Monday, June 22, 2009

Random thoughts on Buying stocks

There were a few inquiries as to what would be good buys & their entry level during this period of correction. You may choose from the stocks that were covered earlier in this blog or you may look through your stockbrokers' recommended buy list. You may also want to check out Bursa's e-Research reports, which include some pretty good small & medium-size companies that are normally not covered by stockbrokers (go here). As to how you may execute your buying, I will now look at 2 stocks that had done very well in the recent rally & are currently undergoing some correction. The two stocks are Genting & Resorts.

Genting rose from a recent low of RM3.08 to the high of RM6.10- gaining RM3.02. Based on Fibonacci ratio of 38-50%, we can expect Genting to drop back to RM4.60-95 in a correction. The short-term uptrend line support for Genting is at RM5.40, which is rather high. This is above the 38%-retracement target of RM4.95. If you choose to buy at this uptrend line, you may want to do so very slowly.


Chart 1: Genting's daily chart as at 22/6/2009 (Source: Quickcharts)

On the other hand, you may have less hang-up about buying Resorts at its short-term uptrend line support of RM2.55. Resorts rose from a recent low of RM1.84 to the high of RM2.93- gaining RM1.09. Based on Fibonacci ratio of 38-50%, we can expect Resorts to drop back to RM2.39-52 in a correction. For Resorts, you may accumulate at a faster pace.


Chart 2: Resorts' daily chart as at 22/6/2009 (Source: Quickcharts)

You may choose to play it safe & buy only when this corrective phase is over. That's fine because one can never tell how long & deep a correction may be. In any case, you should continue to track the stocks on your buy list & update them on a regular basis. Some may choose a hybrid system- buy half now & buy the balance when the correction is over. There is no hard & fast rule. If you no time to track the stock market or to identify stocks to invest in, then you should look at unit trusts.
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3 comments:

  1. tehMonday, June 22, 2009 7:26:00 PM

    Hi Alex,

    Ya both of this share is quite good and safe.
    How about the TA? is that good to buy it now?

    ReplyDelete
  2. Alex LuWednesday, June 24, 2009 1:39:00 PM

    Hi Teh,

    The simple answer is "yes, you may buy around the present level". That applies to whether you are going for a trading buy or a long-term buy-&-hold. In a trading buy situation, you have to consider what's the exit level- whether for taking profits or taking losses. For a long-term buying, you may execute your buying progressively. Even here, you have to keep an eye on the stock & the market as a whole. If the outlook has changed, you may adjust accordingly. Since both Resorts & Genting are fairly near their uptrend line & have retraced sufficiently, I think you may proceed to accumulate these stocks.

    Sorry for the late reply. I was thinking of how to adequately address your planned action, the possible outcomes and subsequent responses.

    ReplyDelete
  3. tehWednesday, June 24, 2009 4:16:00 PM

    Hi Alex,

    For the TA i think i will keep as long term until they announce about the TA global...I expect it will going up when the proposal is approved but the problem is do not know have to wait until when.

    Currently im already bought some TA warrants and wait for the exchange to TA...since you say TA can be buy then i should keep in view on this stock... thanks.

    ReplyDelete