Daily PACS Dec. 13, 2011

Author’s additional notes:

We are back again to where we started. The market can’t get over with the problems Europe is facing. Dow is down by 163 on report that other major credit agencies are joining S&P on reviewing the current credit status that EUROPE has.  I guess everybody who is reading regularly this newsletter will pretty much have an idea how the result will affect our  market if they downgrade Europe  (for new readers, I suggest read the Dec. 9, 2011 newsletter issue again). It is generally a mixed picture of good and bad in the international market. EURO currency is very much down. VIX which is a measure of fear and greed is also down which means that US investor are not much surprise about the news on credit review (VIX being down is good while up is bad for the market).  Dow also did not go down as much as I  anticipated it to be. It closed way off the lows of the trading session.

Over on PACS and our local market, the general trend of the PHISIX once again turned down. Meg’s trend also got affected yesterday and now is trending down. Today, we will watch if the support levels of stocks I mentioned yesterday will continue to hold or not. Our biased will be towards the downside as overall trend is now down. We will be watching for stocks whose trend remains up and stocks that are showing strength.

*For new readers check out “How to use” PACS page found at the sidebar or click this message.

*Please note that PACS’ price  alert level will always supersede any opinion coming from the author.

*Try not to chase stock and always try to buy or sell near PACS given level.

Trading Education: Some PACS trading rules to follow – Dec. 13, 2011

Since the market will likely be a bid down especially at the open, I thought of doing a trading education article again.

I guess those who regularly follow PACS by now have an idea on what stock I regularly trade and what stock I avoid. For the sake of new readers, let me state it again. The basic rules that I follow in trading are all based on PACS. Here they are:

1)      Buy only stocks which trends are up or have turned up from down and avoid those that are trending down.

2)      Buy in the early phase of uptrend and be skeptical on stocks whose trends have been up for several days already (9 or more new closing highs).

3)      For stocks already trending up:

a) Buy on pullback but always wait for a price bounce above confirmation bullish level or strength pivot point before buying and never on the way down.

b) Or buy when new closing high is established especially during early phase of an uptrend.

4)      Never average down. A mistake can’t be corrected by another mistake. Most of the time it will result to compounding losses.

5)      Remember that generally, morning trades are ideal for selling and the middle part of trading are for scouting and observing stocks while the last hour works best for buying.

Personally, I believe that longevity of every trader that follow PACS will be determined by two things:

a)      The discipline to follow and understand PACS.

b)      Ability to cut losses early and let profits run. (Majority of beginners does it oppositely.)

Now let us also discus what happened yesterday.

Just like everyone else, I came in the market with a bullish expectation. Dow was up and European markets also have reacted positively over the weekend EU meeting. My initial thoughts were also to buy into the market.

But unlike everyone else, something stopped me from executing my buy plan. Remember I seldom initiate a buy into the open. Emotions run high during opening and traders especially the beginners usually let their feelings dictate their trades. That is why we usually see the opening trade either gets extremely bid up or sold down.  And so I waited for a while to see how the market will perform after excitement have subsided.

Here was my initial post on my FB and tweeted during early trades.

Apparently while observing the market, I noticed that gains were not holding up. It made me doubt my buy plan and became skeptical. In other words, my expectation over on our market was not being met and thus I quickly realize that the market is proving me wrong. Here is my follow up post on FB and on Twitter.

I still gave my expectation a chance and continued watching the market but when the overall market turned negative. I abandoned the idea of buying. At the same time I turned my attention to MEG. I noticed that its uptrend was under pressure and so I posted another comment.

Some of you will ask what if I made a mistake of buying stock whose trend are still up but have turned into a loss at the same day I bought it? Usually from experience, trades like this seldom become a winner. The right thing to do is to sell all but sometimes the right things are the hardest to do. In this instance, because the stock still is trending up, I might give half of what I bought a chance and cut the other half. Of course that will depend if the stock I bought are still in positive territory. I will even decide to sell all if that same stock I bought turns negative and sellers become predominant in the trades.

Lastly, let me just remind again….”stocks that are cheap tends to become cheaper while stocks that are considered high usually are the ones that become dearer. Always check PACS numbers and monitor prices carefully before deciding to buy. Good luck!