May-29 Up or Down?

I believe on FA side, the stock market should not go down significantly. GDP tells us something but not everything. But at least US is growing at 0.9%, not in a recession anyway. My theory tells me the DOW should be staying above 13000 to price in the economy without recession. On the housing price, there is a recent hot topic in Asian magazines for wealthy people, both eastern and western Asian, regarding bottom fishing the US housing market. Although I am not really sure where will be the bottom of the housing price in US, I guess it won't be too far away, maybe around late this year if it comes earlier.

I am not able to cover the market everyday in next 2 months until August or even later, as I need to settle down my personal stuff. I think I will update when I can, maybe twice a week or a bit more. I think in general, a steady long position for long term buy and hold is highly recommended. I still expect you can earn more with good picks in your long term positions compare to bonds or savings.

May-28 Back for a moment

Just got off the plane and had the dinner home, however, I will travel again with limited internet until 7th June.

Let me first breifly recap the market of previous 6 tradings days I missed. Apparently that was a major correction after break the resistent around 12950 area. My stop loss call on 12950 may shed your loss a little bit. Given most tech and commodity stocks have been flying for a while, this round of correction was not sudden, plus the continued weakness from finance sector. High oil price is an execuse for correction, as always.

For the next weeks, I believe the market will again turn to finance. Dow components AIG and BAC have been dumped greatly and I guess there would be two possibilities in the near future. One will be a decent sell-off comes and leads DOW to 12000. This is very bad situation as most people, either on main street or wall street, don't want to see this. Another possibility would be the rebounce of financial stocks bring DOW back to 13000 area to test previous high and continue a bullish trend. Of course people would like more to see this but we still need to inspect several days.

Trading strategy would be quite conservative. A combination of tech and commodity with your half position in long is OK for now. Be careful if you have short position on financial stocks. Retailers have touched the bottom as I expected months ago. I assume your hedging position on gold longs are quite profitable now.

May-19 Time for Greater China Area

With CEO and YZC are not walking to their all time high, Hong Kong index continue to be slightly more outperformed than US market. In the same time, Taiwan index soared more than 1% today to welcome new area leader who will take over Taiwan for next couple of years. Given the polican instability of Taiwan, the Taiwanese stocks are usually low on PE, I believe this will change in next couple of years. Taiwan may establish more than 6% anualized GDP growth again in the near future and most people are optimitics on the future. I have already recommend SPIL, and you can always think about EWT and TSM as Taiwan plays.

A share is in the consolidation mode and I think following the politics is quite essential to play A share stocks. Buy steels, basic materials, banks and brokers but stay away from real estates.

From tomorrow to 28th, I am not be able to update my comments. Maybe there will be 1-2 comments once I have internet, but I am skeptical about my correctness if I cannot track the market in real time. From 30th May - 7th June I'll be traveling a lot again. Fortunately, I don't see much risk out there if you follow my picks and suggestions. Good luck!

May-18 Tips on Commodity

As I have indicated to watch commodity sector for a while and now I come back on this sector as gold have found its double bottom, as well as my prediction on M head of crude oil failed. To diversify my pick list, you may find ABX AUY and NXG are always on my pick list, for this wave of Gold, I see the possibility to test previous high above 1000 if gold successfully holds above 890. If you have entered on my previous short notice around 850 and 860, then please hold tight, if you haven't steppted into Gold stocks, consider to buy around 900 with stop loss 890. You can either buy stocks or gold ETF, but please use gold price as stop loss but not the stock/ETF price.

Other precious metals should also be your target. Miners will continue to be strong but most good miners are in their all time high therefore buy on next pull back will be reasonable. For exaple, next good entry price for RIO would be around 36-38. If you have noticed, I was among the very few ones that recommend miners on BBS in the previous several months. I am 100% sure that everyone followed my suggestion on buying and holding RIO (also MTL, FCX and PCU) is quite profitable.

May-17 Preview of next weeks with new picks [VIP] and [SPIL]

I'll be away from 20-28th to Greece therefore I would like to draw your attention in following sectors.

• Asian sector, including Korean, Hong Kong and Shanghai
• Retailers, I believe the worst time for retailers has been past

The general market is still in the uptrend. The current target for Nasdaq is 2600, DOW 13200. If DOW holds above 13200, obviously 13750 will be our next target.

Another Russian play I would add to my pick list is VIP. This guy has been underperformed for a while as it spiked a lot during 2007. I think there is nothing changed for its FA given Russian has just begun to explode. To me VIP has already touched the bottom and unlike its peers such as MTL and WBD on my list with great success in past month, it has good potential to rise to new high.

