Tuesday, August 10, 2010

Bad news is the time to buy a stock?

Example one

GenM : A very boring stock which does not fluctuates much. So, it is ideal for those who which to sit on top of its pile of cash. Now, highlighted are two OVERSOLD region which RARELY seen for this boring-sloth. If you could catch it at 2.60, hey ... that is cool. It is back to 2.80, as always after the dust cleared and bad-news forgotten. We traders have short-memory, ok? I DID NOT punt into it that day as I was off-guard. It was a very fast moves, ok?

This example is taken as so many 'investors' buy into it as it is 'safe'. Since it is safe at 2.80, at 2.60 is a bargain!! I remember during peak of crisis, Resorts was at 1.80 level. Wanna buy? I asked my only ex-student to buy it at RM2.00 and resisted at RM2.20(then) to clear. That was a cool 10% in 2 weeks and it shot much higher after that!

You man-man wait for BAD news on it again, like buying more LOSING casinos for the next dive. When it dives, BUY ... at 2.90 is a sell. 2.60 to 2.90 is cool 10% trading a boring good stock?

Example two

Wah Seong : It moved from 2.30(the blue horizontal line - oversold) to 2.70 level before retracing(overbought) and INSIDERS and SYNDICATES were happily distributing the shares to late-comers and it keep retracing ... then a BAD NEWS broke-out... their Italian bid failed. It dropped from 2.50 to 2.30, lost 20cents in ONE DAY. All traders being caught and selling at whatever price, making the selling-through to 2.05. Look at the OVERSOLD region at 2.05. Hey, it is up to 2.50, before retreat recently to 2.40 now, supported by 20MA line(red line). RSI moving lower ... and to me, if for short term trade this is a BUY.

This is just one of the MANY example that market OVER re-act to a piece of bad news, downgrading in an immediate response from some IRRESPONSIBLE broker houses' analysts. Yes, define the TIME FRAME ... for traders with short-term(which most of them in CN), that is fine. But for a person who know nothing much about TA like me, we need to use a longer time frame. All I do logically know is BAD news is the time to BUY.

Linkin Park - Runaway


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