Moving Average as an indicator for entry into the market?

Nortorious · 15 April 2011

Thanks for all the replies and discussion! Certainly learning that there are many areas which I had not considered when it comes to investing/trading in the sharemarket.

From some of the comments, it seems that "long term investing" shouldn't be a Buy and Hold strategy (just because the company pays a good dividend). I'm also starting to understand and appreciate the value and merit of the methods employed by skc.

I have put some stock codes below that I have identified as potential investments, now I know you can't provide advice on whether to buy or not, but can you analyse the stocks to see if my methods of selecting stocks are consistent to my goals?

Stocks I have identified through fundamental and technical analysis (rookie at both analysis types) that have potential for long term growth (and pay dividends that are reasonable):
- BEN
- DJS
- ORI
- TAH
- WBC

What do people think?

Should I put my money back into the online savings account and do lots more reading before embarking on my sharemarket journey?

I haven't used the Events Based selection strategy for the above codes as has been discussed previously (as I was not confident with my knowledge base to use this strategy).

Thanks again for all the discussion!
Loving ASF!

Julia · 15 April 2011

Nortorious, can you briefly comment on the fundamental reasons you have chosen the above stocks? i.e. why WBC instead of any of the other banks, DJS in preference to other retailers?

I'm not at all suggesting there's anything wrong with your choice, just interested in how you made it.

And along the same lines, briefly what technical factors are influencing your choice?

Nortorious · 15 April 2011

Julia said:
Nortorious, can you briefly comment on the fundamental reasons you have chosen the above stocks? i.e. why WBC instead of any of the other banks, DJS in preference to other retailers?

I'm not at all suggesting there's anything wrong with your choice, just interested in how you made it.

And along the same lines, briefly what technical factors are influencing your choice?

Thanks for the response Julia.

Basically the fundamental factors I'm using to assess stocks were/are (continues to evolve the more I learn):
- P/E ratio compared to sector and All Ords
- Div. Yield (also whether the dividend is fully franked or partially franked)
- EPS Forecast and historical EPS
- Beta
- NPV Analysis (using 'Bullmarket' ASF members approach to assesing value)
- Org docs/strategy

My technical analysis skills are very very raw.... I basically look at the 1 year, 3 year and historical chart to assess the trends of the stock. I also look at whether it is in an upward trend, downward trend or moving sideways. I looked at the price pre GFC and after, whether it is making a comeback post GFC. I have also started looking at the moving average and where the price is in relation to this.

In regards to why I selected WBC over the other banks... I see them potentially gaining some market share once the 'Bank of Melbourne" brand makes a come back. This is really only an intuitive thing.... no real facts to support this stance (as yet).

I see BEN as catering to a niche market (go where the big banks won't) and they provide a nice dividend that is fully franked, fundamentals seem good also.

Both DJS and MYR made it into my shortlist but I only posted DJS as I didn't want to bombard the thread with 20 or so stocks that made the shortlist...

What do you think of my approach Julia? And of those stocks which I posted, would you say that they are good stocks for a long term investment (buy and watch strategy)?

What other things should I be using in my fundamental analysis?

I will be doing a fair bit more reading on technical analysis as I don't really have a great grasp of that concept yet.

** I'll actually be doing a fair bit of reading on anything related to sharemarket investing/trading.... thanks to my local library. Have 8 books to pick up tonight for reading over the next few weeks.

Thanks again!

Julia · 15 April 2011

Nortorious, thanks for detailed and reasonable explanation which is appreciated.

To be honest, I can't comment on the fundamental factors you are using for your assessment as I'm not into that kind of analysis. I'm essentially a trend follower.

And I've not given enough attention to the stocks you have nominated to be able to comment on them.

I asked the question to see if you actually had a clear basis for your choice, rather than because I had any opinion about the stocks.

It seems you have given them plenty of thought so I wish you good luck with them.

Sorry to sound so unhelpful.

Nortorious · 15 April 2011

Julia said:
Nortorious, thanks for detailed and reasonable explanation which is appreciated.

To be honest, I can't comment on the fundamental factors you are using for your assessment as I'm not into that kind of analysis. I'm essentially a trend follower.

And I've not given enough attention to the stocks you have nominated to be able to comment on them.

I asked the question to see if you actually had a clear basis for your choice, rather than because I had any opinion about the stocks.

