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Hi All:
It's quite a humbling experience for me in the last few weeks.
All through my posts about my averaging down buy strategy, I maintained
that the basic assumption was that the stock market was still in a bull
market. Averaging down buying in a bear market, I also mentioned, would be
tentamount to committing financial suicide.
Hindsight told me I should have gotten out of a lot of my calls/leaps
earlier on. In fact, my trading systems did give a number of sell (ie,
liquidating) signals on ALL the stocks that I have calls/leaps on. Greed
and fear held me back and I didn't sell.
In fact, I bought more leaps up to May 24.
Needless to say, the next few days saw more carnage...
In any event, things are a little bit better, though I'm still way off from
my best, which was on Mar 27 this year.
Since in my previous last few posts, I mentioned about averaging down on
WMF AH (MSFT JAN2002 140 call), here's a summary of what I bought so far.
Note commission is omitted.
stk # contracts purchase cash
Date closed @ bought price outlay
----- -------- ----------- -------- -------
04-05 86.375 20 9.875 19,750
04-17 75.875 40 5.750 23,000
04-25 69.375 25 3.750 9,375 (partial fill)
04-27 69.813 100 3.750 37,500
05-24 65.563 200 2.125 42,500
--- -------
total 385 132,125
=== =======
average price 3.432
=====
On May 26, MSFT hit a 52-week-low of 60.375, and the leaps hit a low of
1.562 on that day.
At this moment, MSFT is trading at 65.50, and the leaps at 1.812 to 2.062
bid and ask. At 1.812, I would have lost 62,363, or 47%, before commission.
Would I further average down? Possibly, if MSFT goes below 55...
I'm a bit thin-skinned, and I've been debating whether I should continue to
post to RT, because of so many negative posts on my posts. But then, what
the heck! One can't be wrong ALL the time, anyways...
By May 26, I was convinced we are in a bear market, as far as the NASDAQ is
concerned. I'm really confused by events that happened afterwards.
I figured that if we're in a bear market (i.e., NASDAQ), I'd better wait
for a sign that the bear is over, and the bull may begin again, to resume
my averaging down buy strategy.
On the weekly (attached) NASDAQ chart, I'm essentially looking at the
wb-trend % indicator, on a weekly close basis. If the indicator crosses
above the "-0.35" magenta line, as a rule-of-thumb, this would give me some
indication that the bull market may resume, at the moment or some time in
the future.
I will then switch to the daily Nasdaq chart, and monitor the oscillator
closely. I would be waiting for the daily oscillator to dip below the zero
line first, then cross above the zero line for a daily "buy" on the Nasdaq.
At/prior to/after that date, I would possibly resume buying the leaps...
Essentially, I still believe MSFT would not go much lower. I have been
proven wrong many times. Perhaps I could be wrong again...
But then posting to the group is not trying to impose one's opinion on
others, but just an exchange of ideas.
Regards,
Wong
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