Trader Mom @ Home

The market keeps moving up.  The most sensible move is to follow it even if you might think it is somewhat “over-valued”.  In trading, the intrinsic value of a stock is not important.  What is important is your timing.  Yes you already have risk control firmly implanted in your head like me.  But if you try to short a strong stock like BIDU, you might suffer a string of small losses which could quickly add up. Therefore, risk control alone is not enough; you need to improve your timing skills.

Here is BIDU’s daily Chart  Would you still like to short it because it has a very high PE? I bet there are many people out there who want to short it now.

Click on the images to have a better view

Here are 2 stocks that I think are interesting.

PCX have broken out of a multi week consolidation range.  I think the shorts should surrender now and the possible longs can start to pay attention to it.  The break-out was a strong and valid one as we can tell from its volume and the way it moved up.

So has CAT.  Take a look at the chart, which is similar to PCX’s. However, CAT is a large cap stock, which requires much more firepower to move up than PCX.  On the flip side, CAT should be less volatile than PCX.  If you do not have the stomach for volatility, add CAT to your watch list.

BIDU is a Chinese search engine that has captured over 70% of the Chinese search market.  It also has some operations in Japan. If you look at its PE, which currently stands around 70, you might think it is too high.  However, if PE were an accurate indictor of anything in the stock market, everyone would be rich.  So let’s leave it to the economists.  Is BIDU too high to get in now?  I do not know about you.  But I am a short term speculator who has no problem riding bubbles and follows the trend.   The first thing I know is that I will not short it just because it has a very high PE (aka garbage indictor). The trend says it might move up as we can see that it has been in a very clearly defined up trend in the mid term and has been consolidating in the past few weeks.  On last Friday (9/6), the stock moved up with some decent volume. It is a good sign.  Here is what I think

If you already have a profitable long position, hold onto it for a while.  There is nothing to worry for now.

If you want to establish a long position from here, that is fine but you need to be nimble to get in and out using clearly definef risk reward ratio. After all, BIDU has moved a lot in the past few months.  Once a strong stock reverses its direction, the subsequent crash seems substantial. This is because there are a lot of profitable people who want to close their positions.

Click on the image to have a better view

The market was very choppy today and I took a beating(-1300).  I took 3 trades that were 1 small winner(bidu) and 2 big losers(SRS and FAZ).   You can see the trades in my portfolio.
 

I guess this had something to do with  the Somali pirates that were shot dead by the Navy snipers.  What were these pirates thinking?  They had a horrible set-up(asking the massive warship to tow them) with a horrible risk/reward ratio of 3:1. How did they come up with this kind of set-up? This question bugged me all day long and totally distracted me. These Damn Pirates!  However, I still had a tiny winner and they were all losers.  So I beat them by a very small margin today.

Here are the 2 big losers. 2 pictures are worth 2 thousand words.

Tell me whether I have beaten the pirates…….