Definition of Terms

Schizo* n. \ˈskit-(ˌ)sō\

  1. A schizophrenic individual

Schizophrenic* adj \-ˈfren-ik\

  1. relating to, characteristic of, or affected with schizophrenia

Schizophrenia* n. \ˌskit-sə-ˈfrē-nē-ə\

  1. A psychotic disorder characterized by loss of contact with environment, by noticeable deterioration in the level of functionigng in everyday life, and by disintegration of personality expressed as disorder of feeling, thought (as delusions), perception (as hallucinations), and behavior
  2. Contradictory or antagonistic qualities or attitude
    Illustration. 

*Definition by Merriam Webster 

Capitulation Club

You know that moment when you just give up and decide to sell, no matter the price? You’re thinking, “I’ve had enough of this! I don’t want to think about you anymore.” This is after you’ve waited for so long, hoping and praying that a bounce would finally follow. Capitulation.

I capitulated today. But just in a daily scale, okay? Yesterday, I chose to keep 35% of my total position in GMAP, just in case its uptrend slows down instead of the definitive reversal it did today. I knew it was already suspicious when the hundreds of thousands of buyers that were so willing to buy above 10 pesos were missing today. So, when I saw a buyer at 9.96, I sold half of my remaining position. I kept on waiting for the bid volume to thicken up. In retrospect, I don’t understand why I couldn’t have sold the rest of it at 9.80. I definitely had an opportunity to exit the trade. It was breakdown and it should have been clear. Tsk, tsk. I guess I thought I was patient enough to sit through the correction. I don’t think I expected the correction to be as deep as 8.32! 9, yes, but not 8.32. I sold down 8.75 to 8.52. It reached subsequently reached a low of 8.32 and went to as high as 9.26 from there. See, I capitulated. Sayang din un! I missed at least 50 cents. Silly me!

You know what, I think I should know better. I’ve been in this kind of scenario several times before. I can stomach the first dive, but break its new found support, and I’d puke! Then boom! My stock goes flying. This experience reminded me that no matter how bullish I am of a stock, if it’s time to sell, it’s time to sell. And…I should never make the mistake of thinking I can sit anything out (applies for short-term trades only). LOL!

 

Zoom, Zoom!

Momentum trading has never been for the faint of heart. Imagine, buying stocks at the highs… Not everyone is a fan of that thought, but come to think of it, isn’t high relative? When prices are considered high by all kinds of market players, such is the current market condition, momentum trading will prove to be all the more difficult as traders will start to question “follow through”. Will prices follow through on gains the next day? It looks like prices are going to dip first. Should I sell now with a profit then buy back later on when prices dips? Considering the market has barely corrected since its breakout from 4,386 last January 2, is a bigger correction coming and just waiting for everyone to be complacent? Tsk, tsk. Poor short-term players! Always on the look out for the bear to strike. Yes, we are pessimists. But can you blame us for not relying on blind faith or luck in our trading?

The keyword to short-term trading/momentum trading is “uptrend”. Setups I usually look for are those stocks that went up, retraced a little then rebounded from there (See chart below – Circle 1). It would be great if I were able to ride the first breakout (Circle 2) but a breakout from this sideways move does not always assure us that the stock is already trending. Stocks in a consolidation mode are momentum killers so until you’re 100% convinced that the stock has bottomed out, you have to be very fast if you want to make a quick buck. 😛

This setup has proven itself countless of times but there are times when this setup fails. When?, you might ask?. When as stock refuses to correct. Case in point:

Sooo, the uptrend has proven to be stronger than expected. There should be a window of opportunity somewhere. Patience… 😛

Extraordinary Circumstances

Based on its recent disclosure, Petron Corporation employees’ retirement plan is selling 695,000,000 shares at 11 pesos. They’ll be using UBS, Standard Chartered (?), and Credit Suisse. 311 and 333 were big sellers for the day. I don’t know the exact amount they sold but total number of shares that exchanged hands today was 94M. I guess it would be safe to assume that there is still at least 601M shares more to be sold. Yikes!

I’ve heard complaints about PCOR today. The disclosure said the shares will be sold at 11 pesos. However, PCOR has not yet reached this level. So, why are they starting to sell already? After hearing this, I jokingly replied: “They will be selling at an AVERAGE of 11 pesos. So, they started at 12.80. They can still sell to as low as 9.2 and still land an average of 11!” LOL!

PCOR is the first stock to breakdown. I wonder, are many more just waiting to follow? 😛 Remember, we are closer to the highs than lows. I’m sure that a lot of short-term traders are fidgety right now because honestly, even I can’t feel the gains that the index is enjoying.  We actually had a small sell off today and it doesn’t help when you see a flash of red in the ticker c/o PCOR. Herd behavior, anyone? You only need one match to light a fire.

The Importance of Short-Term Trading

Some market participants frown on Tsupiteros or short-term traders. What some or most of you might not realize, short-term traders are actually quite important in the market. Suppose a stock is going up. There comes a time when buying interest fades. If everybody was a position trader, the price will eventually move sideways because demand will eventually decline and no one will be left to buy the stock. In real life, however, not everyone holds onto a stock for long periods. There are actually those who sell the stock the minute they earn a profit, no matter how small. These tsupiteros are underappreciated, in my opinion. See, tsupiteros are actually the ones who feed the price to go higher. When they sell early, they are also the ones who buy back higher, thereby feeding the uptrend. In other cases, they are also those who re-enter the market after a significant or maybe, not so significant price decline. They represent interest after a period of disinterest or a correction phase.

Let’s use current market conditions as an example. The PSEi has been going up since December 29, 2011. We corrected for a day last January 6 then our market continued further up. The reason why the index was able to go up this much is because funds transferred from one sector to another. Banks first led the rally, property followed then just when we thought the index is exhausted, funds bought big caps like TEL, GLO, and SM, thereby pushing the index further to current levels. Notice though, that although some stocks are still pushing higher, buying interest has declined. Buyers are no longer as aggressive as before. The index corrected today by 34 points. So the question now is, when will short-term traders re-enter the market?