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Be decisive, Be patient, Don’t be greedy, Don't be stubborn

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Friday 22 August 2014

Is It Time To Buy Now? - Is this a million dollar question? Not really!

by ckchoy


As a retail trader/investor, where you are a person that keen on catching opportunities in stock market,  I believe you might have experience people around you asking you such a question "Is it time to buy now?" For some, they may think in heart
" Hey I'm not GOD, I also want to know the answer"
or
" If I know, I will be rich"
or reluctantly and answered eg
"Hard to say, if more bad news coming, market may tank more"
"This type of market very hard to play, may win a bit and lose a lot"
"If Euro problem solved, market of course will rally, if not, will continue tank more"
"So much bad news around, I don't know how to digest, not sure what will happen to the market"
"I can see market started to rebound slowly, but will it snap back down? Is this rebound/rally sustainable? QE coming? More China's rate cut? More banks in Europe bailed-out cases pop up?"
and so on.

Instead of only focus on general global news especially on political and have no idea of what's going on next, why don't bring in some basic figures to support your view? Be it TA(Technical Analysis), FA(Fundamental Analysis) or macro-economic (eg inflation rate, interest rate, GDP etc).
Using quantitative figures not only can let you jump out of indecisive infinite loop, it may help you continue improve your experience on market view, a positive cycle to your trading/investing experience.

Below are only some samples for illustration, please do not take the numbers and comments seriously.

Sample answer 1 - TA, short term, using STI index as reference, support play
I look at the short term(few days or week) chart and it is showing uptrend. However, I notice STI has run up 9 straight days, perhaps market is a bit overbought. But since market is in uptrend, I will long the market but wait for a pull back first. From the chart, I see STI possible to make a healthy pull back to around 2920 before I enter.

Sample answer 2 - TA, mid term, using STI index as reference, breakout play
Hey, I'm more conservative, I like to take mid term(weeks to month) view. It looks like a sideway market in mid term, hence I would like to wait for STI to breakout 3000 before I consider jump into the market.

Sample answer 3 - TA, long term, using STI index as reference, conservative play
I'm super conservative, to me long term market is still in downtrend, however I have such support levels in mind, 2920, 2880, 2850, 2800, 2770, 2750, 2700, 2680. As I'm conservative, I would wait for 2680 before I enter the market.

Some may think, hey Sg market is a low volume market comparatively. I like to use HSI ( Hong Kong's Hang Seng Index ) or Dow Jones/S&P as reference.

Sample answer 4 - TA, HSI, support and resistance play, volume breakout play, Dow, S&P
Last year when the Euro crisis started, HSI down from 22000 to 16200, then rebounded sharply to 21700. And this year May the Euro crisis brought into the game again and HSI retreated back to 18100 before rebound back to current level of 19800.  In between I notice the flip flops show strong support around 18200 and strong resistance around 19500. Hence I would long/short around this support and resistance. But if volume breakout and HSI were to stay above 20000, I would turn bullish.
I'm considering the Dow should be trading in the range of 12000 to 13000, and S&P 1250 - 1400.

Sample answer 5 - FA, STI
Historically, STI fair value is around 15 - 25. Current level of 13 is below fair value and considered cheap. However short term market is volatile and there are still a lot of uncertain in the markets. I'm not hurry to buy but would buy on any dips as current level do offer cheap valuation for a long term investors.

Sample answer 6 - FA, specific counter, P/E
KepCorp which is trading about 9-10 P/E which I think is undervalued. It is time for me to do accumulation.

Sample answer 7 - FA, specific counter, value investing
Capland is trading below its NAV of 3.5 which I think is worth considering even though the previous and coming quarter results were/are not that impressive.  Current share prices should have already factored in 40% drop of value in future, let's say 2-3 years time.

Sample answer 8 - FA, sector, earning
I have done my research, coming quarter banks most likely will continue report better than expected results. I'm betting short term on banks for its quarter result.

Sample answer 9 - FA, macro-economy figure, longer term
Singapore inflation rate stays high around 5% per year which I think is not a healthy sign, I expect market to remain volatile. As a conservative investor, I would like to see inflation start to cooling down before I would consider enter the market.  Best is when it comes down to 2-3%.

Sample answer 10 - and so on.

Have you done your homework? Let me check with you: Is it time to buy now?
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