Stocks in China closed up today, January 28, in Shanghai and Hong Kong, breaking a six day losing streak. Shares of other emerging markets were ahead at noon in London. The MSCI Emerging Markets Index was up 1.3%. Six straight declines have taken the index down 9.7% from its 2010 high.
In Hong Kong the Hang Seng Index closed up 1.6%, ending a six-day drop that totaled 7.6%. That decline had taken the index 13% below its November 16 high. The Hang Seng climbed 52% in 2009.
Stocks of big Chinese banks that have taken the brunt of the damage from a government decision to rein in bank lending were among the biggest gainers.
Given all the damage done in the correction to Chinese stocks, it’s hard to say that the January 28 move amounts to a reversal.
The FTSE/Xinhua China 25 Index, which is tracked by the iShares FTSE/Xinhua China 25 ETF, broke below its 200-day moving average on January 26, for example. (The FTSE/Xinhua ETF (FXI) is on my watch list. You can use my new tool, Jim’s Watch list to follow its price.)
Some traders in Hong Kong and Shanghai are calling this a technical bounce rather than an end to the decline. In Hong Kong, for example, the decline took the 14-day relative strength index on the Hang Seng Index, a widely followed technical indicator in that market, to 26 yesterday January 27. Many traders use a reading of 30 as a signal to buy and that certainly contributed to today’s advance.
In Shanghai the composite market index is flirting with the 3,000 level. There’s decent technical support at 3,000 so that the market could stay at this level for a few days. But the support isn’t strong enough to mark a definitive bottom.
In short, the decline has brought many markets—especially China and Brazil—to attractive levels. But the risk of further declines has by no means been eliminated.
But then again, if the risk had disappeared, prices would be much higher, no?
I’ll post on China and Brazil again later today.
Yeah, I’m logged in as you Run26.2. Kinda like the name though, so I hope you don’t mind sharing :O)
Seaturtlelady – The simple question you ask is deceptively hard to answer. It all depends on your own investment strategy and situation. Your Risk tolerance and beliefs. If you think a stock still represents the value you originally bought it for then you don’t necessarily need to sell out of it, so much as just wait until the stock rebounds to your expected price. You can use the dip to buy more if you think the company will go back up and lower your cost basis (assuming that doesn’t put an uncomfortable amount of money into a single stock for your portfolio). And if you can’t risk a 10% to 20% or even higher drop in a stock, you may need to reconsider how much money you have invested to begin with. It all depends on your situation.
Jim – Thank you for all the insight you’ve given. Have learned a tremendous amount from you. I hope you don’t interpret some of the desperate cries for even more in some of the comments here to mean we’re ungrateful. It’s a hard economy, and understanding is addictive.
I give up… Can’t seem to post currectly.
There is about another 3 paragraphs to my post, but site will not let me post them.
Some people will chart support and resistance levels, and use those numbers to base buys, buy more, and sells on.
Some people will use moving averages to do the same.
Some people will consult a palm reader, or a dead uncle.
Seaturtlylady,
There are many many many different strategies for determining buy and sell and “buy more” levels for stocks. If every poster on Jims board responded to you, you would likely see that nearly everybody has a different idea of when to do each.
Here is an article that talks a little about buying and selling rational. The long and the short of it is; you will have to determine your own thresholds for doing so, there are no “best” strategies that always works.
http://www.oldschoolvalue.com/featured/the-art-of-selling-stocks/
Some people will sell if the stock they bought drops by 5%.
Some people who believe that the market is not “timeable” will hold on much longer if, after reviewing the reasons for the buy, they believe that the original buy was a sound, well thought out plan, and that the reasoning behind the buy is still intact. (That doesn’t mean that they will always come out ahead, as even the most sound of investment strategies can be decimated by Mr. Market (Who is impulsive, irascible, rude, uncaring, and will refuse following anybody advice, and who can sometimes be just downright nasty, illogical and seemingly out to get you.)
