So far in my short trading/investing life I've been the following:

  • Value trap idiot (e.g. low P/E equals buy, thrown in CFD leverage, disaster)
  • Fundamentals noob (e.g. quality is all you need, growth is optional, so so results)
  • Growth novice (e.g. gotta be quality but its worth nothing without growth, much much better)

What's next?

Having recently listened to Stan's audiobook "Secrets for Profiting in Bull and Bear Markets" (as mentioned in Donald & Dave's great podcast) I'm at a crossroads....fundamentals mean nothing apparently! Well actually that's not what he (Stan) is saying, rather he's saying that fundamentals tell you the position today, whereas studying charts tells you where they will be in the future, based on the collective knowledge of the all knowing market. Only now I can see why the phrase "the market is never wrong" might hold some water.

A New Lens

So i'm reviewing my portfolio (which is choc full of low debt, high ROIC/ROE, growing revenue/EPS, low P/FCF stocks) with a focus on volume, price relationship to moving averages and support/resistance channels. The aim of this is to identify where each of them are in the 4 stages of Stan's cycle (these are my words not his):

  1. Base (moving sideways from a relatively uninspiring position - could be a LONG wait)
  2. Breaking out (something is really changing, it's on the way up - back up the truck)
  3. Top Area (the uptrend cools off and it's either heading for a Stage 2 continuation or Stage 4 - buy more on pullbacks or get out)
  4. Downtrend (the fun is over, someone somewhere is holding the bag and complaining on a forum that "the market is wrong")

Stan's book is old...the charts in it look like they've been drawn with a ruler and pen, a far cry from the unfathomable complexity my trading platform offers me (Saxo Trader). I now know all the best stocks to buy back in the 1975-1988 era, brill.

Is his method way too basic for today's market or has it already been refined to the nth degree that it's now morphed into something I wouldn't recognise?

Taking Action on My Portfolio

Since I have no clear method for exiting positions or setting stop losses, I decided I'd back Stan and take some action on my portfolio using his wisdom. I sold 3 positions (in profit, at a loss and at break even Inchcape (LON:INCH)

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