Double Top Cometh: Sell Leaders and Buy Laggards

So the rally started on 24 Dec 18. That was the point of maximum pessimism. The MSCI World has rallied 21% in slightly over 3 months!

Many traders who returned from Christmas holidays could not believe their eyes. Many sat out this rally and did nothing, wishing it to come down so that they can buy again.

I believe the rally occurred simply because the sellers were exhausted or finished what they had to sell. January rally was probably a short covering. The smart money began coming in from February onwards. The hedge funds probably piled on the long positions in March onwards. I turned positive from Feb 19 onwards and advised to dollar cost average.

We are now approaching the top for MSCI World, last seen in Sep 18. Will it be the dreaded double top and then decline.

My technical take is this: I can’t even see a small correction at this stage. The weekly chart is still bullish. There is a slightly over 50% chance that the Sep 18 high will be taken out.

At this stage, my advice is this:

1.       Sell away stocks that have the following characteristics:
a.      Dividend yields below 4% and / or
b.      Valuations no longer cheap, e.g. average was 12x now 15x, and / or
c.      Technically overstretched, well over 50 day moving average (3% or more).
2.       Buy into stocks that have the OPPOSING characteristics:
a.      Dividend yields over 4% and / or
b.      Valuations still cheap, e.g. average PE was 12x now 8x, and / or
c.      Technically still below 150 days moving average.
You can now take profit from the leaders and chase some laggards.





https://www.youtube.com/watch?v=X8igURnRZlA

Comments

Post a Comment

Popular posts from this blog

My Funds Portfolio 14 Jan 2021

Image
  Below is the overall performance of my funds. For CPF, I put everything into funds. I refuse to buy SGD stocks because you should see the performance of MSCI Singapore below. In the last 1 year, the performance was down 5.9%. it is only this year that the performance went up slightly but it is still down. If I had used my CPF and cash to buy SGX listed companies I would have done at best 5% even with superior stock picking.   Look at the other indices. MSCI world is up 16.1%, S&P500 is up 18.0%, China is up 38.6%, Europe up 6.2%, MSCI Asia ex Japan up 28.2%. NASDAQ was of course the best performer with 44.7%. So the growth is NOT in Singapore. It is either in the US or Asia, mainly China. Even the best companies from Singapore are listed in NASDAQ, e.g. SEA Ltd. We have become the “forgotten man” or “sick Man” of Asia in terms of stock markets.       The average performance of my funds are 25.8%. this is unrealised return and doesn’t include realised gains. I’ve held them through
Read more

Lessons in Life

 I've worked with lots of people. Some are my good friends. I thought we could collaborate together. But somehow, maybe they found better opportunities elsewhere, decide to cast me aside and work with others. Some, don't add value but still want to be my equal partner. Others, limit their collaboration with me, denying me other opportunities.  The best way to act is to show every inch of gratitude I can to everyone. First, the one that opens doors and work with me wholeheartedly, I shall wholeheartedly contribute and ensure that the pie is greater than not dividing with me and working alone.  For those who opened a door and then decide to limit collaboration, I shall still be thankful, have gratitude. Whatever someone gives me in good faith, no matter how little, I shall still do my best.  For those who shut the door, I bear no grudges for I am thankful we have met.  This is the path I've chosen to walk, without regrets. 
Read more

Performance Attribution

 My portfolio comprises stocks and funds from various gurus and teachers. Here is the description of each one. I shan't name them for fear of being accused of promoting one over the other.  Guru 1: 15 years of track record. Averaged 25% per year return. Highly transparent and informed me of every trade.  Result: from 23 Mar 21 to now.  4.8% return.  Guru 2: 10 years of track record with 30% return per year. Gives me a black box type of system based solely on momentum. Scans through the NASDAQ for the top five momentum stocks.  Result: -15.04%.  Guru 3: Internet sensation with almost 1 million followers. Personal friend. Made 3x in 2020 due to investments in speculative tech companies like SEA Ltd, Tesla, ARK Genomic Revolution, Lemonade, Square.  Result: - 13.2% Guru 4: 12 years of track record of around 7.7% return per year. Purely fundamental analysis.  Result: -28.2%.  My own: 5 years of track record of around 18% per year. Value - momentum strategy.  6.8% It appears that my pic
Read more