January 25, 2012- Strategies on Retracement Trading and the Lead School Fish

I call the following table my momentum retracement trading method.  I don’t know if this will work, but we’ll see in a few weeks’ time.  Granted that the Philippine index is in an uptrend on all time frames, (short term, medium term and longterm – We are above all simple moving averages 50,130,260 day), I intend to simply just buy PSEI index issues.  I listed below all the index movers that will most likely benefit when the index rises, and conversely also move down when the index falls.  These are , what I perceive to be highly correlated to whatever the index does.

Since I do not need to buy all the stocks in the index, I chose the highest market weights (>3% in the index) and made a support resistance table below.  I also checked which stocks in the index are breaking new highs (along with our index).  I find Mr. Henry Sy’s stocks (SM,SMPH) to be the case, as well as Mr. Gokongwei’s JGS (perhaps due to the DGTL-TEL swap that resulted in extra cash flows for the holding company.)

Traders often critique that “there is huge liquidity but not enough volatility to make money”, when it comes to index issues, but of course this is a misnomer as a simple basket of “bluechip stocks” can give gains (at least 3-5% net of commissions, which may not be bad considering how much yield one gets from savings and money market rates.)

Still though, when one compares the following index issues with concept, mining, 2nd and 3rd liner stocks such as WIN,PHES,NI,EEI and all the other jockeyed stocks what have you, it seems tempting to put some cash in speculative stocks, which in my case will not be covered in this post.  I keep things simple for my kind of trading and investing flavor, perhaps to a fault and my detriment, but that’s it.  From time to time, I get tempted to buy good setups too.

If 10 people look at a chart and all 10 of us come to the same conclusion – those are the types of things I am comfortable with.

4575-4600 seems to be a likely support of the index, but many issues can be hitting support prior to those levels.

Please kindly let me know which are the stellar “lead school fish” that I should be hopping on, that I’ve missed out on.

Follow the leader and take care 😀 – Faceless Trader

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