It seems you have given them plenty of thought so I wish you good luck with them.

Sorry to sound so unhelpful.

Ok thanks Julia.

Perhaps you could share how you follow the trends? Is this more of a short term trading strategy rather than a long term investment strategy?

Hopefully I have a clear basis for my choices but like I have said in previous posts, it is ever evolving as I learn more about the sharemarket and investing field.

I find your contribution helpful as I went back and looked over my analysis techniques. I guess once I start investing the success rate will prove whether my techniques are good/bad for picking stocks

I appreciate your input and look forward to many more!

Julia · 16 April 2011

Nortorious said:
Perhaps you could share how you follow the trends? Is this more of a short term trading strategy rather than a long term investment strategy?

My approach is very unsophisticated and uncomplicated.

1. I avoid speccie stocks. I know other people can do well with these, but my own choices here have been spectacularly unsuccessful.

2. Choose companies with solid track record and buy into an uptrend. Sell in downtrend. No specific time frame. If no convincing uptrend, stay out. I'm never invested 'for the sake of it'.

3. Let the winners run. Quickly sell the losers. Again, no specific time frame.

4. Make capital preservation the priority. (This might be different if I were not dependent on income from capital to live on: I have no employer wages or government benefits.)

People's approaches will be different at different stages of their lives. If you're earning a decent income and are many years away from needing to live off your capital, you'll probably take more risks than when you're a geriatric basket case.

tech/a · 16 April 2011

Nice---and simple-- Julia bet it works pretty well.

Nortorious · 18 April 2011

I also like that approach. Pretty logical.

I'm only young and have a safe, well paying white collar job so the sharemarket is really only to compliment that income and hopefully increase my wealth over the coming years.... Hopefully I'll be up in Darwin on my own boat fishing for Barramundi instead of working when I get to my Dad's age!

Thanks for posting your approach Julia. It's yet another approach to consider...

The_Snowman · 18 April 2011

Julia said:
My approach is very unsophisticated and uncomplicated.

1. I avoid speccie stocks. I know other people can do well with these, but my own choices here have been spectacularly unsuccessful.

2. Choose companies with solid track record and buy into an uptrend. Sell in downtrend. No specific time frame. If no convincing uptrend, stay out. I'm never invested 'for the sake of it'.

3. Let the winners run. Quickly sell the losers. Again, no specific time frame.

4. Make capital preservation the priority. (This might be different if I were not dependent on income from capital to live on: I have no employer wages or government benefits.)

People's approaches will be different at different stages of their lives. If you're earning a decent income and are many years away from needing to live off your capital, you'll probably take more risks than when you're a geriatric basket case.

Can you please define "UPTREND"?

Thanks

sinner · 18 April 2011

The_Snowman said:
Can you please define "UPTREND"?

Thanks

What's wrong with the traditional approach of looking at the lefthand side of your chart and seeing whether we are higher or lower than that?

If you wanna get technical about it, Momentum is the indicator which shows this. Momentum(65) will show the approximate quarterly momentum in a fancy oscillator, but all it is really pointing out is whether the current close is above or below the close of 65 periods ago - something which anyone can eyeball on a chart.

Julia · 18 April 2011

The_Snowman said:
Can you please define "UPTREND"?

Thanks

sinner said:
What's wrong with the traditional approach of looking at the lefthand side of your chart and seeing whether we are higher or lower than that?

Thanks, sinner. I'd have thought it was pretty self-explanatory, Snowman, as sinner has described.
Perhaps I'm misunderstanding the question.

The_Snowman · 18 April 2011

Julia said:
Thanks, sinner. I'd have thought it was pretty self-explanatory, Snowman, as sinner has described.
Perhaps I'm misunderstanding the question.

I posted a link to an hour long video detailing a complete, successful trading method that actually addresses the OP question about using Moving Average as indicators for entry into the market and nobody said boo.

You posted generic 'buy low, sell high' advice that can be found on hundreds of websites, no details, no time frames to trade, no details of MA setting to use, no entry, no exit, no money management, nothing new really, and everyone is thanking you like it is the Holy Grail, go figure.....

sinner · 18 April 2011

The_Snowman said:
I posted a link to an hour long video detailing a complete, successful trading method that actually addresses the OP question about using Moving Average as indicators for entry into the market and nobody said boo.

