AUG-08 A View on the Markets

My friends, it has been so long that I came back to think about write something. Life is turning around. Work is busier, time is always less than needed. Previously I was thinking about to go to financial industry but recently I got some suggestions from friends so I decided to stay cool for another couple of years.

Hopefully, you've been enjoying the recent bull-run of the market and certainly writing about the past is useless and we need to focus on the future. One thing I can say and is different from the media is that the economy is far away from recovery, but this does not mean the stock market is heading south next week. Looking back the past bear markets, every bear markets had a V shape rebound or ticker-shape back to the 60% from peak to low, that means 11300 for DOW and 1200 for S&P 500. Don't argue with me that I am too optimistic - just open the chart for the past 100 years and look it by yourself, and you will find in many cases for bear markets, the rebounds were even higher than 60% and ranged from 90%-100%!

Some tips: Hot sectors are still the same: technology and commodity. Weak sectors are healthcare and media press. Finally, buy China.

July-23 Is Airliners resistable?

We have seen the airliners have been boosted to rebound, then our question will be whether the rebound is a dead cat bounce, or still resistable?

 

The most important thing is still OIL price, and most people still think we are in the correction mode but not sell-off mode for OIL. I don't think it's smart to buy after one day gain of ~50% on airliner stocks.

 

However, what we can do is to bet a short-term rebound on Chinese airliners as well - we don't lost much if they don't.

July-17 The bottom

It's not possible to know the bottom until quarters later, and I don't think bottom fishing is such an important thing.

If you miss the airliners today, don't worry, there will be many other opportunities ahead.

GLD retreated a bit as we expected, and I think GLD could be a good hedging option if you want to go long for mid term.

I hope you pay attention to opportunities on A share and H share tonight.

July-15 Gold will be strong

Technically, the gold chart is very bullish, and I believe this uptrend will create a new high for GLD. It's no doubt to own good Gold stocks at this moment.

I think gold price may go to 1200 USD p/o this round and sending the GLD to 117 USD.

Buy on any pull back. Also consider October options play for ABX, GG and GLD.

Other metals, as I talked about Aluminum, it's better to play options on AA rather than ACH, due to size of spread.

July Stupid Mistake on Airliners

I have to apologize once again on Airliners. This is one of my biggest mistakes in 2008. I write this email is to remind you the following facts:

1. Are all airliners going to bailout at the end? Of course not, so we need to pick up ones that will survive, as they will be probably the best gainers in the following years.
2. I think you can easily name big airliners in US. Please choose 2-3 ones that you think might have better chance to survive, track them. This world can not live without big airliners, think about this. Also, for example, count the number of air planes owned by company like UAUA and NWA, and calculate there value. You will find they probably worth more than the stock price.
   
3. I won't be that stupid to suggest you to buy airliners NOW, however, watch them.
   

Good luck.

July-11 Time to talk about Aluminum stocks

I was 100% correct on the futures price of Aluminum, which just hit the all time high at LME. However, I was wrong about the stock price of Aluminum stocks, including ACH. We know that the stock price is determined by the company performance. The major reason of the downtrend of ACH is the ER of this company - profit halved. However, we know this problem was due to the low metal price in the first half and the snow storm in China, as well as the market environment. I think it is more important to consider the strategy from now on.

We see higher Aluminum price again and we also want to benefit from that. Major institutes dumped the stocks, fine, as we can predict the metal price will go up, there is a good opportunity to collect cheap stocks - the company performance will show up in the 2nd half and then it would be too late to catch up.

Do remember, by 2010, China will be the pure importer of Aluminum. It's time to strategically long Aluminum stocks.

Jun-20 Comments on recent market

I am on the bullish side, as both TA and FA do not show a crash is coming around. For the evidence that agricultural stocks are due for correction, the market should be bullish in the next weeks. I would like to draw your attention with sectors and stocks below:

• Tech. Hot stocks such as AAPL, RIMM, ATVI are good ones to catch the tech wave. Buy on dips. MSFT, ADBE, CSCO, AMD are good ones for longer term investment.
• Please pay attention small-cap in A share stocks starting with 002, screen them and pick ones with volume and price increase, such as 002156. Once the market ends the downtrend, these stocks may rise.
• Emerging markets, such as Russian and Brazil are still good to have as they are rich in resouce and good for long term.

