Is It Time To Buy Gold?

Given the rise in the equity markets gold has gone down.  Gold is typically a hedge against market downturns.  It would seem to be counter-intuitive to buy gold now that stocks are giving a bigger return.  Plus no one knows how high the market will go.  However, now is probably the best time to start building a gold portfolio.  As the price of gold goes down due to higher equity returns you can buy more of it.  As the adage goes: "buy when people are selling and sell when people are buying."

Take Profits When You Can

So just took my profits on Tesla today because of several reasons:

• The 20 period moving average crossed the 50 period moving average
• It’s the beginning of May and people usually “sell in May and go away”
• The stock is starting to get overbought on the slow stochastics

I’m going to wait for the pullback and get back in because I know this stock is going to go higher.  As I said before when you invest in Tesla you are investing in more than just a company you are investing in Elon Musk’s vision.  He is a tenacious owner and he has a way of surviving situations that is commendable.  As they say the best indicator of future behavior is past behavior and his ability to build his businesses and grow them amidst a chorus of naysayers bodes well for the future of Tesla.

How To Play This Market Nosedive

I have read a lot of strategies over the years and the common idea that sticks out is to buy when everyone else is selling and to sell when everyone else is buying.  This may seem obvious but not when the emotions of the market get to you.  It goes against the natural feeling that we all have of self preservation.  Whenever we see a crowd running away from something our own nature is to run with the crowd because there must be something dangerous in that direction.  The strange thing is we have not seen it for ourselves. 

Here in lies the issue.  You must investigate something before you run away from it.  Take the time to research a stock and find out whether the company is being managed well.  Then look at the financials as well as the technical analysis.  Lastly consider the market sector.  Is there still potential growth in this sector and is this company in a strategic position to take advantage of it? When you are confident in the direction of the company, do not worry about jittery fluctuations in the market based on insufficient data and world events.  Consider a drop in the stock price an opportunity to buy that stock on sale. 

3 Things to Remember when Trading the Government Shutdown

As we all wait for Congress to get back to work, there are some things to keep in mind about playing the market swings. 

• Never put your money in when there is crisis (unless you found out about it before any one else)
• If you think you found out about the crisis before anyone else, chances are you haven't
• It may be a good idea to buy the dips on solid stocks that have good balance sheets and good management

I wrote a post a while back about shorting the market when it is high.  These situations are perfect examples of why shorting the market is always the most profitable trade.  There will always be an unforeseen crisis that will bring the market down and when the market goes down it goes down fast.  There is nothing that happens consistently that brings the market up fast.  The market will always go up slow and down fast.

The key is to find stocks that are overvalued and their balance sheet and management may be going through some difficulties.  At the slightest sign of market weakness these stocks will drop fast.  Conversely stocks that are strong internally will weather these dips and it is a good long term play to buy the dips on these stronger stocks.  Do your homework before jumping in and I always prefer dividend paying stocks for long term plays because it takes the edge off any potential losses and may even prevent any losses. 

Stocks that may have problems because of the shutdown are those that depend on government contracts like defense, food service, research, transportation, medical, education.  Stocks that may be insulated from the shutdown are those that don't have contracts like clothing retailers, luxury brands, entertainment, etc.

Do your homework and set your stops.  Happy trading!

Investing in Software

Another idea I came across in my constant research on creating residual income is to buy software or apps that people have made and are still generating income.  There are a couple of sites that have been set up as a clearinghouse for people who have created apps and are selling them to investors.

Some of these apps are being sold for as low as $500.  Many of them range, however, from $1,000 on up to $50,000.

The key to making a good investment in this type of product is to make sure that the software or app is still being used.  You can check this by analyzing the data on Google analytics and through the website that is selling the app. 

By KROMKRATHOG, published on 27 April 2013
Stock Image - image ID: 100162204

However, even if the app is not making any money at the moment the question is has it made money in the past and what would it take to get the app to make money in the future.  Just like Warren Buffet's approach to investing in companies you can buy a company with a strong idea and balance sheet but is not performing based on temporal conditions. 

