Fishing for the bottom? Don’t bother, just trade short term





Mar 25 2008
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Looks like good news are aplenty right after the Easter – JPMorgan Chase & Co. (NYSE: JPM, stock) ups its bid for The Bear Stearns Companies, Inc. (NYSE: BSC, stock) and stronger than expected housing report pleased the stock investors. Like it or not the Feds would have no choice but to allow the shareholders of Bear Stearns enjoy some more fruits from the higher offer from $2 to $10 a share. Although this is the first report sales of existing homes increased after six months of decline, it’s no-brainer that a full recovery could be many months away.

Dow chartThe Dow jumps more than 180 points to close at 12,548.64. Most importantly is the fact that DJIA finally breached the 50-D Moving Average though it’s still below the 200-D Moving Average. The benchmark also appeared to be floating strongly above 12,000 level. As far as Monday’s trading day was concerned there were actually quite a number of attractive stocks looking at you, only if you care to look closely. One of them was Apple Inc. (Nasdaq: AAPL, stock) of which I mauled it – AAPL May 135 Call Option. If everything goes well, I might close the position on Tuesday.

Apple Inc. stock chartJust like DJIA, Apple Inc. rose above the 50-D Moving Average, not to mention the price and volume triggered my “Buy” signal on Monday. Initially I was thinking of scalping the stock but I got greedy and executed the limit-order to a higher price – sadly it didn’t get triggered. Google Inc. and Baidu.com Inc. were equally attractive but their 50-D Moving Average spoilt my appetite. So, could the Dow have reached its bottom? That’s a million dollar question.

While many think so a handful of economists thought otherwise. I would like to hope so but I think the psychology of investors are pretty much have stabilize, which is important because it’s the perception that would influence the market’s direction. After the latest 0.75 percent interest rate cut to 3.00 percent, every Tom, Dick and your dog knows the Fed would probably cut the interest rate one more time, the most, before sit down and see how the situation will fare.

Stocks - Fishing for bottomHence, stock investors are mentally prepared and would probably start to re-look at their relatively “empty portfolio” but cash-rich-chest. Heck, nobody knows if the bottom has been reached so forget about fishing it. Assuming the DJIA has reach rock-bottom, the regional stock markets would probably see a rebound within one or two months. However it depends on internal stability – for example, I’m still skeptical about Malaysia stock market due to its new political landscape and the fragile looking government.

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