Year 2007 in review

2007 was a great year for my trading & investing account. It was a transformational year where I was able to identify my weak points and capitalize on my strong points.

Listed below are key items that contributed to my success. I hope this will be a useful guide to my other fellow traders as we navigate the stock market through 2008 and beyond.

* Very disciplined trading. No hopes and emotions. Losses were sold immediately without a second thought.

* Accurate and complete trading records with comments for each trade. The comment provided the reason for the purchase.

* Month-end summaries, where I had to provide the monthly performance -monthly gain/loss to my better half. Helps as you are answerable to someone and you would ensure that you complete the month on a gain. I also tried improving on my monthly gain each month.

*Strict money management principles. In the beginning of the year, based on the portfolio size, I determine the amount of loss that I can take in any stock. Then, before I buy a stock, I enter the following three details in excel: Buy price, Sell price and Stop price. Based on the stop price, and the amount of loss I can bear in a stock, the excel file calculates the number of shares of the stock I can purchase. So, the further away the Buy price is from the stop price, the lesser the number of shares I purchase.

*Strengthened my TA skills , learnt Elliott Wave theory from a great trader whom I truly respect. I believe his classes on TA and learning to count waves have set me apart from other TA traders. He goes by the alias name BT or BlackTruck and his email is black.truck@verizon.net. Please send him an email if you are interested in joining his class.

*Read and implemented the 2% Shark rule and 6% Piranha rule mentioned in Dr. Alexander Elder's Come into my trading room. This is an amazing book. I read this book in October 2006 and since then I have been able to view the stock market in a very different angle.

* Last but not the least, starting this blog and sharing my thoughts with all of you have helped me to streamline my thoughts and identify trends. If I have learnt something that makes a big difference, I strongly believe in sharing those thoughts and helping others.

Money flow data- Amgdata

I will be looking at this information on a weekly basis. This will help me keep track of BIG money. Trading/ investement decisions should always follow the BIG money. It is the path of least resistance.

Source: AMG Data Services
For the week ending 12/26/07
Including ETF activity:
Equity funds report net cash inflows totaling $12.645 billion
Domestic funds reporting net inflows of $9.970 billion
Non-domestic funds reporting net inflows of $2.675 billion;

Excluding ETF activity:
Equity funds report net cash inflows totaling $3.587 billion
Domestic funds reporting net inflows of $2.047 billion
Non-domestic funds reporting net inflows totaling $1.540 billion;

Domestic funds outperform Non-Domestic funds by a big margin.

2008 Thoughts- Tobias Levkovich

Posted on National Post:

Citigroup’s chief U.S. equity strategist Tobias Levkovich provided clients with eight key concerns, eight unasked questions and eight plausible and interesting outcomes to consider for 2008.

Key concerns:
--------------

1. Stagflation
2. Global recession
3. Presidential elections in the U.S.
4. Energy costs
5. Counterparty risks in the financial sector
6. Plunging greenback
7. Sharp declines for home prices
8. Apparent ineffectiveness of the U.S. Federal Reserve’s action

Key questions:
---------------

1. Everyone may agree that real estate prices in the U.S. are trending downward, but where is the value? Where should buyers be looking?
2. If oil is near US$100 per barrel, why are energy companies not earning more?
3. With at least 95% of equity mutual fund flows going international in recent years, why aren’t more people worried about this craze?
4. Why do hedge funds continue to attract money despite mediocre returns?
5. What ever happened to avian flu and will other global fears just fade away?

Key plausible outcomes:
-------------------------

1. The Republicans could hold on to the White House and give the American people what they want – a divided government.
2. Oil prices could fall to the US$70-US$75 per barrel range on slower global growth
3. The U.S. dollar could hit $1.25 versus the Euro when the ECB finally cuts rates
4. The financials are the top performer in the S&P 500
5. China’s equity bubble bursts
6. Hedge fund consolidation rises.

Updated chart of QQQQ

Updated chart to Santa Rally chart.
We broke above the downtrend line (dotted green).
Now we sit right at strong resistance. Two more days left for the year. Future action will depend completely on how we handle this resistance.
Good luck !

Perfect timing

Timing is everything. I strongly believe in this adage.
This morning I perfectly timed the money flow from solars to chinese. This was even before any volume bars showed up on any of the Chinese stocks. Within few hours, huge volume bars across the screen. My BIDU, CHNR, CPSL are doing just great.

Great run with solars & now Chinese stocks

My prediction has turned true for both Solar momo stocks- CSIQ and SOLF.
SOLF won the race to 30s on Friday followed by CSIQ today. SOLF is now sitting at 37s and CSIQ at 31s. 40% returns in a few days.

My next focus group is Chinese stocks- BIDU, CHNR, CPSL, YTEC.
Have been holding BIDU from high 370s. Will be focusing on CPSL and YTEC today.
CPSL is sitting at nice BO point.

Enjoy the Santa Rally :)

Solars

Today, Solars were the strongest.
SOLF made a BO above the triangle posted here.
CSIQ, on the close heels followed with a BO.
The race to 30 nowbegins.