Sites to buy apps:

http://www.apptopia.com/

http://www.sellmyapplication.com/

Direct Real Estate Investing

If you've been following my blog you know that I've been a big fan of ARR which is a real estate investment trust.  Real estate has definitely hit a bottom and is on its way back up.  That means anything related to real estate (Home Depot, Lowes, Toll Brothers, Pulte and most of the REITs) will be headed up soon if they haven't already.

By watcharakun, published on 15 November 2011
Stock Photo - image ID: 10064745

Another way to play real estate is to actually own it.  I’ve found a new service that similar to crowd-funding, allows you to invest in the real estate market and actually own part of a loan.  This type of investing is what the big boys have been doing for a long time but the small players haven’t had access to it.  Now it’s available for the smaller investor and is giving even more returns than 401Ks and retirement accounts.  Plus it’s safer because it’s tied to an actually property.  Full disclosure: I’ve signed on as an affiliate. 

I highly recommend checking out this option for investing in real estate. 

You can check out my affiliate page and if you want more information fill out the email form on the side.

Here’s my page:  http://privatemoneyexchange.org/aff/williamsmithwes

Investing in Bitcoins

I just heard about a new online currency that is being traded and you can potentially make some money just by setting up a free computer to "mine" for the currency online.  They are called "bitcoins" and they are used as inline currency to buy anything.  Some businesses have accepted them as a form of payment already.  The currency is open source and is not controlled by any entity so there is no Central Bank.  Algorithms and code serve as the foundation for the currency and it can be traded for US dollars and other currencies as well.  The current rate is $90 for one bitcoin.  It was as high as $200 a few days ago and it was at $10 a few months ago.

The great thing is you can mine for it for free.  It just takes a long while to find any online so people have come together and pooled their computer resources to find them.  When you find a batch the group splits the batch and you get a percentage based on the amount of work your computer did.  It's an interesting concept and it can't hurt to try since it's free. I set up an account today just to see what would happen.  Let me know if you have any success.

Here's the site for info:
http://www.weusecoins.com/en/

Here's a site for how to mine for them:

http://techcrunch.com/2013/04/08/how-to-mine-bitcoins/

Here's the site to mine for them:
https://mining.bitcoin.cz/

I signed up on Coinbase.com



Update 4-18-13
The best site that I found to generate coins I've found so far is: http://bitcoinplus.com
the mining method on the mining.bitcoin.cz site mentioned is a bit too complicated. 

Check this article as well: http://startbitcoin.com/

Great simplified approach to trading

I know I mentioned this guy's trading technique before but I want to post another one of his more recent videos that describe in more detail his trading style.  He has also developed a software service that gives his daily setups.

I Am Not a Hype Investor

I am not a hype investor.  I’ve seen it many times over the years.  People get hyped about a stock because of a media buzz or worse…a social media buzz, and get taken advantage of after they put all this money in the stock.  Whether it’s a penny stock or one on the major exchanges, there are folks who are going to inflate the value of a company in order to jack up the stock price and then cash out off of everyone else’s expense who have put money in believing the hype.  I’ve been there, I caught the hype bug over a penny stock and it did go up for a day or so off of the buzz, then it tanked and I lost some money.  One of my friends lost more than I did.  Thankfully I didn’t jump in with any large amounts.  

Take your time and study the value of a company over time.  If there is no information about the company on the web, then I wouldn’t invest in it.  Let the big spenders and cowboys have the wild west.  I’m investing to build wealth for myself and my family.  I look for bargains when prices of stocks go down and get in on the upswing.  I also focus on dividends for monthly income and overtime the value of my investments has grown.  Have a long term plan not a short term get rich quick scheme.  This will help you continue to add value to your investment portfolio. 