To reply stocks like LPL, if you think this stock is in good fundamental, feel free to average down now or later. Stock market is always a cyclic business, what you need to do is to diversify your portfolio with 3-5 different sectors and sell on the sudden rise of any of them.

By the way, I decided to go to Singapore, so in the future, I think I can track the morning market and give summary during the night.

Jun-8 Crisis is always good for bargain hunters

Sorry for leaving a week again, as I did not have regular connection in the past week. Given the sharp loss on Friday, the market gives me an impression for another round of sell-off, which indicates my prediction on recent bullish was completely wrong. I am not surprised as it can easily be a mistake once I cannot track the market from time to time. I think now I should really focus on possible opportunities in recent market and try to answer the questions on mailing list in the past week.

First, if there is big sell-off again then it is good time to buy nice stocks again, just like the previous sell-off. We have already seen the financial crisis in Vietnam and I see long-term big opportunity right there. Please remember the Southeast Asian financial crisis in 90s, when the blue chips are head cutted, they recovered in next several years. I think it is now the time to closely inspect Vietnam stock market and wait for a stablization in the low positions and buy some funds. I expect the 3rd quarter this year will be a good entry time.

Do not short financial stocks, this downturn is likely to be the last for this sector, in my opinion. Finally, if you want me to mentioned three sectors to long during sell-off, that would be Russian, Russian and Russian.

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-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-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-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.

Apr-30 Recession?

OK, we have been in "recession" for about two quarters, said by many Wall Street genius, however, main street morons successfully posted two quarters with GDP in positive territory. What a joke!

Please understand that GDP is not the only criteria to measure recession or not, in fact, it does not really matter to us. What we need to do is to pick up good stocks in next few months, and it's done. Such as, let's check, CAF is trading at 48 before market, up 33% when I called on 13th March and A share still looks strong. Many people asked me whether to jump in CAF now, I guess it will still rise in next trading day but will correct in the near future, wait for that dip and jump in.

Many people also asked me about agricultural stocks, I even consider to stop my coverage as I found there are too many people want to buy stocks in this sector so I think it might be the time to stay away. Let's wait for a few days to see what's going on.

Apr-29 New Pick [ZNH] with comments on oil and airliners

I would like to start my coverage on ZNH and put this stock into my pick list with price $32.25 for reasons below:

• Different from world airliners, Chinese ones can benefit from the exchange rate and controlled oil price in China.
• The oil price looks like will have a correction in the near future and lifts the whole airline sector.
• There will be a huge explosion on routes to China brought by Olympics.
  
• China local demand is quite high and is expected to continue.
• Low PE; high growth; oversold.
  

Stop loss is quite simple, recent low on around 29 with -10% stop limit, or the USD spikes big against RMB in next 2 months.

Apr-29 Following Master

Buffet has made his selection on a food processing company, and I think following the master is a simple but smart way to do personal investments. I thought food processing would be a good investment direction so I recommended WBD months ago and this stock is now in good shape. Today I would like to introduce ADM and CZZ as my new recommendations to extend my coverage in this sector. However, I am not going to put them into my pick list now as I need more time to inspect these stocks. It does not mean ADM and CZZ will underperform WBD. I think at least they could be put into your watch list for a closer view.

Apr-28 A New Week

It looks like the bullish sentiment continues to rate cut. The day after tomorrow will be a key day for short term market. Below is my analysis:

• If today and tomorrow have significant gains, I bet big money will dump stocks whatever the rate cut the desicion will be.
• If today and tomorrow go sideways or down a bit, I think it is still bullish.

To me, I expect this wave continues to end of May or early June, but I still need more evidence. In fact, we see the company earnings are not that bad, I hope the two oil giants can report good earnings to lift DOW. It is possible to see DOW13200 with NAZ 2500 within in May.