Sunday, December 10, 2006

There is a time for everything

There is a time to reap
There is a time to sow
There is a time to buy and keep
There is a time stocks must be sold

Timing is crucial. In a bull market, buy on dips. In a bear market, sell on rallies. The difficulty is to ascertain that a correction is a correction and not a reversal. If you read it wrongly, you are in trouble. Worse still, you may compound your error by averaging down. And that may end you up with a catastrophe loss that could be disastrous. A simple stop-loss could have saved the situation.

People say, “Buy low, sell high; or buy high and sell higher”. But I say it is better to buy high and sell low. Buy high and sell low! You must be mad. Rest assured that I am not. Bear with me for awhile and I shall explain.

Smart monies accumulate at the bottom. Their accumulation may last from a few weeks to a few months or even a few years. Once they have got enough, they will push up the price. So the best time to buy is when there is an upside breakout at low level after the forming of a good base. That is what I mean by ‘to buy high’.

At the top, they (smart monies) will start their distributions. Once their distributions are over, there will be a downside breakout. It is very difficult to know whether a lateral movement is a distribution or further accumulation. That’s why you have to wait. When there is a downside breakout, it means that the distributions are over. And the downtrend has commenced. It is here that you must sell. This is what I mean when I say ‘to sell low”. Actually, it is to sell low at high level. Got it?

The moral: Follow smart money, but be one step ahead of the pack.

Bye now folks, good luck and all the best.