Avoid the Pitfalls and Market Maker Tricks

After listening to several radio interviews of a few traders who used to work on Wall Street, I have a better understanding of the market and important pitfalls to avoid.  It is important to know that there are a lot of sharks in the water waiting for inexperienced an emotional traders to make irrational and quick decisions.  However, that does not mean that you can’t make any money in the market.  The opposite is true.  You can make a good living trading in the markets, you just have to be smart and know how and what to trade.  

One key piece of information I just learned from a guy who used to be on the NASDAQ was that market makers (the guy at your brokerage house) will watch people’s trades and look to see where most people place there stop loss price and some unscrupulous guys will move the price just beyond the point to where the majority of stop loss orders are and trigger the stop loss so they can take their commission.  For the trader who’s gone golfing and not watching his trade, he will lose money plus the commission he paid to the market maker.  

This just underlines the point that you can’t trade blindly and not watch your trades.  You also have be patient and wait for the proper setups so you don’t get caught waiting on the market to move.  The best way to engage this current market is to be either long term buying high yield dividend stocks or very short term, trading the market swings for only a day or so.  

There's another thing you have to watch out for as well and that's the penny stock sharks.  These guys will put messages all over the place about a particular stock that trades below one dollar.  They will talk about how this is the best stock of the year and it is going to go sky high.  However, they don't have any information that lets you know why.  What about this stock is so great that it is going to be the hot stock of the year?  The problem is that you can't get detailed information on many of these stocks because company data is harder to come by for penny stocks.  So just use common sense in these situations.  If someone tried to sell you something saying that it is the best thing in the world, but didn't have any information on the product, would you buy it?  I think not.

Market Commentary 8-4-12

It felt good to be back in the plus column yesterday with my Walmart trade.  This market has been very volatile over the past few weeks and timing is everything.  It is so important to remember the basics when trading so you don’t get too emotionally involved.  The market will only go in three directions: up, down or sideways.  Granted the best and most conventional ways to make money are when the market is going up or down, so let’s take out sideways.  This means that your job is to make your best judgment (not guess) as to what direction your trade is going to go and timing your entry with enough space to make a profit.  Now what do you need to know to do that? You need to know how far you think it will go in either direction and you need to know how much money you have to invest in order to pay your commissions and see a profit.  You also need to know the technical setup, the fundamentals of the company (valuation – is it cheap or expensive), overall market conditions, and the news surrounding that company and its sector.  These are all key in helping you determine your entry and exit points.

For me on options trades, it is a little more complex because options move differently than stocks because of the Greeks.  I don’t know what the exact price the option is going to be because of this.  So I always try to choose options that move closer to the stock and that means options that have a Delta between 30-70.  This also means that I have to buy at least 3 contracts to be able to make money on small moves.  I like to buy between 5 and 10 contracts so the moves will happen quicker but that also means more risk.  

The current market was moving sideways for a while without enough of a move to make any money.  However that all changed within the last week and the market rallied on Monday (starting from the Friday before) and then tanked on Tuesday and Wednesday.  Then Thursday and Friday saw a big rally again.  These moves were all directed by the news .  However if you looked at the technical setups and many stocks they followed they were true to their form.  

Take Walmart for instance.  I saw it make a pullback on Thursday and it looked like a textbook bull flag setup.  The trend was up and it had just broke through a resistance level only to come back down to a level of support.  I waited for the bullish candlesticks and for it to break above the halfway point of its pullback.  Then I got in the trade with enough money invested to make a profit if it went to its original fall off point.  It took a day to develop but this morning after good news from the jobs report the stock moved up to my price target and I made my profit.  

News plays a big factor in the movement of stocks and it is best to stick to the other indicators (technical and fundamental analysis) because no one has a crystal ball and we don’t know what the news is going to be.

Chart Analysis 8-2-12

Here's a Facebook post from Investools Instructor Dave Johnson talking about the overall market movement.  He is pointing out that the market has broken through a resistance line and has gone back below it.  His belief is that the market will go back down to its support line and then back up to break out of its resistance line again.