I mentioned TSM and EWT weeks before but didn't put my pick list, but anyway it's still not too late to add SPIL to my pick list. I believe there will be another huge wave for Taiwanese stocks given the speculation on establishment of sweeter policies with mainland. SPIL is a good company anyway, as in these tough times for semiconductor industry, it does not directly design products but provides testing and packaging service for them, which is always required in the semi-industry. Besides, semiconductors has already bottomed out, therefore I am quite optimistic on its future performance.

May-16 Off topic: How to read the rating from institutes

We have been seeing a lot those upgrades and downgrades from institutes and many people are somehow lost as statistics indicate that 70% of the price projection from these analyzing report never meet. Today as there is nothing important to comment on the market (data and trend is still bullish, given the shake the day before yesterday's Nasdaq and the spike yesterday to establish a bullish pattern), I briefly talk about my impression on analyzing reports from different institutes:

• Reliable in long term scope: Merill Lynch, Bank of America, Deutsche Bank, S&P, Morgan Stanley
• Publish report for their own purpose (pump, dump or accumulation): Goldman Sachs, Credit Suisse, UBS, Citi, Lehman Brother
• Totally unreliable: Piper Jaffray, Bear Sterns

May-15 Recent strategy

First of all, many new people coming to this group and welcome! Glad to see people are mostly recommended by friends who are old registers in this mailing list. This implies many people think my emails are useful.

Today a friend discuss with me regarding the scope of trading. Basically, the trade-off between long term capital return, or short term swing profits. For most people, I recommend the long term scope as you may not have time to stick on the market and can not find a good entry or exit price for a certain stock. In many case, people find they can make more money if they can hold long, I believe many people here have similar experience.

Regarding the relationship between the broad market and stock on your hand, I think it is always more important to pick right sectors and stocks than predict the market direction. This has been proved to be true in the past several months when I recommend fertilizers, gold and other commodity stocks. Also, you may also find how fabulous it was to buy CF at 70 and hold until now.

What I want to say is quite simple, for my picks, I think for most people, buy and hold is a good strategy in the current market, if there is a correction but not a reversal to another new low, I would rather recommend to accumulate during the lows. Such as 12700 I said for previous correction.

Anyway, CHU CN and ZNH is still at good price to me, as well as many India stocks, Korean stocks, such as PKX and LPL are both in good shape. I like Asian plays better than anywhere else for recent market.

May-14 Shipping stocks

If you didn't catch this wave on shipping stocks in US, consider 2866 1919 0368 1138 in Hong Kong and also their A shares 601866 601919 and 600026. With BDI near new high, I think Chinese shipping stocks will catch up very soon.

May-14 Next Target

Simple and straightforward comments: if you get in around low 127xx, you are happy now. If you follow some people to play short, I am sorry about that.

Next target would be previous high near 13200, if DOW could hit 13200 and then holds above it, we see 13400 area as next strong resistance in 135xx area.

Still, you have chance in Asian markets at this moment. Forget about Tech now, you don't have much mean left when RIMM hits all time high and AAPL on its way. Normally, stocks are cyclic business and every dog has its day. Now I think it's better to check good stocks with sound FA. True, you may easily earn 30% on a stock but you may end up with 50% head cut - I have been heard similar stories innumerous times since previous downturn.

I'll try to find some good stocks to add to my pick list in next few days.

May-12 Market Update

Sorry for a bit late update today due to several personal issue.

If you followed my suggestion of buying around 12700 supporting area, your position should be profitable now. Next step is quite important: Let's see if DOW could close and hold above 13060, which determines the near term direction. A breakout will lead DOW to test 13300-13400 area, but an M head will bring DOW back to 12500 or even lower. Please track closely if you play swing.

Let's eye on the impact of the earthquake in China, while I hope it won't effect much on stocks outside Sichuan and Chongqing. I am still long on Asian sector. Regarding individual stocks, I am sorry I can't reply all of your emails, here I paste ones at least act in normal manners (NOT absolutely manupilated) with good fundamentals in my watch list. Please note, I am not taking this list into my pick list due to extreme volitality.

AOB COGO CTRP EDU GA JRJC PWRD SNDA SINA SOHU WX

With nice return, please also be prepared to lost 2/3 or even more of your investment if you buy these stocks.

May-9 Need to be careful

Several days ago I predicted the correction to 12700 area and now it's almost here due to AIG earning report. My strategy is quite simple:

• Load stocks you like from 12700-12600
• I see a strong support on 12550-12650
  
• Cut your loss when DOW dips below 12500

This strategy allows you load at downside risk of 1.5% on index and around 5% on individual stocks. If the stocks are hit hard this time, I guess government may again try to save the market.

