Buy high sell higher?
by, 10th-August-2009 at 02:03 PM (1701 Views)
FNArena Rudi's view...
** iI would take Rudi's view as a good contrarian signal for market sentiment...There are many misgivings and false truths about financial markets. One of these is that investors should "buy low and sell high". Wrong. If you try to buy low in this type of market you risk ending up with a loser stock, while all the rest is running away from you. The correct mindset, and I am borrowing this from US trader Dennis Gartman (publisher of The Gartman Letter), is to "buy high and sell higher".
Attached are three charts - one of XJO, just to show where one should "buy low sell high" and where one should "buy high sell higher" and where one should be sweeping your profit off the table before others help themselves to it... but as usual, don't take my words for it, do your own analysis.
I am expecting the market to pull back, esp from stock fundamental angle: a) many stocks are reaching very inflated level that is "inducive" for profit taking; b) the weakening economic fundamental moving into the next two quarters; c) the overseas (read USA) market influence on ASX, esp when their market fundamentals are much weaker than ASX's; d) China's impending plan to constrict lending to control bubbly assets; e) large number of stocks are due for ex-divi soon, that will apply pressure on the index value; f) the basis of the current rally - the XMJ sector is showing weakening momentum; and the XXJ sector is showing a highly overbought state and is susceptible to profit taking, once the major leaders have gone ex-divi... this time, it's a fight between liquidity+market sentiment vs stock+economic fundamentals - my bet is on the latter.