Dave’s Trading Diary – Short Selling Added To The Mix

 See the Trading Diary Here:

Hi Guys,

Well, as promised last week, I spent some time creating short selling rules.  Short Selling is where you make money as the share falls, in stead of when it rises, and is particularly useful during a bear market (where share prices fall considerably for a period of 6 months or more).  I’ve added some short sales this week to the diary.

How To Know When It’s The Right Time To Buy Shares

I also looked at one of my favorite books “Reminicences of a Stock Operator” by Edwin Le Fevere, the story of Jesse Livermore.  In it, Jesse makes a comment about “general conditions being right” before you decide to buy or sell.  So I did some research and found out what some UK Fund Managers look for as being the right general conditions before they buy again.

  1. The US Housing Market should stabalise and start to rise.  As yet US housing hit a 15 year low in July 2010, and lending is very tight, which brings us to indicator number two:
  2. Banks need to start lending again.  The UK has a credit indicator, showing how much lending is being done by the banks.  More is optimistic, less is pessimistic and bad news for growth.  Currently in Australia business lending is tighter than usual.
  3. Investors would shrug off bad news.  Sometimes investors realise that things are so bad, any new bad news doesn’t come as a shock any more.  This is usually seen around the bottom of a bear market move.
  4. Businesses turn optimistic.   Currently businesses are giving very cautious outlooks in their reporting, indicating that they are not optimistic at present.

And after all is said and done, history shows us that the average recession lasts 14 months.  If we’re going for another one, this will also be good to know.

What About Individual Shares This Week?

This week I have 3 sells and 1 buy.  I figure I’ll just take the signals as they come for now, seeing as the market is treading water.  Some stocks have still outperformed or underperformed the market.

Short sells are APN, BOQ and NWS.  I would have added MBNas well, but no short selling was allowed on this stock.  All are a case of being below their 50 day and 200 day moving averages, with little support left – a simple variation of William O’Neil’s bear market rules.

Buys are WSA, after a Dow Theory entry on a weekly chart.  See the diary for more info and charts.  No sells for the existing portfolio this week, although BKN is coming close.  Another lower weekly close would do it.

As always, if you enjoyed this, link to it from your site or send it to your friends.

Happy trending!

Dave McLachlan

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August 29, 2010   Posted in: Dave's Trading Diary

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