You posted generic 'buy low, sell high' advice that can be found on hundreds of websites, no details, no time frames to trade, no details of MA setting to use, no entry, no exit, no money management, nothing new really, and everyone is thanking you like it is the Holy Grail, go figure.....

Yeah go figure, someone asked Julia what she does and she responded with what she does.

We are only trying to clarify your question, "how do you define an uptrend".

Go figure.

Joe Blow · 18 April 2011

The last three posts in this thread have been removed. Now, can we please move forward in a constructive way, without the name calling, sarcasm and provocation?

Nortorious · 19 April 2011

The_Snowman said:
I posted a link to an hour long video detailing a complete, successful trading method that actually addresses the OP question about using Moving Average as indicators for entry into the market and nobody said boo.

You posted generic 'buy low, sell high' advice that can be found on hundreds of websites, no details, no time frames to trade, no details of MA setting to use, no entry, no exit, no money management, nothing new really, and everyone is thanking you like it is the Holy Grail, go figure.....

Hi Snowman,

Thanks for the link to the video. I haven't been able to watch it as yet. This computer doesn't have sound and it didn't really make much sense without the commentary. I will watch it though and will comment accordingly after I have (and then will let you know if it is indeed the holy grail)

I appreciate all the posts on this thread, even though some have veered from my original question. All of the information is useful, even if it is nothing new (or not new to the wiser owls) or not directly related to the moving average as an indicator for entry question.

CanOz · 22 June 2012

I cannot self manage my superannuation as i am a non resident for tax purposes, as is my wife. What i can do is switch from the different types of investments, rotate from risky to non-risky. I've been in fixed interest for the last 4 years and done quite well. I would like to take advantage of some of the bear market rally's and bull trends when then develop, if possible.

For a little more active approach, and perhaps to catch some seasonality I'm looking to use a way to switch my Super from Fixed Interest to Growth, then to High Growth. I'm thinking of using a SMA of the index, the XAO.

Something along the lines of, i switch from Fixed Interest to Growth once the index is above the 70 SMA, then to High Growth once the index is above the 100 SMA. Reverse for going back to cash, High Growth to Growth once the index has crossed the 100 SMA, then to Fixed Interest again once the index has crossed the 70 SMA.

Anyone else have any other thoughts on this?

Here are most of my choices....of course i would need to correct SMA for the market...

Cheers,

CanOz

Ves · 22 June 2012

sinner said:
Yeah go figure, someone asked Julia what she does and she responded with what she does.

We are only trying to clarify your question, "how do you define an uptrend".

Go figure.

Replying to an old post obviously. But I thought a better question, was "what is the strength of the trend?" I've seen my fair share of stocks, whether up or down trends that reverse fairly quickly. The dreaded whipsaw lives looms large.

CanOz · 22 June 2012

Ves, can you think of something creative based on fundamentals to give me some ideas?

CanOz

Ves · 22 June 2012

CanOz said:
Ves, can you think of something creative based on fundamentals to give me some ideas?

CanOz

I'm a stock picker. I don't really use entries signals for the market as a whole. I don't think that'll help you much in terms of when to be in fixed interest vs managed funds.

The only lines of thought that I can think of would be these two ideas from other posters:

Craft's posts on equity risk premium here:

https://www.aussiestockforums.com/forums/showthread.php?t=23385&page=6

Macros had an interesting thread a while back:

https://www.aussiestockforums.com/forums/showthread.php?t=23600

Honestly, I need to do something about the little superannuation that I have at this point. I'm only young in my working life - but better to get it right at the beginning. It's rotting away in some aggressive portfolio option at the moment... it still boggles me how they have only averaged 1% pa since the GFC when the DJIA is a fair way above what it was at that point.

Maybe the best thing you could do in your position is use your knowledge of technical analysis and pick your entry from mid-to-long term signals on the ASX 200 or All Ords.

odds-on · 22 June 2012

CanOz said:
Ves, can you think of something creative based on fundamentals to give me some ideas?

CanOz

CanOz,

I would recommend doing some research on dividend yield of the ASX20 compared to a "risk free return" such as a 1 year term deposit at a leading bank. When there is a large spread between the dividend yield and the risk free return, it is time to enter the market using an income based fund. When there is little or no spread between the dividend yield and the risk free return you want enter the market using a growth based fund. Or is the other way round?

Dividend yield is the fundamental key.

Cheers

odds-on

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