Good morning,
Prior to the opening of the stock market, shares and futures around the world rose on speculation that the US Federal Reserve will hold on its’ stand that rates will stay on hold for an “extended period”. The key discussion we had was not whether the rates will be increased, but for how long it will stay at the current rates. Some of my friends who are new to stock trading asked me what has interest rates to do with the share prices. Well, those of us who are experienced in trading stocks know that it will increase operating costs if interest rates are increased and it will hurt operating profits of companies. Having less profits means there’s lesser to share amongst stock owners and the value of shares will decline. Sounds simple to us, but to the many it may be the first time they heard. What amazed me is that my friends are trading the stocks without the knowledge of fundamentals of stock trading. They are trading because they heard from their friends which stocks to buy. I suggested to them that they could be better off if they invest their money with a fund manager than to “gamble” their hard earned money.
In a volatile market such as stock trading, learning how to trade stock is crucial because there is no sure way of continually posting growths in profits for any trader year after year, stock after stock. Trading is a zero sum game, and for every winner there is a loser. The greatest myth about how to trade stock successfully is the need for the trader to be able to predict the stock price’s movements. This is grossly wrong, and the best way to make money in stock trading is to avoid approaches that rely on stock price predictions. The reason behind this is simply there is no person that can correctly predict stock price movement accurately and consistently all the time. The only way to be successful in stock trading is education and a systematic approach to select and trade the right stocks. The key to protecting yourself and be a winner in the stock market is to understand where you are putting your money, so it is important to invest in learning because knowledge is power. It seems like I am promoting my KUTE system training course, so let’s move on to my actual stock trading performance.
The US markets started the night brightly even as the markets wait for the FOMC policy statement and the new economic data. Stocks had risen ahead of the announcement as the report of rising commodity prices and labor market signaled that the pace of layoffs is slowing. However the rally fizzles after the Fed decided to leave the rates intact as correctly forecasted in my last blog. I believed the rally collapsed because many have expected Fed to keep the rates unchanged but it is not clear from the Fed’s statement how it will tighten the market to prevent inflation. Also, more than 2/3 of the House voted to accelerate the credit card reforms to 1st December that allows interest rate increases on existing balances based on limited conditions causing financial stocks to decline in the last hour of trading.
The market closed with 55% advances and 43% declines for NYSE and 38% advances and 59% declines for Nasdaq. CAH closed 1.64% higher at $29.13 and NBL closed -0.2% at $66.14. DRIV closed at $24.75, a whopping 10.89% increase; OSG was down -2.28% at $37.25, BHI down -5.85% at $40.89 and SKX down -0.98% at $22.27. So far so good for KUTE this week for the only 2 stocks the system picked, i.e. CAH and NBL.
The stock I am still waiting to offload PTEN closed at $15.74, down -0.69%. I am not too worried because of my 30-20-50 rule and that the stocks selected are fundamentally sound. It traded the day at the high of $16.10 and I sold off 1 position at $16.07 with slight profit. 2 more position to close and I look forward to another trading day.
Have a great day.
Francies Cheng
BBus MAppliedFinance
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