How do I invest in stocks?

Gone of the old day (as newbie) when I just invest base on what other people said (friends, collegues, newspapers and even BANKS!). I’ve even lost money after listening to Bank’s “RECOMMENDATION” investing in mutual funds and currency. I also had a chance to learn from a new friend who previously was a remisier, the dark side of the stock market. “Someone” is just out there to make money from the retail investors like most of us. Those were really painful lessons as I threw away my hard earn money to make someone rich. 

Fortunately, I took action to better equipped myself to continue to play in this investment game. I consider myself a better investor now with the knowledge I acquired from the investment workshop.

There are 3 parts of homeworks I do before putting my money in particular stocks:

  1. Identify and select a good stock / company with a good business.
  2. Value the stock price to see whether it is undervalue.
  3. Plan my entry point and exit point. Do technical analysis to determine the right time to buy and sell.

I will share these 3 parts in detail in the subsequent posts.

Insiders Selling in US stocks

Entering 3rd week of September, I am getting very cautious on the stock market and also waiting eagerly of the market correction. I plan to off load my penny stocks this coming week as things do not really look good and I just don’t feel comfortable holding the stocks now.

I read two consecutive reports regarding the insiders selling these few days. The reports mentioned that there are many Corporate officers and directors in US have been selling the shares at great pace since August. They are the one who know the company inside out and they know what is the fair value of their company. In the principle of “Buy Low Sell High”, this selling of stocks by insiders is a very clear signal that the stock price is over value and the future earnings do not justify the current stock price. This is the leading indicator that stock market is going for a correction very soon. I will believe this indicator more than other analyst reports and preserve my cash first!

XLI – Industrial ETF for long term investment during economy recovery

XLI is another ETF that I am watching closely. When the economy comes out from recession and starts the recovery, the companies from this sector will start to manufacture capital equipment, machinery, engines for transportation, etc. Every company needs to have those infrastructures & equipment in place to expand their manufacturing capacity to produce the goods during the economy expansion. The top 20 companies for the XLI ETF as of Sept 9, 2009 is listed below:

As of Sept 9, 2009, XLI ETF is traded at $25.96. It is trying to break the strong resistance of $25.445 (61.8% Finonacci Retracement Level). XLI is currently above 20D, 50D and 200D MA line. 200D MA, a long term trend has reversed and currently on the up trend. I will wait for see whether XLI can break the resistance and stay above the $25.445 in Sept / Oct before I put my money into this fund.