Saturday, October 6, 2012

Reversal Trend Stocks

In stock investment, you should learn how to see the mega trend.  When it is generally a bull trend, you simply buy some blue chips and it shall earn you some good money.  When bear comes, you took your profit.  As long as you don't stay too close to the market, this can rather easily be achieved.  Just walk around a wet market and ask 10 stalls how the market is.  You will be surprised how closely their non-professional opinions are related to the real market performance.

Then you must realize NOT ALL stocks are the same.  Even during an obvious bull run, there are some stocks going down.  Like wise during bear runs.  Some stocks will still go up.  Finding out these 'Reversal Stocks' is important for a full time traders.

The reason goes like this:  there is a fix amount of money floating in the market.  The mega fund managers simply CAN NOT withdraw TOTALLY from the market even if it is GUARANTEED a bear market.  They are required by law to keep investing ie. 70% of their fund.  So during bear market, they will focus on a few stocks to minimize loses.  As a result, during bear market, a few stocks will always be on a up trend.  And not surprisingly, those are the stocks didn't join the previous bull run.

As long as you have done your fundamental analysis, knowing mega trend stocks and reversal stocks allows you to invest both during good and bad time.

2 comments:

ChampDog said...

You mean look at the KLCI trend for example?

Why there is a law that fund manager cannot withdraw everything?

Michael Tsen said...

KLCI is mega trend, I am referring to individual stocks that can 'really' make us $$. ie. now cimb, digi, maxis, tenaga are all on high. But maybank is at low now. Could maybank be a reversal stock for the next 2-3 weeks ?

Read the prospectus, fund managers are 'required' by 'contract' to keep 80% invested in equity for example.