everything was beyond repair. Finally, I sold the stock with a loss, a rather big loss in my opinion, as all my previous gains were wiped out, together with some of my savings.
Thereafter, I picked myself up, and told myself to learn the lesson, as it was really a memorable and painful one. From then, I invest again with more care, and soon broke even in November 2009.
A new start, a new beginning.
From now on, I will constantly tell myself to invest with care, always go through the fundamental and technical aspects before plunging any of my hard earn money into the stocks. This blog will be a place where I keep my trading diary, where all the precious lessons I learnt from my trades will be documentated. I believe these lessons will be beneficial to my investment portfolio and it will lead me to my eventual success to financial freedom!