I get caught in a few occasions that my predictation using technical indicators went haywire when there were sudden drop trading volume. On Aug 6, everything looked good on this chart. The stock price breakout from consolidation and broke the resistance of $0.13 with 63.5M shares traded. The stock price was above 20D, 50D and 200D MA, at the upper Bollinger Band, on top of the Parabolic SAR, MACD confirmed bullish convergence, RSI & Stochastic were bullish. All Standard Six indicators showed bullish convergence and looked really good to enter the position. The next day the volume dropped to 14.2M shares and end up with a bearish marubozu candle. For the subsequent days, the volume getting lower and lower and out of the sudden the stock was losing momentum. Now I have to hold on this stock as a longer term investment.
Looking back, one of the mistakes I made previous was to buy IPO stocks. I still can remember using ATM to subscribe IPO stocks that I did not even know what is the company is about. The impression I had last time was it was very easy to make money from the IPO offering. You subsribed the share for $0.10 and the 1st trading days it would shoot up to 100%! It was the easy money, wasn’t it? However, we would never go and sell the share as our greed told us that it would go higher and higher and made money $$$! At the end of the day, the price would drop back to even lower than the IPO price. I have lost money with Del Monte, Dynamic, Giant Wireless, Valuetronics and Eastgate that my record is almost 100% (LOSING MONEY!!) I have got rid of Del Monte and Dynamic two weeks back and still holding Valuetronics.
Lessons learnt: Do not anyhow buy IPO stocks unless you are VERY VERY SURE it is a good company with very good business prospective and fundamental. Anyway, it is always a gamble to buy IPO stocks as there is no historical data for us the assess the stock price. It can make money very fast and also make us lose money as fast!
I have been “investing” in stocks since 1998, but maybe a more appropriate work is “buying blindly”. What I did was to hear from my colleagues what shares to buy and just throw my hard earn money to buy the stocks he recommended. I did not know how to analyse & evaluate a company, did not know how to analyse the stock chart & totally lost with those jargons like support & resistance, correction, candle sticks, etc. I was just like those retail “investors” out there (uncles & aunties) and did not even know what kinds of risks I was putting myself into. I bought Keppel Land, UOB KayHian, Chartered Semiconductor (when the stock price was S$10!), JIT (later acquired by Flextronics) in my initial first few years of investing. As expected, I lost money and I am still holding my Charted Semiconductor share today! But I have started to average down my ChartedSc stocks as I know semiconductor recovery is around the corner and I can minimise the loses when the stock price goes up.
Recently I decided to take up some investing courses and it reaps benefit. I’ve learnt how to analyse a good company and evaluate the stock price whether it is under value or over value. I also learned how to use Technical Analysis to analyse the stock price trend to time my entry and exit points. I decided to share my learning experience and stock analysis in this blog space after encouragement from my classmate. I will be sharing some company analysis and stock charts I have done. Welcome for any comment as this will help me to learn.