STOPS:
BIDU – 100.13
SOHU – 68.73
JKS – 24.62
SPY – 112.31
It’s a few days before thanksgiving and I made a move into the stock market. I’m not sure what combination of events caused me to invest 8000 dollars into a market that is still in correction, but I saw a few things and I made some moves. In this post I’m going to show you the charts I looked at before I bought my positions and explain what I was thinking. Here is a copy of my transactions page after I bought my positions.
Now my first point is that investing into a correction is something that I’m willing to do, but it is not something that my partner Tim would recommend. The main difference is that Tim is more conservative and looks for a stock to begin rising and gets in on the way up. I’m more inclined to find a good stock at a great price and take a chance on making a bit more profit. I have said it before and I’ll say it again, we are not experts here at Duck Brothers, but we a learning as we go. We are bound to make some mistakes, but in analyzing our moves and keeping good records we can hopefully learn from our mistakes. I’m just showing you what I sometimes do when entering the market.
The first stock I bought was BIDU. It was a big winner for me back in July and September; and I’m up almost 15% on the year with BIDU already. I have been looking for a good time to get back into BIDU and this morning I was given a good price. The price had dropped
d 3.05% in the first few hours and I thought that was about as far down as it was going to go for the day. BIDU is a good stock and is has been featured in IBD several times; I think it is in the top 5 of the IBD 100 right now. I saw this mooring’s drop as a great time to get in on an excellent stock for a discounted price. As you can see, the stock was sticking to the lower bollinger band, sometime crossing it, showing that the stock was over sold. That usually means the stock price will equalize and make a correction to the median price. Notice that this is a good move on a highly touted stock that has very little risk of taking a huge loss. No stock in the top 5 of the IBD 100 is going to loose more than 5% of it's value in a single day. I felt confident that if I did take a short term loss, it would be made up eventually with a solid company like BIDU.
The second stock I got involved in was SOHU. It is another Chinese based Internet company. I had some good luck with SOHU earlier this year as well. Almost the same scenario as BIDU, you could say that I’m diversifying my portfolio in the Chinese Internet
sector and protecting myself from huge losses in case one of these stocks takes a dive. Again, SOHU is a solid company and I was willing to risk a short term loss to make an extra 2-3% in gains. SOHU had crossed the lower bollinger band twice and rebounded. I was pretty sure that the stock was going to stabalize around 4% lower than the opening price.
The third stock was JKS. This purchase was probably my worst decision of the morning. I had a run in with this stock earlier this month. I was scared off by the beginning of the market correction and I tightened my stop; I hit my stop loss on 11/15 and sold my 100 shares for 31.76. I had a chance at taking a 20% gain if I had sold on 11/04 but I held on and lost it all. I wanted to get back in, but I can’t justify the price I paid. Hopefully the market will turn it around and move me in the right direction.
The last, and fourth, stock I invested in today was SPY. This is an EFT based on the S&P 500 index. I like to be invested in an index EFT to balance my portfolio. I tend to invest in sectors, for example my dual investments in BIDU and SOHU. The market indexes can be a great place to park some money and just ride the market for a while. I find that the S&P 500 fits my investing philosophy a bit better than the NASDAQ. I don't have a chart for this one, but it pretty much resembles the S&P 500 on a 10% scale.
Any of the major indexes can bring the general market into correction so watch them all and follow the distribution days. According to William O’Neil 3-out of-4 stocks follow the general market.
My investing story begins shortly after I was out of high school. My father gave me a financial CD set called Automatic Millionaire by David Bach. I was enticed with stories of people investing small amounts of money each month in a 401k or IRA, and over a 30 year period becoming millionaires. Later this became reinforced by another CD set called Americas Finest Companies by Bill Staton. This set taught investing strategies in the stock market and about compounding interest. According to Bill the stock market had averaged 13% a year since 1900 and if you invested in blue chip companies you would become a millionaire. His example was invest $20 a month starting at the age of 16 and by 65 you would have one million dollars. Over that 49 year period you invested $11,760 but with compounding interest you have over $1,000,000. My question is why would you not want to learn how to invest? I started using his strategy in 2005, like everyone in 2008 I lost half my invested money. Discouraged with my investments I decided I needed to learn more. Again my father points me in the direction of a book. The title of the book is How to Make Money in Stocks by William J. O’neil. This book teaches how to read charts and what to look for in companies. William J. O’neil is the founder of Investor’s Business Daily and has made profits in good times and bad. I have been using his strategy for half a year now and have been successful. In this blog I will show my portfolio and track and my progress. I will also give a stock of the week and track the performance of those companies.
Good luck to everyone with their investments and I hope my advice comes in handy.
Tim Meyer
