Saturday, April 29, 2006

It is Low --- LOW

LOW (Lowe's Companies Inc.)

Lowe’s Companies, Inc. operates as a home improvement retailer in the United States and Canada.

Its closing price is $63.05 as of 4/28/06. It is good for mid term investor.

My suggestion: Buy (7)
Instruction: Buy small portion next week. Be patient for possible lower price and the price increase.

Wednesday, April 26, 2006

Option Trading is the Trend

Just Try it!

Option trading volume broke records in 2005. More than 1.5 billion options traded in the U.S. in 2005 which is a 27% increase over 2004.

The option trading is no longer a few special traders’ privilege. Many regular stock players have joined the option market. The market is getting hotter and hotter. More and more people start to talk about “option” just like talk “stock”.

The reason is simple: the options are incredibly versatile instruments. Options let you profit from volatile stocks.

Yes, to know how to trade option, you need to do some homework first. You have to know the procedure to apply and set up your account; to understand a few fancy words and concepts. In the very beginning, it may be a little frustrated. But after a while, you will know that play option is very much alike to trade stocks. You can pretend they are the same somehow. You have to study the stock and do the same analysis anyway.

In fact, I am using the same way to trade both. For conservative reasons, I like to buy the longer expiration options usually. It is just like buying the stock with a few of restrictions.

“In Google and Apple, more than 1.5 calls traded for every put last year as their shares climbed more than 115%. In GM, 2.3 puts traded for every call as the auto maker skidded to a 23-year low as investors rushed to hedge their stock and bond holdings.” --- Barron’s Online

From the above summary, we can see that the option market is a very good reference or index for stock market; and we can also imagine that many ones got big awards from the option market if they bet on the correct direction.

Again, the best way to learn the option trading is to practice it yourselves. After a couple rounds of trade, everything will look easy.

Monday, April 24, 2006

Stock Trading Basics --- When to Sell

“Sell or not sell”, as “To be or not to be”, is the hardest question in investment.

This morning, I received emails and phone calls from some friends. Because the market, especially most of the tech stocks, was down this morning, they felt difficulty to make their decision on whether sell their holding or not.

Before answering their question, I asked the followings:

  1. What is your strategy of investment?

Before you buy a stock, you should have your plan for whether it is a long-term, mid-term or short-term investment. General speaking, if you are a long-term investor, you should not concern the recent market movement. Only the short-term players should be sensitive to the short trend.

  1. What is your holding instrument?

If you are holding a stock, you should worry less. The option holders must seriously think this selling question.

  1. Which sector is your security in?

The hot spot of market moves around always. A big market movement means, most likely, the shifting of some hot sectors.

    1. If your stock is in the hot spot still, you should wait and watch.
    2. If your stock was, but is no longer in the hot spot, you should consider moving out. You can buy it back if you really like it.
    3. If your stock would be the next hot spot, you should add your holding when its price is lower.
    4. If your stock is not in any of above cases, you are most likely a long-term investor (because you are not chasing the hot spot…), you should ask yourself about its industry and potentials. Probably you should think less about the short market movement.
  1. How are the stock’s fundamentals?

Fundamental is the key of a successful investment. The price of a stock with bad fundamentals could rocket to the ceiling, but never be able to stay long. The price of a stock with good fundamentals could decrease, but would be back sooner or later.

Please check your stock’s fundamentals. They will tell you want to do.

Please keep in mind that the over all economy is good still. We are not in a bear market. Some sell off is technical. There are some good earning news lined up for release. Even you really want to sell your holding, you should wait for chance. If you have cash, you should think buy some attractive ones.

From my own experience, I always reduce my holding to half when not sure. In such case, no matter the market up or down later, I will have a reason to be happy with.

When you thinking of selling your holdings, you should “forget” your cost or your purchase price and consider the market factors only. Another important thing is to keep calm. To watching your stock’s price every minute will not only make you crazy, but also block you from make a good judgment.

Remember, the market is always up and down, but your mood should not.

Good luck!

Sunday, April 23, 2006

Weekly Review (4/17/06 -- 4/21/06)

Before the worries spread cross the market

The good earnings overcame the bad news during this week as I said in last week's review. The Dow ended up 1.9 percent at its second straight six-year high, the S&P gained 1.7 percent and the Nasdaq finished 0.7 percent higher. Meanwhile, both gold and oil reached their new highs this week. Most metal prices reached new highs too.

By reviewing the oil’s numbers, I cannot believe it is a normal market activity. It most likely some giant players jumped into the market, try to stir the market and get benefit of it. If this assumption is true, we would see the oil price will keep its customary to the next new high; if it is not, the oil price should have a mild adjustment.

In either case, the psychological impact to the market would not be trivial. Even with another week of strong earning, the traders will be afraid to push the market another step higher.

The high commodity prices will be represented into the stock market sooner or later. The energy and nature resource related sectors will get benefits from it; the others will be impacted in one way or another.

Mr. Bernanke will have a speech on the coming Thursday. Will he give the market a positive signal? I doubt it!

The possible good new are good earnings and an oil price adjustment. The possible bad news are a lot. I even wonder if any international news will damage the market. In any situation, to play save, not to gamble, I suggest you reduce your position widely except the stocks in the resource related sectors.

I am not optimistic anymore. I think the market will start to slip in the next week.

For Conservative Stock Investor --- CNX

CNX (CONSOL Energy Inc.)

CNX engages in the production of multifuel energy and provision of energy services primarily to electric power generation industry in the United States. It has total proved reserves of approximately 1,127,724 million cubic feet of gas.

Its closing price is $85.01 as of 4/21/06. It is good for mid and long term stock investor.

My suggestion: Buy (7.5)