Monday, April 04, 2011

Fallacy In Some Common Investing Thoughts

Tomorrow is T+3, sure a lot of selling - Errr, actually, everyday is T+3, what kind of logic are we employing when we say that? Unless we know for sure how much of the buying was purely on contra every day? Do we know that? If the average daily volume was 1bn and then one day it spiked to 1.5bn, are we saying that would indicate more contra positions taken up? If that is true, it also meant that the 1.5bn selling would also free up a lot of cash waiting to re-enter. So, do not use that phrase again, its close to idiotic.

If you want to gauge true short term selling potential, look for increasing volume and increasing share prices 3 or 4 days straight, then you can say there is potential short term profit taking. Contra buying and selling happens everyday. Contra is not a major factor anymore, not like the 90s when people can buy shares with little or no collateral. Now most investors have margin, some even T+5 or T+10 in certain broking houses.

Don't speculate-lah, invest-mah - Back to the same diatribe again. Investing does not mean long term, and speculate does not mean short term trading. You are doing one or the other based on the amount of information you have on hand:
a) fundamentals outlook
b) technical charting info (if desired)
c) readings on volume and price, or momentum trading
d) information on M&A, corporate exercises, etc.

Say there are 100 factor points for full understanding where the stock is headed (and believe you me, that is not solely based on fundamentals alone, or else Buffett won't have nearly half his holdings under water now), the more factor points you have in your hands, even if its a day trade, that is investing. If you buy a stock with little or no knowledge, even if you are buying Public Bank and hold for 5 years, that is speculating.

2 comments: said...

Good point. Anyway, strong conviction without knowing about the company is also not called investing...

surewin1woh said...


EA Hldg's volume jumped...and her boss had top-up his holdings last week. Start brewing...

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