正文
the bottom fishing method good on paper but in practice is very hard,
first, it\'s against short term or mid term trend, more often than not it\'s weaker getting more weaker; second, there is often a reason behind decline,
so for the bottom fishing to work, as lately in LDK\'s case, you need a few conditions,
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on the TA side:
1, bottom should be deep enough, ie, don\'t try to catch a falling knife.
The first major down often run about 50% of stock price and maybe 2 week time. Try to stay on the sideline and resist temptation by checking price/vol.
one occasional exception for this is when the down swing is so violent that it deviate the moving average lines so much so fast, that it war rent a timing rebound. This can be a very good trade if one remembers that, as a rebound, once it kisses the moving average line, the rebound is over and trade is mission completed. Don\'t overstay an rebound.
2, a deep cut stock may often need 6-8 week of flat bottom to calm down. During this time there might be one or two instance that the price moving high a little bit. Realestate brother has a way to say that don\'t buy the first white candle, DaoLuan said the same thing, TA indicators need to get rehabilitated as she explained in the SNDK trade. In any case, wait until ALL moving average lines are getting close to each other and ready to tick up.
3, after a flat period there is often a final shake down and then stock rises up quite quickly. This is because that a lot of energy was built up during the flat bottom as shares change hand. So when some trigger finally arrived, which often in the form of some FA-changing news, stock gets out of gate all ready to go.
Sometimes you may buy small pieces in down swing or in the flat bottom, this is often for the purpose of probing the bottom or the uptick timing, so it\'s not a shame to admit wrong if you are wrong, and cut loss on those pieces swiftly.
4, once the mid term upswing is identified, do NOT get scared! This should be the real greed time to be real brave. Pyramid up! Instead of pyramid down.
5, checking up-->consolidation-->up patten, buy dips during upswing. The secret of the whole idea of bottom fish is to get heavily involved in the upswing! The idea behind this is that, you can be off on timing by quite some, but you still come up with big winner because of good money management. Remember try to win home run, and lose peanuts.
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on the FA side,
the whole idea of bottom fishing is that the fish will rise when time is ready. On Wall St, any stocks with declining earning should be avoided since they would not have institutional support. Get some idea of DCF model is extremely important, a good bottom fish candidate should have capacity to generate better earning in the future, but may have been misunderstood by the Wall St due to some incidental reason, like a M&A that is not well received, or in LDK case, some claims of dispute. For a bottom fish to jump again, you have to calculate the probablity that the negative factor gets discounted reasonably soon.
Over long term, when filtering through all kinds of news and evnets, a company is valuated by the money it makes. Growth of revenue, earning, and margin are all important factors. You go bottom fish a damaged stock only if it may, at the end, re-interest the mutual managers with its cash flow.
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LDK has been a heck of ride, and its fall and rise again, while very dramatic and a little slightly prolonged, should serve a superb example for bottom fishing.
All good luck,
first, it\'s against short term or mid term trend, more often than not it\'s weaker getting more weaker; second, there is often a reason behind decline,
so for the bottom fishing to work, as lately in LDK\'s case, you need a few conditions,
----------------------
on the TA side:
1, bottom should be deep enough, ie, don\'t try to catch a falling knife.
The first major down often run about 50% of stock price and maybe 2 week time. Try to stay on the sideline and resist temptation by checking price/vol.
one occasional exception for this is when the down swing is so violent that it deviate the moving average lines so much so fast, that it war rent a timing rebound. This can be a very good trade if one remembers that, as a rebound, once it kisses the moving average line, the rebound is over and trade is mission completed. Don\'t overstay an rebound.
2, a deep cut stock may often need 6-8 week of flat bottom to calm down. During this time there might be one or two instance that the price moving high a little bit. Realestate brother has a way to say that don\'t buy the first white candle, DaoLuan said the same thing, TA indicators need to get rehabilitated as she explained in the SNDK trade. In any case, wait until ALL moving average lines are getting close to each other and ready to tick up.
3, after a flat period there is often a final shake down and then stock rises up quite quickly. This is because that a lot of energy was built up during the flat bottom as shares change hand. So when some trigger finally arrived, which often in the form of some FA-changing news, stock gets out of gate all ready to go.
Sometimes you may buy small pieces in down swing or in the flat bottom, this is often for the purpose of probing the bottom or the uptick timing, so it\'s not a shame to admit wrong if you are wrong, and cut loss on those pieces swiftly.
4, once the mid term upswing is identified, do NOT get scared! This should be the real greed time to be real brave. Pyramid up! Instead of pyramid down.
5, checking up-->consolidation-->up patten, buy dips during upswing. The secret of the whole idea of bottom fish is to get heavily involved in the upswing! The idea behind this is that, you can be off on timing by quite some, but you still come up with big winner because of good money management. Remember try to win home run, and lose peanuts.
--------------
on the FA side,
the whole idea of bottom fishing is that the fish will rise when time is ready. On Wall St, any stocks with declining earning should be avoided since they would not have institutional support. Get some idea of DCF model is extremely important, a good bottom fish candidate should have capacity to generate better earning in the future, but may have been misunderstood by the Wall St due to some incidental reason, like a M&A that is not well received, or in LDK case, some claims of dispute. For a bottom fish to jump again, you have to calculate the probablity that the negative factor gets discounted reasonably soon.
Over long term, when filtering through all kinds of news and evnets, a company is valuated by the money it makes. Growth of revenue, earning, and margin are all important factors. You go bottom fish a damaged stock only if it may, at the end, re-interest the mutual managers with its cash flow.
--------------
LDK has been a heck of ride, and its fall and rise again, while very dramatic and a little slightly prolonged, should serve a superb example for bottom fishing.
All good luck,
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