Archives for March 2014

Foreign Investment

As the US economy struggled to free itself from the grips of the worst recession in nearly 80 years foreign investment began to look very attractive. Buying stocks in foreign companies is an effective means of investing. It can be profitable and it does not require directly doing business in foreign lands and in foreign languages. Two basic means of investing in stock as a means of foreign investment are to purchase foreign stock or to purchase stock of US companies doing business overseas. Both can be done by investing in the US stock market . Many US multinationals offer foreign investment opportunity albeit by proxy. Investing in American Depository Receipts of foreign companies listed on the New York Stock Exchange allows stock holders to participate in foreign investment and not need to speak German, Japanese, Chinese, or any other foreign language. Investing in and trading stocks listed in the NYSE or NASDAQ commonly provides one with more and better information for fundamental analysis than if one tries to invest directly offshore. Trading electronically in US stock markets also allows traders and investors to use stock technical analysis tools such as Candlestick analysis in order to profitably anticipate stock price changes.

Why foreign investment? Long term investment in growth stocks can be very profitable. It may well be easier for an average stock to be a growth stock if its business is in a growing economy.  By investing in stocks listed on US markets investors do not have to deal with unclear information, foreign language reports, or market manipulation that the SEC typically discourages in US markets. The same Candlestick stock charts that work well for trading or investing in a home grown US stock will work just as well for trading ADR’s of European stocks such a Roche, Nestle, or Siemens, the Indian conglomerate, Tata, or Petrobas, the Brazilian oil and gas giant. These stocks are amenable to day trading or long term investing . Their fundamentals are available as the SEC requires Level II and especially level III ADR’s to adhere to reporting requirements similar to those required for US stocks listed on the NASDAQ and NYSE .

Buying and selling stock in US companies that do business overseas gives investors a wide exposure to foreign investment. Companies like 3M, Cisco, Microsoft, and Proctor & Gamble do business across the face of the globe. Investors and traders can follow stock fundamentals of these companies looking for intrinsic stock value and a margin of safety . They can also follow technical aspects of these companies’ stock prices in order to profit by buying at the bottom of a price curve or selling before a market correction. Considering how volatile the markets have been recently there is a lot of potential for profit in foreign investment by those using Candlestick charts to guide the way.


Basic Stock Trading

Basic stock trading is a recipe for success, even in today’s complicated stock market . Basic stock trading requires both fundamental and stock technical analysis. Technical analysis of stocks using Candlestick stock charts provides traders with clear and accurate signals. Candlestick analysis allows traders to identify known stock price patterns to a volatile market. By doing so traders are able to profitably anticipate the upward and downward movement of stock prices , options prices, and futures prices on stocks . Fundamental analysis provides traders with a clear view of a stock’s potential, both upward and downward. However, the market discounts stock fundamentals as soon as they are known, leaving technical analysis as the tool of choice for basic stock trading.

Traders can use the tools of basic stock trading like both technical and fundamental analysis in trading derivatives, for example. Besides analyzing when to buy or sell stocks with Candlestick patterns, stock trading relies upon tactics for management of investment risk , diversifying a stock portfolio whether for short or long term trades, as well as the use of stop loss orders and limit orders in general.

Traders limit risk in basic stock trading by limiting the amount put a risk in each stock trade. Traders limit the risk of trading by diversifying their trades over several stocks or stocks in several market sectors. This trading strategy is similar to diversifying a stock portfolio in long term investing . In doing so a trader may miss out on having all of his money in the trade of the year and may also avoid losing all of his trading and investment capital in in one bad day of trading. However, the best way to limit risk in stock trading is to have a clear picture of what stocks are likely to do next. Traders using Candlestick pattern formations as their guide can have a clear view of market trends and when a market reversal is likely to occur.

Basic stock trading online includes the use of trailing stops through a broker and includes the use of limit orders. When a trader uses a well-defined and well executed trading strategy he avoids falling prey to greed and fear in his trading. By setting limits at which he will buy stock or sell stock he limits his risk. By using trailing stops in online trading he protects himself from a rapid stock price turn around. When a stock opens the trading day it may gap up or down from its closing price on the previous day. In this case limit orders may be useless as the stock price may start the day past the limit given by the trader. This is a good reason for day traders looking to profit from short term market moves to close out positions at the end of the day. The use of stock technical analysis tools like Candlestick signals allows traders to enter and exit the potentially most lucrative trades as fundamental to stock trading.


