The Home Trading Blog

We are back from our extended holiday to Europe and had a fantastic time. The way it looks I didn’t miss much in the market and we picked the perfect time coming back. Looking ahead I can see many buying opportunities. Let’s just hope the market has found its bottom. Whilst overseas I occasional looked at the different indexes, one day 2-3% up and a few days later 2-4% down. Crazy market conditions. The German and the Australian index haven’t made a new low for some weeks now making me hopeful that we have seen the bottom.

Looking through the charts this weekend I could see many bullish bars indicating the same. And for the first time in months there are a number of stocks ticking all the boxes (according to the HSC) for a buy. If the upcoming week remains positive there will be plenty more joining in. Whilst the market is volatile though, it might be worth to look at a slightly different strategy to determine the stop loss. David teaches to never risk more than 15% on any given (HSC) trade and if the turning point is closer, use the turning point +1% as the stop loss. There is nothing wrong with this approach, especially if you are just starting out.

A possible variation is that you always take the turning point + 1% as your stop. The turning point is the last most significant low and this price has a high probability of being future support. Once this is taken out you don’t want to own the stock anyway. However if this is 20% away from your entry price you don’t want to stop yourself out to early. If you take this approach, you should first determine how much money you are willing to spend to find out if you are right. This is usually called your risk, but I see it more as your investment. I have better results when I focus on the investment rather than the risk.

As mentioned before I have a number of stocks fulfilling the buy criteria according the HSC. They are APA (APA Group) – 14%, HVN (Harvey Norman Holdings) – 22%, STO (Santos Limited) – 15.67%, WBC (WestPac Banking) – 16% and ASX (ASX Limited) 15%. The percentage is the difference between the buy price and the turning point assuming the price opens on Monday at the previous trading day’s close.

When you have multiple buying opportunities and only funds to buy one or two stocks you may also look at possible resistance. Apart from the usual fib levels you want to look at significant highs and lows in the past. Looking at APA for example you will see that the current price (4.12) is closer to the turning point (4.43) that started the last downtrend than to the last low (3.53). Also the absolute high is at 4.89. This does not mean the price won’t go significant higher than that, but you have areas of possible resistance relatively close to your entry price and in my personal opinion this gives you a relatively low risk/reward ratio.

It’s good to back and I am looking forward to a very prosperous year ahead.

The portfolio as of 7th October is: