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|
Magic Charts Newsletter
February 2nd, 2002 |
This issue includes...
1) "How is the sample portfolio ?"
2) "When to buy stock"
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1) "How is the sample portfolio ?"
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The sample portfolio is on 7.7% gain. It was +12% yesterday,
but some corrections pushed it back to 7.7% but still not
bad compared to the major indices which are a few percent
negative.
We need to make an average of 6% gain per month to equal the
100+% we did last year, so we are on course!
We sold Red Hat and Mercator, because they both closed below
20% under their highest point.
We bought for $22,500 each extra shares of Ball Corp, Moore,
Ameristar Casinos and Racing Champions Corporation, to get our
debit balance on the 50% again.
There is a screen shot at the bottom of this page
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2) "When to buy stock"
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We have developed a method to decide when to buy stock.
We consider buying stock once every month in general every
date will do as long as it is a fixed date.
We decide on the first, because we want to release the
newsletter on the second of third.
The idea of the fixed date is that you don't have to worry
about if it is a good time or not to buy (in our experience
is it very difficult to pick the right moments to buy, so we
decided to use a regular schedule and so avoiding a lot of
stress. (if you buy something and the market drops blame the
system !)
Four times per year we decide
which stock to buy over all
the
charts we have available on March 1st, June 1st,
September 1st and December 1st.
Why these months ?
Because of seasonal movements in the stock market, commonly
there is a drop in prices the first week in January and
the market is slow during the holidays in July and August,
so if we want to avoid these periods we come to the above
dates.
The months in between those dates we only choose from the
stocks which are already in our portfolio, that way we
increase the part of the stock which are doing well in our
portfolio, and buy for about 10% of the total value of the
portfolio, but only if they show a strong chart, otherwise
we wait a month and keep a lower or none debit position.
That way we protect our portfolio in times when the market
is changing direction, or is sliding down.
In good times we increase the portion of our strongest
stocks until a debit balance of 50% to get the best leverage.
The advantage of this system is that it is very easy to
maintain. Only once a month you will have to decide whether
or not to buy new stocks. and it gets a good leverage when
the market is rising, and protects the portfolio when the
market is decreasing or changing.
We could get more leverage when we buy stock whenever there
is enough room, or whenever we have sold something, but
only in a strong climbing market as we have seen in 1997-
1999. It increases the risks in our portfolio which is fine
if you don't have to live from your portfolio, and can handle
a drop of say 20-30%.
We have decided to use the once per month schedule for our
sample portfolio.
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Copyright 1998-2002 by Magic Charts. All rights reserved.
This document may not be copied in part or full without
express written permission from the publisher.
Trading in stocks involves risk. You can lose money. We are
not making recommendations to buy or sell any stock. We share
our views about how to trade stock.
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Magic Charts sample portfolio per 02-01-2002
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