Trading During A Recession

Trading during a recession or other times of economic stagnation is often more successful than investing. Traders can profit whether the stock market or individual stocks go up or down. With strategies such as options trading it is possible to leverage investment capital while also limiting investment risk. Trading during a recession allows traders to profit from swings in stock price even when long term stock market trends are flat or declining. It is always wise to do fundamental analysis of the stocks that one trades. Intrinsic stock value and margin of safety are drivers of eventual stock price and give traders a clear idea of stock price potential and likely trading range. However, when trading during a recession, as in most trading, Candlestick stock charts provide traders with a clear view of market sentiment. Using Candlestick analysis traders can sell stock, buy stock, sell short or profit in options by buying calls or buying puts. Technical analysis with Candlestick signals gives traders the ability to profit no matter what the economic conditions and not matter which direction the market is going.

During a recession those interested in long term investing often shop for bargains, a stock with strong fundamentals, a low price to earnings ratio, and the promise of renewed success when the economy picks up. The problem for investors is that this recession could last for a decade if analysts are right. The monumental debt burden in the two greatest economies of the world, the USA and the EU, combine to present a drag on economic growth that will eat away at long term profits and growth. However, the ups and downs the stock market caused by brief market trends and market reversal provide profit opportunity for stock traders. With the use of technical analysis tools such as Candlestick chart formations traders can anticipate changes in market sentiment. Using Candlestick trading tactics traders can profit from both the rise and fall of stock prices.

Using easy to read Candlestick signals, traders avoid being defeated by the psychology of trading. It is all too easy to become euphoric at what may appear to be a market breakout and all too easy to become distraught when the market falls. Candlestick patterns guide trading with statistically accurate appraisals of market patterns. Because markets repeat themselves a Candlestick signal gives a clear signal of coming price activity. Traders can avoid being tricked into poor choices by following the advice of the Candlesticks. In trading during a recession there often emerges an attitude among both traders and long term investors that things are just not going to get any better. That may be the case, even for a year or two. However, not all stocks languish during a recession. And, there is always market activity, up and down, as traders test the market. Those willing to do their homework and use the clear signals of Candlestick pattern formations can profit by trading at all times, including trading during a recession.


Find the Market Bottom with Candlesticks

Again, I like to look back at previous blogs to revisit where we thought the market was going. Below is a blog done as the euro sovereign debt bailouts regained life and there was another stimulus package coming.

As the Euro sovereign debt bailout regains life and another economic stimulus package is on the horizon it may be time for traders to find the market bottom with Candlesticks. Two things drive stock and stock market prices. These are the fundamentals of the economy and individual stocks on one hand and market sentiment on the other. In both trading and long term investing, margin of safety and intrinsic stock value are good measures of the value of a stock. What may look like a promising stock with a low price to earnings ratio may be underpriced as regards forward looking earnings but market sentiment may be such that the stock remains inactive and underpriced. Market sentiment is the composite action of everyone from the day trader to one who only engages in buy and hold investing. While fundamental analysis helps spot hidden stock value in a bottoming market, it is often more profitable to find the market bottom with Candlesticks. Stock technical analysis with tools such as Candlestick charts is useful in spotting new market trends and market reversal. If a trader or investor is looking to profit from a market turnaround he will do well to find the bottom with candlestick patterns  and trade or invest accordingly.

It is fine to talk about finding bargains in a down market but just how long will the market be down and how long will a given stock be ignored by the market? Both fundamental and technical analysis are necessary in both short term trading and long term investing. However, it is with Candlestick analysis that smart traders are often able to spot when the market is going to turn and profit from buying at the bottom. To find the market bottom with Candlesticks, either for the market in general or for individual stock prices, traders follow stock price patterns and their representations as easy to read Candlestick signals. A commonly useful signal is the Doji Candlestick. This Japanese Candlestick signal indicates market indecision. It is useful in predicting a market rebound or a correction in an ascending market. The Doji is a very short to virtually flat candlestick with long upper and lower tails. It tells us that the market opened and closed on a stock at nearly the same price but that the market tested both higher and lower during the trading period. This signal often precedes a breakout. It is not especially useful in a flat market as it does not tell us in which direction the stock market or individual stock will move but in an upward or downward trending market it commonly warns the trader of a turnaround. In a falling market it is a way to find the market bottom with Candlesticks.

After a recent sell off took two and a half trillion US dollars of value out of the markets many are predicting that the market has hit bottom. The smart stock investor or stock trader will not rely upon the pundits. He will work to find the market bottom with Candlesticks and profit thereafter with Candlestick trading tactics.


