Wednesday, January 2, 2013

Time to cut down on your bullish position size for Singapore market -

A very good post I have to share here from our friend Mr Daniel Loh. 
Dear Friends,

Of course, while everyone rejoices with STI having a 40 points move, our job is to remind you of a possibility of a consolidation in the general market when STI is near 3240. STI has been one of the strongest performing index in Asia and a lot of stocks are seen powering on.

Since november, we have continued to urge everyone to get on the bus to buy stocks, when everyone is worried about the fiscal cliff incident. We however maintained our view that this fiscal cliff is a tremendous opportunity to make big money!

Indeed it has. Now STI has reached 3200. I am not saying that STI can't go up further. It will if the whole general market is still bullish. But do note that 3240 is a strong resistance. The market can't go up at the rate we have seen these 2 months forever. A healthy pullback is needed for the market to continue its bullishness.

So what is the strategy of investing now??

I would suggest exercising good portfolio management.  

1) Cut down on your position size overall on bullish positions for Singapore market. ie. in the past you may buy $30,000 worth of shares. Now buy only $15,000.
2) Take note that the risk is higher now than 1 month back.
3) Focus on stocks that are fundamentally good with earnings.
4) Take note of when your companies earnings' dates are for their 4th quarter results
5) Sell away all short term positions for stocks that have increased a lot before their earnings
6) Leave 50% of your money as cash to take up positions when market consolidate again