Saturday, October 18, 2008

Stock picks

A reader recently gave a feedback and requested for some stock picks.

In my opinion, in the current market, it is actually advisable to trade along with the market trend and not try to be a contraian ( someone who goes against the market). This is because, on a really bad trading day, no matter how good the stock is, it will usually drop too.

Hence at the moment, I believe in predicting when the STI index will drop or fall though the use of technical analysis. It might not be full proof, but at least you are not playing against the odds.

Also, through the simulations that I ran using chartnexus for the period of the last 1 year, shorting works the best. I.e try not to pick a stock to buy now, but rather, pick a stock to short by using CFDs or futures. ( The risk is really high, so please consult your financial adviser before doing so)

Market recovery is not really expected yet. So try not to go long for the moment. Even though it might be cheap now, it might get even cheaper. If you are really itching to buy, use the dollar cost averaging method. Buy a little at a time in regular intervals. This is because you can never really predict when the exact market bottom is. However you can increase your returns by using the method nearer the time frame where it is around the bottom that you forecast. And in my opinion, it will at least be May09.

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