I have done many mistakes in my life. But I am thankful that one thing I didn’t do wrong was pursue a worthwhile ideal – to take the Chartered Market Technician program and to finish it.
I have made plenty of mistakes in my life. I am backward financially because of this.
My losses have stemmed from being unable to cut a losing position when the size is an 8 digit figure. I have proven to myself that I am ineffective in the 8 digit realm and the less than 10% loss had blown up to 20%, 30% until I cannot recover it unless I wait in vain which is technically a bad strategy.
My losses from Cosco during 2013 (fundamentals cost me a fortune) then airlines (CEB) despite fundamentals again- undervalued Properties (GERI) in 2015; Gold stocks in 2016 (despite macro and world prices)
All of these have been rooted in my inability to understand that fundamentals will not save me. I need my fundamentals to align with the technicals. Or in other words; it’s futile end of the day to discuss earnings and growth or management or their dividends and billions of pesos. I had to learn the hard way. I have to learn in 8 digit figures way. I have to explain haplessly that we will recover. It is a difficult thing but we will recover if not stocks ; then businesses or forex but with a strong discipline of what works in the market. Unfortunately we have proven this to ourselves – trading or investing – is based on reasonable expectations and risk management.
A strong growth company doesn’t equal a solid growth stock.
I have had to learn that in the Philippine market for the past three years is a momentum driven market with the very catalysts of speculative disclosures and hear says and strong money flows as the most important criteria. I have learned that buying new highs no matter what that stock does would have saved me. Even if I never understood a single thing of what that stock did. That the Philippines is a basura led market when it comes to outperformance and that’s the truth; whether I like it or not.
I understand technicals. I know moving averages and charts and retracements. I took a course just to prove to myself that I truly understand these technical jargon and I took the test and the essays just to prove to myself that I know what I’m doing. And more and more ; I had to define my investment philosophy.
1.) owning stocks during a bear market is akin to financial suicide.
2.)investors must realize that “blue chip” stocks will not recover over the long haul. Even after 7-8 years after the 2008-2009 bear market; some stocks will not recover. A 20-50% loss in a casino stock like PLC or Bloom or Melco will not be solved because you waited 5 years. It will not. It only recovers when a catalyst happens ; that changes the relative strength of that sector – when money flows into that sector- happens. So if you think that in between the 5 years; a catalyst happens- then that’s the buy and hope strategy and that’s what it only is.
A person who has GERI at high prices above will not recover even when the stock presents undervaluation extremes unless Andrew tan did something for the price action.
Fundamentally undervalued stocks don’t go up by itself. Yes we can argue holding on to it because the recurring income has grown 70% yearly. Yes we can argue buying it due to the value and opportunity it presents but note that 5 years time An equally undervalued asset like Shangrila has never went up even when its assets are also very much undervalued in the stock market versus the market prices.
A company reporting 400-500% growth in net income and even if that can be sustainable within a larger base versus the past years – does not guarantee a strong trending stock. This is hard truth to all academics and why the CFA sometimes isn’t as important when given context to the Phil market – a stock that can grow its earnings per share doesn’t guarantee a strong stock price. It took 3 years for people to look at TA. It might take 3 years for people to understand the undervaluation of CEB. By then; you’re dead and better off with your business that can earn 15% or more.
A person holding AGI or RWM or MEG should not think that their losses will be erased after 5 years. It doesn’t work that way. you need momentum to drive that value. Without it; your negative loss will never recover by itself. And note that these companies reported earnings year on year. Rwm is the only casino that has not lost money but it had a similar fate. 80% down like all the casinos.
I could blame the myth of the rational market or theories or I could only blame myself.
I could say that – there should be a strong correlation that rising gold prices and fears of a collapse in markets should benefit gold stocks. Unfortunately; as long as traders see the seller FYap, or if they see the 30 cent resistance – maybe even a $1340 or $1,400 gold price doesn’t guarantee a rise in gold stocks. The correlation of gold stocks in the Philippines versus that in the US gold miners is negative. The theories and the academics are dumbfounded. It’s only the candlesticks that matter. It’s only the moving averages that do.
I could say that – there should be a strong relationship that higher earnings should lead to higher stock prices. But I can give a solid compelling argument that it’s not true based on evidences. The previous decade must have believed in fundamental investing but the current decade is decided by trends and just that. Momentum and money flow whether validated or not is all that is important
The reality? Maybe yes. Maybe not.
Maybe in between.
My conclusion why getting the CMT is the best decision I did was because I finally realized that a true technician. A purist as they call. Is the only true reality.
Even the other technicians who are also chartered financial analysts would attest that if the stock fell below the 200 day moving average – no matter the great assets; no matter the earnings growth – they will do what technicals would merit them to do; avoid that stock at all costs.
One thing I believe in ; only when there is a strong relative strength and that it is a leader in that given industry – and shows a reason to be bought (think why PF is being bought for instance) do you consider the ramifications of that decisions.
The only truth – stop losses
Volatility stops; average true range stops. Key support and resistance stops. Recent pivot lows, 8% max loss. 20/50/100/200 day moving averages and profit taking stops. Those are the only rules to live by.
News and earnings – these are only for your screeners and are only parameters to check if people would buy or sell due to that.
Also ; buying stocks on pullbacks provides better risk reward than buying breakouts.
Kiss the channels.
Get the retracements
Avoid the breakouts.
– Faceless Trader ; CMT