Dave’s Trading Diary: The Market Finally Shows Its Hand – Short Sells

This excerpt from the trading diary is for educational purposes only and is not to be interpreted as trading or investment advice. See Terms Of Use here.

Kenny Rogers Was Right

As the old song goes – you’ve got to know when to hold em, know when to fold em. Kenny Rogers had it right, but the poker analogy doesn’t stop there. As a player at the table (and anyone who is in the share market, namely 43% of Australians, is a player at the table) we get a rare opportunity to see our opponent’s hand. That hand is the price in the market – because when the market moves out of its range like it did this week, it shows us what the market (or the collective psychology of the market’s millions of participants) is thinking.

I’ve been harping on for months about the Materials sector and how it isn’t really the darling that everyone thinks (maybe it was in 2003-2010, but that is a long way from today), but this week that information finally paid off. You see, if you are going to hold stocks during a bull market, which stocks would you prefer to hold? The ones in the strong sectors, or the ones in the weak sectors? Similarly, if we want to be making money on the downside, we would be looking to the weak sectors or the ones that are in the doldrums. And currently, that sector is Materials, and Energy too.

Current Trading Diary Performance

See the Trading Diary here

We had a good run, but almost all of the stocks bought in the trading diary over the last 4 months have been stopped out. The average performance ended up being just over 1.5%, probably enough to cover brokerage when it comes down to it.

Am I disappointed at this? Definitely not! We dipped our toes in, took a chance when it looked like we could make some gains, and then got out as the market turned around. If the market continued up a great return would have been made, but now the market is tanking we are out just over our initial stake. As far as “Risk / Reward” goes, this is fantastic.

To further put this into perspective, the All Ordinaries is DOWN 13% for this financial year, the trading diary is UP over 1% plus dividends and tax benefits. It’s not phenomenal by any means, but it’s been a good game well played so far. Next time there will be fewer mistakes as well, as every time a lesson is learned.

Short Selling Opportunities

If you were looking at the Sector Indices (which you definitely should have been), you would have seen that Materials has been falling and lagging behind for some time. And, surprise surprise, it has also had shorting opportunities for the last 3 months too. Silly me, being blinded by my hope for a Bull Market, didn’t even look for them. Chalk up another lesson, thank you.

This week I did get into BHP and SGM as short trades. There are plenty of signals, but my trading platform won’t accept all of them as short trades, so typically the larger the stock the better.

Trades are taken using signals from the Stock Market Trading Plans and courses at this site.