Newbie Lessons - All your questions answered

[Sir Osisofliver]

Sir O: THANKYOU, and also I love you and want to seks you up.

I'm taken

The basic trend stuff you posted on the 7th has really helped. Funny how you can keep seeing the edge of something that everyone else knows and never quite get it until someone stops and uses small words.

LH HH LL HL .... ahhhh. At last you guys make sense.

PS:


Re: the bolded bit - is this necessarily the case when the close is lower, is it something you get from the data shown here, or is it something you have to read off the volume graph that's not shown above?

It's from the data displayed here.

In relation to the volume. SELLS = BUYS. It cannot be any other way. The use of the volume indicators therefore only has meaning when you include other metrics or indicators. People talk about the number of sellers and buyers in the market (I did it above for example), because it's easy to think of it in that way but it's a little bit lazy.

Perhaps what I should have said is that there was more Selling PRESSURE than buying PRESSURE. The actual number of sellers or buyers may be irrelevant. (Think about it, one large Institutional seller or buyer acquiring or disposing of volume in the market can trade with a much larger number of smaller investors).

Included with this is a concept of hidden volume - Many brokers (because they have operators and direct access to the market through a SEATS platform) do not disclose the size of the trades they are performing. The operator may have 200,000 shares to purchase, but will work the order and only disclose a small portion of the trade, and continue to add volume to not frighten the sellers or buyers away.

This is the kind of behaviour in the market that can only be seen if you are a) looking at the tick data (live data trades as they happen) b) it's not summarized so you can see the individual trades (like the screen grab below) and c) you have some inkling of who they are. Who performs a particular trade eg Macquarie is no longer disclosed to the market - market participants now have the option to disclose their transactions should they choose to do so after three days. This is the result of some serious lobbying from the broking industry - but personally I feel it takes away from the transparency of the market.

Cheers

Sir O

 

[SmellyTerror]

Cool,that makes sense. Thanks.

 

[Sir Osisofliver]

OK Newbs Technical Analysis Part Deux Support and Resistance

Ok Newbs if I slip up and say more sellers than buyers, from Smellys question above you can see that I'm just being lazy, and I'm referring to the amount of selling or buying pressure rather than an actual volumetric.

Some people will have you believe that Support and Resistance can be a complex topic for newcomers to Technical Analysis. The reason for this is that we are entering the stage where certain chart features become subjective. A stock hits it's resistance level and starts to come down, will it drop till it hits the support level? Will it double top? (come back up and hit the resistance level), Triple top? Break through?

What everyone thinks (and how the markets react to all those different thoughts (IE NOISE)) will determine the actual movement of the share price. Traders therefore tend to get nervous (an emotional response) around support and resistance levels because the market is uncertain, and an uncertain market is one in which you have a higher probability of getting it wrong. It's ALSO the point at which the trader has the greatest potential of making a profit so these points tend to get a great deal of attention.

These support and resistance levels are subjective because of noise (random events and uncertainty in the market) and personal experience. You've learnt about what noise is and how that can affect the market and specific stocks.

What is the importance of personal experience?

Your experiences when you trade will colour your emotional reaction to what you are doing. This is why they say that psychopaths make the best traders, because they tend not to have any emotional responses. If you have a particularly good trade EG you punted on some QGC shares at 15 cents and made a bundle, naturally you will react positively and look for more of the same. It's a positive feedback loop. I did well in this I should look for more of it and is a perfectly natural reaction.

Similarly when we get burned in something, ABC Learning Centres for example, we tend to think that ALL childcare centres are the pits and you wouldn't touch them with a ten foot barge pole. I'm sure the company directors of Peppercorn Management Group disagree with that assessment.

It's important to try and at least be aware of what your emotional responses to a particular event is and whether they are intuitively affecting your response.

Moving right along then... What is a support and resistance levels?

Support levels.

Simply put, support levels are where the buyers (or bulls) feel that the stock has been oversold, represents good value or simply feel that it cannot go any lower and buy the stock, arresting the drop in the share price. Buying bids also tend to accumulate at certain price points creating these resistance levels. If you look at the nice chart below where the stock bounces several times off the same price, you can see the obvious support level in the stock. (notice how frequently Inside and Engulfing bars indicating uncertainty appear at the turning points).

Resistance levels are the flip side of this. Sellers (or bears) in the share accumulate orders at certain price points, where they think that the price is too high and we get a ceiling on the price. Like the graph below…

OK Newbs, now what do you think will happen if we get a support line or a resistance line that rises or decreases over time?

Stay tuned for the next lesson where we talk about rising/falling lines of resistance or Trends

Cheers

Sir O

 

[longcall]

Hi guys,

I'm new to the sharemarket and I am very interested in buying renounceable rights. Does anybody know where to get a list of all current renounceable rights that can be bought on the ASX?

