Stock up on Stocks!

My Dear Guerilla Investing readers, thank you for being patient and coming by every so often. I've been busy with my 8-5 that I just couldn't find time to blog the past two weeks. For this week's post, I'll take a break first from my post about using credit cards to comment about the recent activity in the stock market.

I'm happy and surprised about the way the stock market has been performing since my last blog post. It's made a new historical high already and everybody seems to be in euphoria expecting the index to track higher and higher.

A local brokerage report anticipates the PSEi to go to about 5,100 by 2011, then there's another report by a foreign brokerage house that the PSEi will go beyond that to about 6,000 or more.

In fact, as a testament to the growing interest in the local stock market, Credit Suisse will open business here, to quote an Inquirer news item -

"Zurich-based global financial services group Credit Suisse is setting up a stock brokerage in the Philippines, reflecting the resurgence of foreign investor interest in local equities, which are now trading at record highs."

Exciting and interesting times are indeed ahead.

You can bet that a lot of the financial institutions - banks, insurance companies, brokerages - will earn big bucks in the year to come as interest by the investing public gains momentum. The momentum will surely boost the financial houses' trading gains.

Local Flavor

I've always maintained that there are now more local investors compared to years past; and, while foreign "hot money" is needed to elevate the stock market and perk up trading volume, we don't have to rely on them as much as we had to in the past.

Check out this piece of news -

Since the start of the year, the PSEi had gained by another 1,000.64 points or about 33 percent, making it one of the best performing bourses in the region. In 2009, the PSEi rose by 63 percent but mostly on thinner trading dominated by local investors.

While the volume was thin in 2009, our index still rose 63% - mostly due to local investors. Now imagine, with hot money flowing into the country then most likely the PSEi will make history again and again in the coming months, if not years. With the hot money coming in, the peso will also most likely appreciate.

This scenario is similar to the years 2006 - 2007, in my opinion.

Don't be too greedy

Right now, the market should be poised to correct.

All the index bellwether stocks have already gone up a mile and the second liners have also ran their course. The basura stocks are gaining momentum, which to my memory usually precedes a market correction.

Most of the counters gaining recently were the mining stocks, with one of my recommended stocks - Atlas Mining - leading the way (prior to Lepanto, that is). Even some mining stocks with no "stories to tell" (at least to me) went up like CPM, NI, and ORE. PX has since sputtered a bit after hitting a 2010 high of 17.

Atlas Mining may also correct in the week ahead. While I've recommended that this is a long term hold, you may do well to join the profit taking for your trading positions, if any. But if you're no expert (like me), you might as well just hold on to it as long as you've padded that many profits since you bought it at 10.50.

My other recommended stock may also be teetering on the brink of a major correction. I'm pointing to Metro Pacific or MPI. I'm closely monitoring it.

What I missed though was the major major (hehe) run-up of Lepanto Mining. I really felt bad that I was not able to join in, but I felt better when I read Mr. Gus Cosio's blog post last September 22, and I quote -

"Unfortunately, I was not able to take advantage of the big move in LC. I don’t mind because I do not flatter myself that I can spot every stock that moves."

I realized that I'm never going to be able to join in all the "gravy trains" of all the stocks. I just have to make sure that I'm able to gain a trading profit and always remember to cut losses, should the case be needed.

Trading Stock Focus

Mining stocks may really be one way to boost your portfolio. A report just came out recently that minerals outputs went up by 50%! Imagine that.

When the blue chips and second liners have made their uptrends , there's bound to be trading opportunities for the smaller stocks. Two stocks I saw that may be good to trade are APC and DGTL. APC suddenly went up near the closing hours for no reason and is pointing to an apparent breakout from its recent downtrend.

As my experience tells me, breakouts are always good trading opportunities and usually run their course for 3 days. With Wall Street trekking triple digits this Friday, I'm sure APC will have a follow through buying on Monday. Keep your fingers crossed, mine are.

On to DGTL. DGTL made a nice move on Thursday close. Then followed it up on Friday after news came out with Sun Cellular claiming the lead in postpaid versus giants Globe and Smart. The stock swung wildly, going up and down and up.

I checked the chart today, there's a gap up on Friday. On Monday we will know if DGTL will continue going up, or it was just a one day wonder. Gap ups, as far as I can remember, are a positive sign.

Between APC and DGTL though, I'd choose APC.

Of course, I'm assuming that if you, dear reader, plan to trade any of the two stocks, you have at least three to six months of trading experience.

You need at least some trading experience to know how to time your entry and exit points.

I can't teach you how to time, as I'm still learning the skill as well. It won't be perfect, so don't fret if you don't buy at the lowest price and sell at the highest price. If you do, then chances are, it's greed that's driving your motive.

Some guerilla tips on trading

For those who don't have as much experience, I proffer the following guerilla tips on stock trading -

(1) You don't have to buy the stock at the open. I've noticed that the time between 10AM to 11AM is a window of opportunity to buy a stock at a better price.

(2) Compare the buy up and sell down volume. If there's more sell down, it can mean two things - the insiders don't want it to go up yet; or, it's just a one day wonder. Better choose fear over greed. There'll be other stocks to trade anyways.

(3) Look at the quality of the buyers. Who are the brokerage houses buying? Of course, you will have to expect that if these are small stocks or basura stocks, there will be no foreign stock brokerages buying that stock. Try to know if the brokers are familiar names.

I think I've said too much already. Remember, the market is most likely going to correct soon since the blue chips and second liners have already started tapering off their gains. The second sign is that the small stocks have really gone up so much. I can't point to the exact date of the correction, but it will happen next week or the week after, so tread carefully.

As I always say, appreciate the risk, then appreciate the capital!