Buy Cheap Stocks

As stocks have taken a beating of late it could be time to look for bargains and buy cheap stocks. When deciding to buy cheap stocks for long term investing the investor is looking for different characteristics than a day trader who might buy cheap stocks in expectation of a quick profit. In long term buy and hold investing one looks for stocks that are underpriced in relation to their eventual value. Such stocks will commonly have a low price to earnings ratio, a strong margin of safety, and forward looking intrinsic stock value. An ideal stock for a long term investor is often lying forgotten by the market. It is not especially volatile. On the other hand when traders decide to buy cheap stocks they are commonly looking for stock volatility. They may look for stocks that have had drastic changes in their fundamentals and are in a period of market inefficiency as market sentiment settles on a stock price. Using Candlestick charts traders can buy cheap stocks before they rebound or sell short before the market makes them cheap stocks.

Picking stocks in a down market is only part of how to make money if one chooses to buy cheap stocks. The other part is timing. Candlestick analysis provides traders with an objective means of stock market and individual stock analysis. Long ago traders recognized that market price patterns repeat themselves. Rice traders in ancient Japan developed an easy to read system of signals for trading rice. Today Japanese Candlesticks are used for trading commodities, stocks, options, futures, and foreign currencies. Candlestick patterns essentially predict the future by remembering the past. When a trader or investor wants to buy cheap stocks he does so in order to profit when the stock rises in price. Although the long term investor may have a longer time horizon in mind he, as well as the trader, wants to buy stocks at the lowest possible price. He does this with an eye on the fundamentals of the stock but with his full attention on technical analysis tools such as Candlestick stock charts where he expects to see clear signals telling him when to buy stock, sell stock, sell short, or stay out of the trade.

Traders, unlike long term investors, look to profit from both the ups and downs of the market. By following stocks with Candlestick charts traders seek to buy cheap stocks before they rise in price, sell expensive stocks before they fall in price, and repeat the process each time the market cycles through the same set of stock price patterns that it has followed for many years. By assessing the fundamentals of a stock and gauging market sentiment with Candlestick pattern formations traders are able to distinguish between stocks that are likely to rise in price and cheap stocks that deserve to be cheap and may be on their way to bankruptcy or a buyout by a stronger competitor. The point, when using Japanese Candlesticks, is to profit from buying cheap stocks in either the long or short term.


Retirement Stocks

Those who would like a nest egg stashed away for their later years will often seek retirement stocks, stocks with a good margin of safety as well as intrinsic stock value. Retirement stocks often pay dividends as well. The point is to have a steady income from ones portfolio while individual stocks still appreciate in value over the years. There is a conservative, buy and hold investing aspect to retirement stocks that requires a balanced stock portfolio. It also requires that investors still pay attention to what they have in their portfolio with both fundamental and stock technical analysis. The point of retirement stocks is that the well-chosen ones are profitable and don’t necessarily require minute by minute attention by the retiree who would like to devote more time and effort to learning how to sail, garden, improve his tennis backhand, or familiarize himself with the art galleries of the world. Nevertheless, the world of stocks has the tendency to change, which is what keeps making profits for traders using Candlestick analysis as a guide. Even with well-chosen retirement stocks such as consumer stocks stalwarts like Proctor & Gamble, Coca Cola, or Clorox, a little attention to the market using Candlestick patterns allows prospective retirees to pick stocks that are currently under priced and helps retirees rid their portfolios of stocks that are ready to fall in value.

The point of balancing a portfolio of retirement stocks is that economic conditions can drive stocks in different directions. During a recession consumer stocks often go up in price while growth stocks may falter. During a recovery growth stocks may take off again while consumer stocks will settle back into their usual routine. When oil stocks and oil futures go up in price, industrial stocks and transportation stocks often suffer, and vice versa. By diversifying a stock portfolio a retiree spreads his investment risk over several stocks in several market sectors. A valid concern in picking stocks is just how many stocks to choose. A wider range of well-chosen stocks helps diversify investment risk. By picking too many stocks the prospective retiree needs to devote time to following his stocks when he may prefer to take his wife out to lunch or stroll along the beach. He may also dilute the profits that he could have achieved from successfully investing in start-ups. Although a portfolio of retirement stocks will often be mostly large cap stocks, adding a couple of stocks with the potential for substantial growth may be a good idea, providing that the investor takes a close look at Candlestick chart formations to make sure that his choices are not ready for a market correction just as he buys the stocks.

When choosing stocks entry price is always important. Many good stocks for the long run have already been discounted by the market. The time to buy these stocks is when they are at their lowest price. This may be during a general market reversal or may have to do with the individual stock itself. Smart investors looking towards retirement pick strong stocks based upon fundamentals and then buy stocks based on technical analysis with Candlestick stock charts.