Food for Thought

Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each. The villagers, seeing that there were many monkeys around, went out to the forest and started catching them.

The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.

In the absence of the man, the assistant told the villagers; "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each."

The villagers rounded up with all their savings and bought all the monkeys.

They never saw the man nor his assistant, only monkeys everywhere!

Now you have a better understanding of how the stock market works.

Stock Update as of July 26, 2013

Hi Guys...been awhile, and I apologize for that. Been busy studying technical analysis to add to my arsenal.

Anyways, on to the guide. We can see now that the PSE's resistance points are at 6,800 level, and if that breaks, at 7,000-7100 levels. Keep this in mind when buying your stocks. Also, Ghost month (August 15 - September 15) is approaching. This usually means that stock prices will go down, so set aside some cash for buying opportunities.

The day started at the 6,815 levels, but the bulls failed to push past resistance, and so the bears took over and drove down PSE levels to 6,732 levels. As for our stock picks:

I've highlighted priority buys with yellow. BDO, MBT, and BPI are currently under review by Moody's on whether they will receive a credit rating or not. So far, Moodys has only given the PSE positive feedback which is good news.

You might have noticed MER's volatile price action due to SMC selling a lot of its shares. If you were able to buy during the dips, then congratulations. 

As I mentioned before, the Ghost month is approaching, so we will be experiencing little price movement towards our target prices. Remember to control your emotions and instill discipline. 

My Technical analysis is still a bit rough, but here a few charts to consider:

BDO seems to be in a short-term downtrend, but DMI doesn't confirm this. The candle touched the lower part of the bollinger band which is usually the support line. I added a few shares at this level.

LRI broke through support today, and the downtrend is confirmed by DMI (but DMI has been that way for awhile now). Anyways, Stochastics is headed towards the oversold levels. Watch out for a doji before buying.

MEG trend lines are showing an uptrend but isn't confirmed yet by DMI, but stochastics is in the overbought level. If this trend continues, we will see MEG at 3.65. Watch for a break in resistance levels before buying.

I encourage you to start studying technical analysis. Your investing plan should consist a mix of Fundamental analysis and Technical analysis. Fundamental analysis is for picking which stocks to buy. Technical analysis is for when to buy and when to sell.

Remember to always protect your capital.

Also, take my technical analysis with a grain of salt since I'm still quite new at it.

And as always, Caveat Emptor!

God bless,

Crimson