Good morning!

Apologies again for intermittent service this week - hopefully we should be back to normal next week.

Trading opportunities

Thankfully it's been very quiet for company news in the last few days. Probably like most readers, I've been pondering whether the world is going to hell in a handcart, which is what market weakness in the last 7 weeks seems to be telling us. Or whether it's all an over-reaction, and a buying opportunity?

Overall I'm thinking in terms of taking advantage of irrationally oversold situations - where you can find quick 20-30% profits aplenty - remember that bear markets are frequently punctuated with explosive (but short-lived) rallies. So this is a trader's market, rather than a buy & hold market, in my view - i.e. the quick rebounds are there to be grabbed, and then banked a few days later, in my view, as they often reverse again.

It's also a time to be keeping some powder dry, for those wonderful opportunities. Remember that small caps are mostly very illiquid - so it only takes one clumsy (or forced) seller to slam the price down a huge percentage. If the company concerned has recently put out a positive or in line trading update, then the danger of a profit warning is slight, so such plunges can be buying opportunities, if you've done your research properly.

Whilst everyone else is wondering what's gone wrong, and is frightened by the price suddenly dropping 20%, I'm backing up the truck and buying heavily. So far so good, in most cases recently, it's worked very well. Shares are for buying and selling, not getting married to. So personally I'm perfectly happy to bank a profit at any point, if a well-timed buy is showing a nice paper profit. There's no shame in banking a gain, especially when markets are as turbulent & unpredictable as right now.

Chatting to a friend last week, we agreed that it makes sense to have a core holding in a company you like, but to also have a trading holding in the same share, which you are happy to buy and sell on short term moves - banking profits on a big rally day, then buying them back after several days of falls, and signs of panic selling in the market. It won't always work, but all you need to achieve is a 60:40 win:lose ratio (which was my result last year) to…

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