How do I time my entry point?

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After identifying a good stock and calculate the intrinsic value, the next important step is to develop a trading plan or investment plan of when to buy and when to sell. The first thing before I enter the position is to look for excuse for not to buy because it is easier to identify the not to buy signals.

When Not to Buy?

  • When the stock in on the down trend. I check whether the stock price is below 20D, 50D and 200D MA line. I do not want to buy a stock which may go lower and lower. I also use other Technical Indicators (MA, MACD, Parabolic Stop and Reversal, Bollinger Band, RSI, Stochastic) to confirm my analysis. Below is stock chart for S&P500, I show some Technical Indicators (MA, MACD and Bollinger Band) only on the charts otherwise the charts will be overcrowded when I include all six Technical Indicators. 
  • When the stock breaks below a strong support line.
  • If there is no clear support line on the chart, I will use Fibonacci retracement to identify the support level. 61.8% Fibonacci retracement level is a critical support or resistance level that I will pay special attention to.
  • When there are reversal patterns shown on the chart like Head & Shoulders, Double tops, Triple Tops.

     

  • When the stock price are testing the resistance or on top of the resistance of a channel.

     

When to Buy?

 

  • When the stock is on an up trend. The stock is above 20D, 50D & 200D MA, and all technical indicators show bullish convergence.
  • When the stock price breaks the resistance with high volume.

     

  • When the stock price breaks out from the consolidation.

     

  • When the stock price retraces back close to the support line on an uptrend channel. I buy on the dip.

     

There are still lot more patterns I need to learn to perfect my entry points. I will continue to share in my stock chart analysis.
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General Electric (GE) – Fundamental & Intrinsic Value

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Base on latest quarter:

  • PE = 12.8
  • Dividend Yield = 4.8%
  • Net Earning = 7.5% (10.5% in 2008)
  • Current Ratio = 2.2
  • ROA = 1.64% (2.18% in 2008 Full Year)
  • ROE = 11.5% (15.7% in 2008 Full Year)

Intrinsic Value Calculation (DCF Model)

  • 10 Year Average Growth Rate = 3.9%
  • Discount Rate = 5%
  • Number of Shares = 10,393 million
  • TTM Net Operating Cash Flow = $36,064 million
  • Intrinsic Value = $32.76

Stock Background
 

  •   5 years historal high = $42.15
  • Current Price = $17.00 (only 40% of 5 years high & 48% discount to Intrinsic Value of $32.76)
The stock price is currently above 20D, 50D and 200D MA. Strong support at $14.57.

My target entry level is between $15.00 to $15.50 when the stock price retraces back to the support level.

Continue ReadingGeneral Electric (GE) – Fundamental & Intrinsic Value

FRE & FNM move into consolidation

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Both FRE & FNM demonstrate the same chart patterns and move into consolidation phase after heavy trading last month. Both stock prices are above 20D, 50D and 200D MA but volumes are dropping.

FRE 61.8% Fibonacci support level at $1.714. It is a good entry level for long term investment if the stock price stays above this support line.
FNM 61.8% Fibonacci support level at $1.483. It is a good entry level for long term investment if the stock price stays above this support line.
 
Note: FRE & FNM do not meet my stock selection criteria.
Continue ReadingFRE & FNM move into consolidation