A critical look at positions
11:08 pm Tuesday 16 November 2010
It appears that the bounce on Monday leaves conflicting views among readers. One big mistake investors tend to make is to create their outlook based on their own existing position. When investors are very long in their trading positions, they try to convince themselves that the market is going up. Conversely, those who managed to lighten up their portfolios and have sufficient cash in their balances are happy to see the market go lower in order to start new buying round. There is always the need to be objective especially when markets come to possible cross roads. My best advise is to understand every item in your portfolio. It is very possible that some stocks will decline while others become firm. There is no substitute for having an objective look at the condition of every stock.
Here are a few stocks I would like to watch:
EDC – I think the stock has hit the bottom of its range. I sense that it could range between 5.33 which was the recent low to 5.95 which appeared to have been a support level before it broke down last week.
DMC – I think the stock remains strong, I either sense or am hoping that it will ease further to 33.50 whereby a range could develop with a high of 36.50 and a low of 33.
FLI – Good fundamentals are being appreciated by investors. The stock has shown strong support just below 1.30.
DGTL – I am holding my breath for this unappreciated telco. Their business model is slowly gaining ground. It may not be a star but it ain’t no dog either.
ORE – Monday’s price action on ORE should not be ignored as there appears to be no large seller of this stock. We could surpass 4 by the time Nickel lists. ORE seems to be shining under the halo of Nickel.
TEL – I like this stock for its dividend yield and proven stability in revenues and earnings. I am afraid, however, that some portfolios are shedding TEL’s weight on their portfolios that I sense further selling. TEL may no longer be on the way down, but I doubt if it will bounce up strongly.
I am sure there are stories for every liquid stock and different views. What I want to highlight today is the idea that there are some stocks that look to be bouncing up from strong support levels while there are others that have some price erosion to go. One such stock could be SLI having broken through the 1.90 support. I think AP could also be facing further correction although many will dispute this. PNB is another stock which may see more downside if there is no follow through this week. In contrast, I see URC and RLC to be continuing its strength in this consolidation. For the mining sector, I believe AT and PX will benefit from the enthusiasm for NIKL.
All told, I believe it will not be an easy market for the rest of the week. The thing that is going for us is that the 91-day T-Bill auctioned on Monday were taken at a yield of 1.48% p.a. There is a lot of cash still floating around, and that is making stocks look really cheap.
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