I was thinking there might be a website that lists them perhaps...

thanks team

 

[Michael Dempsey]

Hi All,

Let me make this point clear. ANYONE can retire very comfortable. It doesn't matter what your income level is, your level of education, whether you went to a private school or any other factors - all it takes to become financially independent is 1) Self Discipline and 2) A small amount of Knowledge.

The average Australian will earn approximately 1.8 million dollars during an average working life. For every Australian working today 8% will become "Financially Independent" when they retire. (we'll talk about this definition in a second). Out of 100 people aged 15 today, by the age of 65

38 will be deceased
38 will be living in poverty
16 will still be working
7 will be retired on a livable income
and 1 will be wealthy.

The way that the ABS (Australian Bureau of Statistics) defines "Livable income"? - In retirement your income is 60% or greater of your last year's pay. "Wealthy" is defined as your retirement income is greater than 80% of your last years pay. Yet with just a small amount of information and self discipline - those numbers could be MUCH better.

Sir O[/B]

I have to agree 100% with what I quoted above.

I started seriously investing at 25. I sold my business and retired age 35. Interesting to read that I fall into the "Wealthy" as described above.

I was a high school drop out and a simple tradesman. I never earned big money. Just simply used the principles described above. I did use a tone of debt though. Debt was the key. The other part of the puzzle is knowing what to invest in.

I invested in anything I could get my hands on. Property, shares, business opportunities. Looking back, if I just focused on investing in quality stocks only, I'd be much richer, like 3 or 4 times.

Anyone can achieve financial freedom

 

[Cink]

Just a general question here.

If some1 from Mel wanted to call me using her landline/moblie to my moblie, does she have to include like QLD area code 07 in front of my moblie or just go 04xxxxxxxx .

 

[NeuromanceR]

Just a general question here.

If some1 from Mel wanted to call me using her landline/moblie to my moblie, does she have to include like QLD area code 07 in front of my moblie or just go 04xxxxxxxx .

Yep, just the 04xxxxxxxx mobile number. No area code.

 

[senortodd]

Hi,
I am very new to this and still very much in the early days of learning about shares (try first month).

Anyways my stupid question is:

What is the significance of a price rise on low volumes? Does it mean anything different to a price rise on high volumes?

Cheers,
Todd

 

[Sir Osisofliver]

Hi,
I am very new to this and still very much in the early days of learning about shares (try first month).

Anyways my stupid question is:

What is the significance of a price rise on low volumes? Does it mean anything different to a price rise on high volumes?

Cheers,
Todd

Todd,

I'd prefer some context with this question. Which stock was it that had a price spike on low volume, which stock had a price spike on high volumes? Define high volumes? How tight is the registry? What are the market caps of the stocks involved? What is the usual liquidity of the stock/

So much of the market is perspective and context.

Cheers

Sir O

 

[person]

Sorry, I know this question is from a million years ago but I cannot work out what PPR means on the second page.

It isnt defined anywhere in the first few pages and it isnt in the Acronyms thread. Also there are 65 Acronym matches if I google it and even then I cant see a relevant one. Can someone please spill the beans?

Thanks

 

[arco]

Sorry, I know this question is from a million years ago but I cannot work out what PPR means on the second page.

It isnt defined anywhere in the first few pages and it isnt in the Acronyms thread. Also there are 65 Acronym matches if I google it and even then I cant see a relevant one. Can someone please spill the beans?

Thanks

Principle Place of Residence

 

[swm79]

Sorry, I know this question is from a million years ago but I cannot work out what PPR means on the second page.

It isnt defined anywhere in the first few pages and it isnt in the Acronyms thread. Also there are 65 Acronym matches if I google it and even then I cant see a relevant one. Can someone please spill the beans?

Thanks

Principle Place of Residence

meaning the house you primarily live in i.e. not your rental property or beach house etc

 

[swm79]

echo.... echo.... echo....

haha

just got in before me!

 

[person]

Thanks guys.

 

[Sir Osisofliver]

Sorry, I know this question is from a million years ago but I cannot work out what PPR means on the second page.

It isnt defined anywhere in the first few pages and it isnt in the Acronyms thread. Also there are 65 Acronym matches if I google it and even then I cant see a relevant one. Can someone please spill the beans?

Thanks

*Hands person his bifocals*

Let’s say you have a significant asset with a low LVR (This could be your PPR or an investment property for example). Currently the bank loves you - they get to use your asset and make lots of money from you by using the currently unused security value of your asset.

You would be MUCH better off if instead of the bank using that security value - you yourself use it. But how do we use it effectively so as not to endanger the viability of the asset?

In the case of a PPR (principle place of residence) there are a couple of important things you need to consider.