Market has sustained the strong rally from yesterday. Many people were caught off-guard with this rally. Actually I think many technical analysts missed drawing the correct trendline. They were connecting Aug lows with the Nov lows. The trick was connecting the highs and then extending into a parallel line for the support.

RIMM earnings

From Marketwatch:

For the quarter ended Dec. 1, the company reported earnings of $370.5 million, or 65 cents a share, compared with earnings of $175.2 million, or 31 cents a share, for the same period last year.

Revenue doubled to $1.67 billion from $835.1 million last year.

The results were ahead of Wall Street's expectations. Analysts were expecting earnings of 62 cents a share on revenue of $1.65 billion, according to consensus estimates from Thomson Financial.

- Basically Revenue doubled leading to doubling of earnings coupled with beating of estimates. Market likes it as indicated from the pre-market run-up. It closed yesterday at 106.99 and now it is close to 120. I will be adding this on my radar for a buy.

Solarfun SOLF

If you see SOLF breaking out above the upper triangle- then just BUY !!!
This will make a quick move to old highs as first step.

Santa Rally to begin

Time for Santa Rally..I don't see any reason for us to break the lower trendline..Do you ?

DRYS 60 min chart

I am using this chart for all entries and exits. Andrew's pitchfork applied successfully here.

Nice ride on DRYS

DRYS broke down further today. It broke the critical support around 81-82 and that accelerated the downfall to 71. I have covered my short here. My entry was in 85, 89 and then at 81. I am expecting to see a bounce from 69. If it breaks 69, I will reenter my short but I guess it will more likely bounce from that level.

Weekly chart of DRYS

Weekly chart on DRYS shows that it has been closing outside the channel for the fourth consecutive week. Simple TA tells that there is more downside ahead. If it ever closes inside the channel, that would be the only time to become a bull. DRYS is probably holding up till year-end as it was one of the hottest stocks of this year and fund managers will continue holding till year-end.

Gold breaking down ?

Gold seems to be breaking down from this triangle formation. The above chart is for streetTRACKS Gold ETF- GLD. I have entered a short position here at 78s. We had inflation data coming in this morning which was hotter than expected. Following this news, GLD broke down. I am not sure if the 38.2% retrace will stop this slide. This should be safe and good trade. I will stop-out if enters back into the channel.

Why the Fed bailout might not work

Interesting article on CNN Money/Fortune:

The announced plan to make credit markets more liquid could end up having the opposite effect. NEW YORK (Fortune) -- The Federal Reserve's latest move to make credit markets more liquid could deepen problems in the banking system and actually cause the markets to be even more illiquid.
Wednesday, the Fed, along with other central banks, announced a plan that is designed to enable banks to borrow money directly from the Fed at below-market rates. This will allow a wider range of banks to access Fed credit, and simultaneously allow them to submit a broader range of collateral to the Fed when taking out those loans.

Why do this now? The Fed explained in a release Wednesday: "This facility could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress." In layman's terms this means that rates on loans between banks - measured by something called the London Interbank Offered Rate, or Libor - are too high for the Fed's tastes, so it is now prepared to itself lend to banks at much lower rates.
Before this move, banks could borrow directly from the Fed through the so-called discount window, at 4.75 percent. The key Federal funds rate is lower, at 4.25%, but that is open to a narrower range of financial institutions and accepts a narrower range of collateral than the discount window. The new program - called the Term Auction Facility (TAF) - will auction funds to banks at rates very close to the lower Fed funds rate. The first TAF auction, for $20 billion, is scheduled to begin on Dec. 17.
What could go wrong with such an approach? Surely, it makes sense for banks to be lending to each other at lower rates, since that can spark more lending across the whole financial system. But Libor is a market rate, ultimately reflecting banks' views on each other's creditworthiness. Indeed, at 5.06% before news of the TAF was released by the Fed, Libor was considerably higher than the Fed funds rate, reflecting banks' caution about each other. But maybe the widened spread between Libor and the Fed funds rate is an inescapable product of the times. Given the credit problems U.S. banks are facing, they are naturally wary of each other. Maybe the Fed thinks banks are being overcautious, so the TAF is its way of bypassing what it sees as unwarranted skittishness.
But it makes more sense to believe the banks' view of each other than the Fed's. Banks do business with banks each day, so they're far more likely to have a good handle on each other's balance sheet problems. Moreover, as theoretically profit-making entities, private banks have to carefully assess the creditworthiness of the borrowers, which means they have far more incentive to do their homework than the Federal Reserve.
The potentially dangerous aspect of the TAF is that it will allow banks with problems to borrow their way out of trouble, rather than by taking measures like issuing large amounts of stock to bolster their balance sheets. Struggling banks are struggling chiefly because they were mismanaged and wrote too many risky loans when credit was cheap. The TAF potentially gives mismanaged banks even more cheap credit, which will delay a much-needed restructuring of the banking sector. Nervousness about banks could then deepen, leading to even fewer loans being made.
One of the big lessons of the credit crunch is that overly cheap credit causes massive harm to the economy in the long run. The TAF suggests that the Fed still hasn't learned that.