Gus Cosio says so

Ideas on the Philippine Stock Market

What’s in a trader’s DNA?

7:00pm   Friday  31 July 2009   Philippine Stock exchange Index  2798.33 (+1.2%)

When headline stocks have run up as much as they have already, I find it helpful to follow volume and price spikes among stocks which are hardly make it to the 20 most active list.  This gives me ideas of what the next move should be.  Yesterday, I mentioned PAX, CYBR, SINO and EEI.  I think these stocks are going to be in for some action in the next few days.  Analysts refer to these moves as rotation buying.  Investors and traders start to set their sights on fundamentally sound stocks that have not moved for a while.  The spikes signal that traders have spotted the stock and have moved money in.  Because these stocks start from a relatively low liquidity condition, the surge of volume usually results in a spiking up of prices.

In looking at second and third liner stocks, care and diligence should not be thrown to the wind.  I always do my homework to make sure that indeed it is not an empty shell that I am buying.  To start with, I noticed that PNB traded 5.273 million shares today turning Php 119.3 million in value.  The last time PNB traded large volume was on April 8 when it traded 4.418 million shares.  It opened at 11.50 and closed at 13.50.  The spike pushed PNB to trade around 20-22 where it was stuck for around 2 months.  Today is what I think to be a “break out day,” and it is not inconsistent with my expectations because they will likely report good 2Q09 results.  My view is that the stock is worth at least 30; but don’t take my word for it.  Go to the PSE website and read all PNB disclosures.

Another stock I like is EEI simply because it is trading around 4X 2009 earnings.  This has been a very good company in both good times and bad.  It is just a stock that the market does not understand much.  The price and volume spike of the last few trading days tell me that interest is pouring into EEI.  Perhaps, some investors are getting to understand it.

CYBR appears to be in play but one has to be very careful in trading this stock.  I looked at their 1Q09 disclosure and the numbers are all red.  It will probably move higher but purely on a speculative play.  I fail to find any good fundamentals on the company, that does not mean that it cannot go up in price.  I think momentum buying will push this up some more.

In the market, when investors have tasted blood, they tend to want more.  They will want to squeeze as much as they can in a market rally. It makes sense because having earned from the run up, they have bigger capital to put at risk.  It is both human nature and a gaming instinct.  It is in a stock trader,s DNA.  So while the market sentiment is upbeat, the risk reward will likely be in favor of the risk taker.  Like a good poker player, however, you should always manage the money on the table.  A good poker player may not always be dealt a good hand, but if he manages money right, at the end of the game he will be ahead.  It’s all about understanding your chances.

Cheers.

http://www.condron.us

Advertisements

July 31, 2009 - Posted by | Financial markets in Asia

6 Comments »

  1. Do you have any opinion on TKC (“T”)? Thanks.

    Comment by Warren | July 31, 2009 | Reply

    • TKC is a very good company. The problem is that manufacturing is down everywhere in the world. I have no doubt TKC (T) will recover. I’ll have to get more details on how the company is doing before I can give you a decent comment.

      Comment by Gus Cosio | August 2, 2009 | Reply

  2. sir gus, your insights are practical wisdom. i’ll be one of your followers from here on. good luck in our trades!

    Comment by rael | August 1, 2009 | Reply

    • You are certainly welcome to follow and even comment. I like to hear other people’s ideas because I do not have a monopoly of them.

      Comment by Gus Cosio | August 2, 2009 | Reply

  3. Hi, Mr. Cosio!

    I am happy to have found this site through PMT.

    I am a newbie ( 3 years ) in the stock market. I’ve been feeling bullish since April but I can’t really explain it to myself why. Your blog enlightened a lot of issues in my mind. Thanks very much. I’ve been putting on positions every month as the trend progresses. Right now I’m holding AC, CHIB, EEI, PAX, MEG as core and ZHI ( ultra-speculative garbage, my bet as next GEO ).

    As extra cash builds up, I am now looking at PSE ( the stock ), as an overall proxy for the nascent bull market. What do you think, sir?

    Melvin

    Comment by Melvin | August 1, 2009 | Reply

    • Funny you should ask. When PSE, the stock tanked to 140 in January, I started buying it. I bought all the way down to 110, and then it recovered. Sadly, I sold my positions at 170, a bit too early in the game. I definitely agree about your proxy idea. At today’s price, this will probably give a dividend yield of at least 3%. As a suggestion, you might consider an accumulation strategy since your horizon will be long : set a target amount and buy it over a a period of time, buying more when the price is down and less when the price is up. This is a good stock to hold over a long time horizon.

      Comment by Gus Cosio | August 2, 2009 | Reply


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: