Week 3

Sex, drugs and rock'n'roll . Why am I starting my post like that? Because entering these three words simply helps me to get to top pages in Google search. There's a useful marketing tip.
Now, about investing this week :
First of all, my brother gave me advice of putting everything, that is a little next level for part of the readers or maybe just some extra text, in italic.
Though I was still looking for stocks with break points (from fall to rise) with technical analysis, I must admit, it was hard to find. At least on NYSE (New York Stock Exchange) and Nasdaq (US. Technology Stocks). So I went to search for good fundamentals. Fundamental analysis is all about the earnings and management. The basics of fundamental analysis : http://stocks.about.com/od/evaluatingstocks/a/Fundanatools1.htm


Now, the P/E is a tool for measuring if the stock is overvalued or underestimated. 
If P/E is
below 10 - underestimated and if you can see the potential for earnings growth in the future before the rest of the market, it's smart to buy.
10-20 - the market has valued the stock correctly in the moment and liquid (bigger the liquidity, bigger the chance to get your money out quickly and smaller the chance of losing your money through bankruptcy)
over 20 - the market has overpriced the stock and you should be careful, because if the market realizes the mistake, stock will face a correction (very important notion, which means that sometimes the news and current good financial situation starts to boost people's ego and makes them feel safe financially. Just like the boom 2006-2008. It means when the stock is overpriced and probably gonna fall, then investors say the correction is about to emerge.)

Perfect example of how easy it is to make money basically without any indicators, just research :
An investor named Chris Camillo, who wrote a book called "Laughing at Wall Street", where he talks, how he turned 20 000 $ into 2 000 000 $ with three years.
In estonian language it's possible to read here https://fp.lhv.ee/news/4668783
All in all, all he did :
1. went to clothing store with his wife, where he found a line with 150 people waiting and after couple hours they all got informed that in the whole country, the new collection is sold out. But there was nothing in the news, so the market didn't now nothing about it. Mr. Camillo made his conclusions and bought the store's stock. With 48 hours his money had been tripled.
2. the pharmaceutical company's new drug had failed some clinical tests and investors lost interest. He kept talking to the specialists and reading the company's reports for a couple months. He understood that though all the negative results in the past, the drug will pass all tests and bought it for 2.95 $. A month later, it costs 20 $. "The illusion has become real"
All I'm saying, keep your eyes opened.

Now let's talk about my last week's investments :

• I made a huge mistake by selling NKE (Nike) too early. I only earnt 0.8%, but the day after I sold it, Nike profits tops estimates and shoots up 6.1%. Another certain mover is always stock's earnings beating its estimates. Also, the retro Air Jordans came into stores and store lines where huge and that hit the news. Probably is gonna rise a little because of the good news and all the fuss.  But be careful, because NKE has P/E of 23, which means moving into risky zone there.
• JNPR made its 2-week rising (triple bottom) and probably gonna slow down now. That's why I sold it, made 5% profit. JNPR P/E is 56, which means it's overrated and probably is gonna fall in long term. It's a smart move to get out.
• A has the same case as JNPR and made 6.6% profit. But A has P/E of 10, so it's liquid (The ability to convert an asset to cash quickly. Also known as "marketability")
• KIM is +1% in the moment, which for 3 weeks is not very productive. But I'm holding it because MACD indicator (the lower one) favors it. But I will keep being watchful, because it has P/E of 55

What is MACD indicator? Video is the best way to learn this http://www.youtube.com/watch?v=k9nds4OpA2I. 

If the blue (MACD) and green (Signal) line crosses the 0.0 (zero point) and blue line is above green line, it means the stock is bullish. But when these two cross each other and blue line is gonna go under a green line, the stock turns bearish. 
Bull market - A financial market of a group of securities in which prices are rising or are expected to rise
Bear market - A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows.

• Now, L has an P/E of 18, which sounds promising and not that risky, which is good. Though it's -1.45%, I will hold it, because the MACD indicator tells me to. It's the same case as KIM. Just gonna post the graphs : 

Now, what am I gonna buy next?
I simply chose from the stocks that fell the most last week and found :

• ALXA is a pharmaceutical company that got FDA approval to its agitation drug. But in a funny way, with the last day + after hours trading it has fallen -20% to 5 pts., which I don't get. Though EPS (earnings per share) is negative, the MACD shows bullish market. It's the biggest risk I have taken so far, but I'm willing to try.

There has been a huge fuss about 'fiscal cliff' all over the news. It means that in the beginning of 2013 the taxes will rise, so companies suffer. But, same time US. is decreasing its debt, which is a very good sign to macro economy. In conclusion, I believe that it might effect the stock market for a first couple a months, because the earnings decrease marginally. But everything will go on as it is, because in long-term it helps US. economy.

Good page to learn investing for an intermediate investor, everything about technical and fundamental analysis :
http://stockcharts.com/school/doku.php?id=chart_school/

Have a good christmas, next week, new post!