The Home Trading Blog

I was surprised this week to see the blog portfolio profit only marginally lower (7.49 %) compared to previous week (7.52 %). Looking at the XJO (Aussie 200 index) and at my charts for the week I would have expected a bigger drop. The Australian market lost further ground and finished the week more than 1 % lower. Comparing this with some of the major markets overseas (e.g. US and Germany) you will see that the German and US markets have passed the April 2010 high already, whilst the Australian market is still more almost 400 points short and has some catching up to do.

I mentioned last week that I will sell DJS (David Jones) and JBH (JB Hi-Fi) and one of my readers pointed out that DJS should have been sold already on the 22^nd October. I have missed the swing low that was created by an outside bar on the 8^th October. I have adjusted my transactions accordingly and turned a 1.5 % loss (selling it last Monday) into a 7.26 % profit (selling it on the 22^nd October).

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Last week we saw Australian shares posted their worst week in three months. We saw a similar picture in the major international markets and our blog portfolio followed the downward trend as well. With ILU (Iluka Resources) and PDN (Paladin Energy) we still had some strong performers helping to limit the overall loss. The current positions are still up by 7.52%.

As mentioned last week we have added CPU (Computershare Ltd) and MQG (Maquarie Group Limited) to bring the total number of positions up to 20 again. Both finished the week lower though with CPU retreating 6.29%. Next week we’ll be selling JBH (JB Hi-Fi) and DJS (David Jones Ltd) as both had two closes below their uptrend band.

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The Australian Stock Market had a good week finishing stronger than the week before. It is now more likely that we have seen the end of the last primary cycle (19.3 weeks) either early on the 25^th of August or right on 19 weeks on the 1^st of October. We will need to wait and see how the new cycle unfolds to see this more clearly. One of the challenges I have with cycle analysis is that it leaves a lot of space for interpretation. However it still gives you a good indication in which direction the market is going.

The strong showing of the market reflected in the blog portfolio, with the profit (of current positions) up to 9.6% and the number of stocks in the red down to only 3. The  downside were the retail stocks in the portfolio, which finished the week lower and DJS and JBH look like a sell for the week after this (unless they bounce back strongly). We also got stopped out of ERA (Energy Resources of Australia) after they spiked down during the week. After we have added WBC (Westpac Banking Ltd) this week we now have another two spots to fill. The transactions for the week were:

1^st November: Sell 726 ERA @ 12.38 for a total loss of 10.15%
5^th November: Buy 436 WBC @ 22.93

Looking ahead I have identified 4 new buys for next week. The first two are QBE (QBE Insurance Group) and NWS (News Corporation Inc). While both looked very attractive at first glance, I have noticed a bearish bar for the week, indicating there is a high probability of the stock moving lower over the coming weeks. Here are the charts to illustrate this. Read more…

The markets certainly look more bullish than bearish and the big question is if it will stay this way. We have added two more positions to the portfolio and have another 2 (maybe 3) stocks fulfilling the HSC buy rules according to my analysis. I have also noticed more than 15 stocks had a bullish outside vertical bar (BUOVB) for the week. This is usually a sign that the stock will continue to raise over the coming weeks.

As I have mentioned already we have added SKI (Spark Infrastructure Group) and DJS (David Jones) to the portfolio on Monday. We are still waiting for TOL (Toll Holdings Ltd) to go above 6.21 for a buy. For the week ahead I have also MGR (Mirvac Group) and GPT (GPT Group) as a buy, with SKI and DJS still  flagged as a buy as well.

The transaction for last week were:

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Excuse me for sounding like a broken record, but we are still in a period of uncertainty in the market. What initially looked like a good week (looking at the international markets), ended with a sharp fall of the US and European markets on Friday. This meant the major markets finished the week slightly down compared to the week before.

However the Australian market and our portfolio finished the week marginally up compared to the week before. Most stocks in the portfolio didn’t move much with the exception of ILU. Last week’s profit on ILU was 37.81 % compared to when the stock was bought and this week’s profit is 48.77 %. A shame that we sold half of our holdings some time back. On the other hand, I am quite happy to have some profits secured. You never know how the market will be moving and most analysis and future prediction is made based on probability. One of the biggest mistakes an investor can make is not to lock in profit. I have spoken to many people that have seen a 30% profit turn into a losing trade and this really hurts. I happily accept the fact that I can’t be correct in each of my trades and that a minority of them end up being losing trades. What I can’t accept is having made some good money on a trade and then losing it all.

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Well looks I was right (and wrong) about the market. Look back to the Update 26, where I mention we will have a major low between February and middle of May. We are currently on track to the low for the 53 week cycle in the XJO. Most times it retraces at least 38%, which would mean another 150 points or more. In Update 34 I was hoping we had seen the low already in February, but I was wrong.

Thank you Mr Rudd, for the higher taxing of the mining companies, which send the miners sharply lower. Thank you fat finger, for causing a rollercoaster ride in the markets this week, sending the Dow to its biggest point lost in history. And finally thank you Greece  for starting the whole mess.

It always amazes me how this all comes together at the end of a bigger cycle. As you can imagine the portfolio took a big hit last week and we got stopped out of three positions. They were STO (Santos Limited), MQG (Macquarie Group Limited) and DJS (David Jones Ltd). We further sold half of the holding in CPU (Computershare Ltd) and our position in ORG (Origin Energy Ltd). I missed to mention this last week, Origin was actually already a sell the week before. So looking at the transactions for last week, we have:

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