You only had to read about 5 lines

Cheers

Sir O

 

[mrlawler46]

Sir O,

I have recently begun trading and have been following a report with my father (Which has had quite good success), and I have followed this person into an option which is up now on when I bought it (Thankfully).

But, I was wondering what the hell I have done and what it means..... Also if I choose to execute it; a) How would I go about it and, b) when would be a good time to execute if at all?

The option is as follows:

This was on offer to existing shareholders on a 1 for 1 basis to acquire 1 option in the Company at a price of 1 cent. The option gave the holder the right to convert the option into a share by paying a further 3 cents at any time up to 29 June 2010.

I know this seems very self explanitory but I may be reading too much into it.

Any explanation would be appreciated,

Matt

 

[Sir Osisofliver]

Sir O,

I have recently begun trading and have been following a report with my father (Which has had quite good success), and I have followed this person into an option which is up now on when I bought it (Thankfully).

But, I was wondering what the hell I have done and what it means..... Also if I choose to execute it; a) How would I go about it and, b) when would be a good time to execute if at all?

The option is as follows:

This was on offer to existing shareholders on a 1 for 1 basis to acquire 1 option in the Company at a price of 1 cent. The option gave the holder the right to convert the option into a share by paying a further 3 cents at any time up to 29 June 2010.

I know this seems very self explanitory but I may be reading too much into it.

Any explanation would be appreciated,

Matt

Matt,

From the sound of it (since you didn't give an ASX code for the option) it appears to be a listed option. If it is a listed option it will be designated by a four letter code. EG MPOO (Molopo Option now defunct).

The option is an agreement by the company to sell you a fully paid ordinary share for three cents. You have already paid a premium to acquire your option (1 cent) to the company, which the company gets to keep.

If the fully paid ordinary shares trade above 4 cents your option is "in the money" - you will make a profit. If the shares do not trade above 4 cents before 29th June 2010, you would be silly to exercise the option as you would be paying three cents for something worth less than three cents. The option would expire worthless.

To exercise your option get in touch with the broker who you bought the shares from and they should exercise the option for you. Alternatively ring the registry and request to exercise the option.

Companies do this because a) they get a small premium which adds towards their operating capital immediately, and b) in the future (in this case before 29 June 2010 which is quite a narrow window), they will receive additional funds if the options are exercised. Be aware that this can be a dilutionary effect depending upon where the share price is. If the option expires worthless, they haven't lost money - it's no skin off their nose.

Hope that helps

Cheers

Sir O

 

[dazza22]

Hey,
Thanks so much for all your advice and explanations on "how it all works"(special mention to Sir O), I've kinda been "trading" for 2 months now and had no real idea on what i was doing. ie. saying that stock sounds good im going to buy some of that, really more straight out gambling than investing, and luckily fluctuating a bit over even. I've been to a few seminars held by the asx and stuff to try and gauge a general idea of what i'm doing though am still pretty vague on everything. I'm trying to stay aware of whats going on reading the news and stuff. Like recently there was an interest rate rise by our reserve bank and that was awesome for our economy and a large portion of shares jumped, and they are predicting another rate rise on Melbourne cup day.

What my question is really is, if the market knows an event is going to occur ie. intrest rate rise, has it already adjusted itself as though it has already happened, and deviates according to how accurate the predictions were or does it choose not to fluctuate until much closer to the date. Also i hear alot about "these figures were worse/better than what the market expected causing blah blah blah", what kind of material do i need to be studying to know what the market is expecting(ie. rough ball park figures) I know this isn't a very straightforward question, though i would just like your opinion on how you tackle this sort of information with your analysis techniques.

Thanks in advance for any advice dazza22

 

[dazza22]

I've just been delving around other beginners threads and keep reading, RESEARCH RESEARCH RESEARCH. like thats all well and good for someone who knows what they're talking about but as a beginner i have no idea what that means(maybe im a little behind the 8 ball ). Does it mean boot up google and type in the asx code and see the shares performance against an index such as the all ords, does it mean look at what dividends its likely to pay out..... Another piece of advice ive gotten(i know to take it all with a pinch of salt so don't say) is that stuff in the news has already happened so theres no point in buying something that has recently had a big story, lets say hypothetically this is the case. im not psychic so how am i meant to predict a stock that has a high probability for growth?? (sorry if this seemed a bit ranty)

 

[dazza22]

I'll let someone else post next lol

ive also been delving into software to help with my learning aswell. Two programs ive found useful are fc charts and quotetracker which work nicely with my comsec account, the main pros to these being that they are free and useful lol. I have allot of time on my hands being a uni student haha, my life consists of 20 contact hours during a trading week and everything else i do i cram into the afternoons, also because i live in wa the trading days over by about lunch time, so i was wondering if i could get some advice specifically on how to be an active or even a day trader(i cant seem to do this successfully and my profits from longer trades are mainly used to cover mistakes from these day trades).

Thanks dazza22