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We’ve seen the market pullback over the last couple of days. It’s common for some to have this lingering feeling of anxiousness to let go or change their portfolio - as Mr. Jose Aranaz would put it “People behave differently when you have money on the line”. Have you done any reflection lately how the market movement has been affecting you?
It is during this time that having an investment strategy shines the most – whether it is by Fundamental Analysis or by Technical Analysis. The important thing is that you need to have an educated basis to guide you in achieving your investment goal.
But really, with the market in a steep decline the last several days, is this major cause for concern? For the day traders and short term investors, YES it is. We can only speculate if the SMA 2 will support the price or it will breakdown and test the SMA 3.
If we break this trading day into fractals, here is what it would look like. We have seen a fierce tug of war between buyers and sellers.
The sellers jumped in the opportunity at the first spike and it was all bear from there. Others call it a knee jerk reaction when a sliver of opportunity presents itself - in this case, an opportunity to sell. They panic sell to cut their loss or stop their bleed. I can only speculate how the market will behave tomorrow. Traders should be vigilant on their positions.
But how about the long term investors, should they be concerned? The answer to this is more complex. I wish to share with you two things and you decide what the answer will be for you.
DIVIDENDS AND PAPER LOSS
Remember that there several ways to earn from the stock market. You should also look into the dividends. That’s right. In a bearish sentiment, dividends are most commonly taken for granted. If you are long term holder, also take into account dividend declaration whether stock dividend or cash dividend. Accounting dividends can cancel or lessen your capital depreciation. Dividends are commonly available in blue-chip stocks.
Remember that a loss or a gain is only realized when you SELL your stocks. Otherwise, it’s just paper profit or paper loss. If you are a long term holder, bear in mind that a market cycle always includes recovery.
This is a 10 year weekly chart of the PSEi. The steep angle of the expansion of market on the latter part made the price far from the SMA 1. A correction, at this point, can be healthy. Not only that, it can be a buying opportunity. If you take a look at the stochastic, we are at the 80 level and we are sustaining that range. You can take a look at it as stocks being overbought, or as confirmation that the bullish trend is still strong. Even the MACD is in agreement. The bigger picture tells me that yes, the market is still in a bullish trend, and a correction maybe due. But in any case, if I am a long term investor, I could probably sleep tight for the next 2 years and let my investment do the work.
Happy investing everyone!
By: Ryan Ulysses Cruz
Director of Operations
Biz Whiz Business Training and Consultancy
*Biz Whiz regularly conducts free seminar on Stock Market Investing for Beginners. For more details. please visit the events page.
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