An ascending triangle pattern is a potential trend continuation pattern that occurs in an uptrend that moves to a higher high, pulls back to a higher low, rises to a similar high and then pulls back to another higher low creating a horizontal resistance line and a rising support line. If the trend continues a breakout of the horizontal resistance occurs. In my experience, very often a breakout of resistance is followed by a pullback or test of the breakout where old resistance can become new support. This pullback test is common and can be expected on breakouts.

Market Update 8-1-12

The market is basically moving sideways and is not the best market to trade in.  Reason being, the market moves are not big enough to make enough money to pay for your commission and make a decent profit.  Plus you have to have perfect timing in order to catch any movement in a stock in order to make some money.  There are ways to make money when the market moves sideways but these are more sophisticated trades.  For beginning traders I would definitely wait until there is a confirmation of the market’s direction before getting into any positions.  If you see a stock that is moving on its own regardless of market conditions you may want to take a position in it, but given the way the market responds to news and rumors it is safer to just wait until there is more definition in the market’s movement.

The best move to make at times like these is to buy dividend stocks that pay you a dividend regardless of the market moves.  I just got my dividend payment from ARR and it feels good to be able to make money regardless of where the market is.  It feels even better when I look at the value of ARR and it is up 82 cents since I bought it (read my previous blog entry on ARR).

Trading Ideas 7-28-12

We had a market rally on Friday but I would still be careful not to go long on any positions for more than a day or two.  Although the bulls have most of the strength overall any unsettling news could derail this rally fast (as we have seen before).  I missed getting into a position on GE and WMT but I didn’t feel comfortable getting in when WMT is reaching all time highs.  You don’t know when it will turn around on you.  As I pointed out before analysts are looking at WMT getting to $79 so we’ll see if that holds up.  I will definitely get in on a pull back next time now that we have tested these new highs.

This is what I had mentioned before about GE.  If you look at how it has been tested over these past couple weeks and it still charges back up despite market news, you can feel comfortable about getting into a position.  I saw a profile description yesterday on one of the day traders I’m following on Twitter. His philosophy was spot on…

”My trading approach is technical focusing on stocks that are trending and have a catalyst behind their movement.”  

It is very important to keep this in mind when choosing a stock to trade. The technical setup will tell you when to get into the trade but if there is no trend then the stock can go either way…”the trend is your friend.”  If there is no catalyst or reason for the stock to move higher like analyst expectations, growth in the sector, or a new product release, then the movement in the stock won’t be strong enough to make a profit.  Lastly, I would like to add one more piece to his philosophy: the fundamental analysis.  The stock has to be undervalued for it to be a good buy.  Just like you buy clothes or food on sale, if a stock is on sale people will be more inclined to buy it. 

Market Update 7-26-12

Sorry I’ve been offline for a couple of days but I’m waiting for the market to stabilize before I jump back in.  The market wants to go up but it is fighting the negative news in the media about Europe.  Apple’s news about lower earnings caused a dip in the market and the lower earnings on some other key companies have caused the market to sputter as well.  Despite all of these factors the market is still trying to push upwards which shows that once we get some positive news there will be a rally.  

Walmart made an interesting move upward today as it broke through the $73 resistance that has been holding it back.  I’m going to look for a pullback tomorrow and then get in.  The break through shows that buyers are comfortable watching it going a little higher so when it pulls back I’m going to possibly build a position.  

GE has been showing a lot of strength through the recent dips in the market.  It always seems to come charging back looking to break through multiple resistance lines.  I may look to scalp some of these moves as well.

There’s just a lot of negativity floating around in the news that seems to have a big impact on the market.  Because of the many scandals (LIBOR, MF Global), the fund mismanagement (JP Morgan), and the highly visible Facebook gaffe, there is a considerable lack of confidence in the market from retail investors.  This affects the movement of stocks as well but it seems like from a general perspective most stocks want to move higher despite the bad vibes.