May-8 Chinese sector is still a buy

First of all, I hope people here benefited from this rebound of gold from 850 to the current level of 882, I suggest you to closely track the gold future price and take some profits above 890. 900 will be a strong resistance and I'll simply using trailing stop on stocks and futures.

Come back to China A share, I believe this is not a simple rebound to 4000 and then game over. I would rather tend to bet on an uptrend back to 4700 area or even higher with help of Olympics and intensified infrastructure construction. I am not covering individual A-share stocks but I will reply individual question, if there is more than 10 people ask me individual A share stocks, I'll start A-share coverage.

Many people asked me about Chinese stocks trading at US, I am not going to cover them one by one, but in general, these stocks may spike once in next 3-4 months just like last year. During the next 3-4 months, I believe there will be a lot of shakes with more than -10% dump in several minutes. Please take these dumps as buying opportunities. In general, small Chinese stocks have this kind of pattern: Spike huge - pull back - spike and distribution - flat high level and distribution - dump and distribution - - rebound and distribution - dump and accumulation - flat and accumulation - shake and accumulation - spike huge and once again. It's highly risky to play with these stocks and you cannot really wait for another year when you 60% underwater. Bigger stocks like SOHU and CTRP may differ a bit: they act like a good A-share stock, higher high and higher low with high BETA - if you are not able to play swing, then just B&H.

During this uptrend of Chinese economic, I won't be surprised to see one spike per year for Chinese stocks.

May-7 Asian weakness

To me, today's Asian weakness is a correction after recent rally. If you have already sold CAF, FXI, PTR and other Asian stock following my call to reduce long position several days ago, I think it might be a good time to load some position back. Correction might last several days longer so I would recommend to load them back.

A bullish sign from US market is DOW holding above 13000. You can stay aside if DOW is trading below 13000 today. I have noticed yesterday that small Chinese stocks in NYSE and Nasdaq might go flat for months and then spike like 2007, so in next 1-2 months, any big dump of these stocks could be buying opportunities. I will mention several good ones later but in principle I don't like these highly manipulated stocks at all because of siginificant risk involved.

May-6 Daily Market View

If DOW could hold 12700 area, then this small correction will over and I would expect buying zone would be 12650-12750 with stop loss 12500. Following sectors and stocks could be your targets:

• H-Share ADRs, CAF
  
• Indian ETFs
• Brazilian resource stocks
• Tech and transportation

For candidates for short and put as hedging purpose, consider bond insurers and financial stocks. In current market, any short position will be highly risky. Volatility will be quite limited.

May-05 A correction may come

Given several technical indicators such as CCI, MACD, BBands and other indicators such as VIX and Put/Call ratio, I bet on there will be a correction on recently market. This correction won't be very decent and my target is 12600-12700 level, around 300-400 decline from current level. This reflects my reduce call on DOW falling below 13000 again. Just now DOW is 12989 so I think if during this afternoon there is no evidence showing the market strength, you may reduce your long position in general.

However, individual stocks may vary from sector to sector, for example, commodity sector may rebound to steady back from previous decline.

May-2 13200 is here

I was told that I was a moron and crazy idealist when I said this rebound will actually go to 13200 around end of January. Now it's here. What should we do now? My strategies are different based on your positions.

• If you 100% long, on every 100 advance of DOW above 13000, reduce 10% of your position until 13500. Then use 13500 as your stop win point for the rest, otherwise, 13000 is your stop point.
  
• If you 50% long, one every 100 advance of DOW above 13200, reduce 10% of your position until 13500. Then use 13500 as your stop win point for the rest, otherwise, 13000 is your stop point.
• If you are empty, buy 30% of your position on Asian stocks and ETFs when you still can, use 5% stop loss if you have good entry price during weekly lows.

Please, do not consider to win on both sides, long and short, this might be too difficult for many people. Frankly speaking, I find it difficult to both long and short stocks, rather I will trade Forex or Gold instead to hedge my stock position. This is not recommend for most beginners.

BTW, I hope you enjoy the ride on ZNH, which surged 9% last night in Hong Kong.

May-1 Sentiment still bullish

I cannot say anything until today. The sentiment is still bullish as many big guys said the worst is over. However, I still think the economy is not that good in US, so I continue to bet on emerging markets.

In the next days, we see non farm payroll data coming. As DOW topped 13000 yesterday, I think it won't be the last time we see 13000 during this period. Next try of 13000 is critical and necessary. A fail on holding above 13000 will cause major correction to 12600 area. This is my personal opinion.

Currently, I think only Asian markets are safe.