To follow-up on India, some other advantages vs China are: Free flow of information (China can and will totally shut down the internet [see province with ethnic problems]); could be argued that India has better entreprenuership (sp?) and easier abiltity to create individual wealth. India certainly has issues with poverty rate and infrastructure needs.
DJ… I have the same issue. I am showiing up as seaturltlelady, but my comments post as mine.
Related to the initial Jim post.. here is a link to an article in Time on China v India
http://www.time.com/time/world/article/0,8599,1957281,00.html
India has become my “flavor of the month” to explore for stocks… not an easy task.
Thanks guys for sharing your expertise! I’m most appreciative that ya’ll took the time to respond!
DJ, its the same for me, it shows me logged in as the last poster (you) but then switches when I post the comment
Odd, now it just switched to reflect that it is djbarber who is logged in…. Never mind that last post then….
I think the site is having technical difficulties…
I am djbarber, but it says in the “post a comment” box that I am logged in as Run26.2… And I can’t post anything…
I think Jim may be overloaded with stuff to talk about. Lots of earnings reports related to his picks and the State of the Union.
I was surprised he had not posted yet, but am sure that it will be worth the wait.
Seaturtlelady:
There is no magic %, as ruters noted, he uses 8%, some use 10% for a stop loss. If you are looking to buy more, then you need to make sure there has been no significant change that warrants the drop. I would look as 50 & 200 day supports and see how close you are to those as well as if there has been overall change in market sentiment.
Just be careful that you don’t try and “catch a falling knife” as the saying goes. Trying to time the bottom is almost impossible, but if you sitll have conviction i the stock then doing some nibbling can be a good dollar cost averaging strategy. I’m looking at doing this with VZ.
Seaturtlelady,
The best advice I can give is cut your losses early and let your winners run. I typically put in stoplosses @ 8%. If a stock goes down 8% you clearly didn’t “time” it right. When the loss is triggered you can then reassess to see if you would want to get back in on the dip. You could probably use the same general rationale about adding to positions on a dip, but always reevaluate, you don’t want to throw good money after bad.
Ummmm…could one of you please give me some feedback on my question above?? I know everybody has their own strategy for buying and selling but I’m really curious what your thoughts are on timing to buy more when a stock is down.
Can you tell I’m eager to learn from all of the pros?? 😎
Jim. Thanks for all of your posts. I have found them very helpful. I understand and accept your clearly stated purpose of providing information for investing over a period of 12 to 18 months. Therefore, I don’t expect you to comment every 1/2 hour on the latest insecurities in the market.
QCOM lowered its 2Q guidance which didn’t meet analysts’ expectations. I understand that when companies lower their guidance their stock may sell off.
I know that technical analysis is not perfect but has been proven to be modestly accurate and adds one more handle to hold onto in the uncentainty of the markets.
I know that it is not a good idea to keep investing in a stock that is going down until there is some evidence of a bottom. (“Don’t try to catch a falling knife.”)
Thanks again for all of your help and advice on staying calm during a correction.
Jim,
I know a lot is going on today, but I’m curious about Potash. It’s tanking on 4Q results that were probably inline with informed expectations. It could also be down on the $4-5 `10 EPS guidance. Are you still thinking $130 by March at this point?
I doubled down as I like its long-term prospects…
To all,
My initial comment towards Jim reflected the way I felt. I respect Jim’s commentary, so I was looking forward to his take on at least one of those two major stories. No disrespect towards Jim was intended.
To Jim,
If my comment offended you in any way, I sincerely apologize.
“Junk Posting” “Clown” Huh? If people are going to disrespect Jim, a total class-act who provides a ton of useful free info., they should expect and be prepared to take a few shots in return, that’s all.
Thank you, “greedibanks”.
totally agree.
come on people! stop the junk posting. go to the yahoo finance page and comment on there if this is all you can do.
Thanks in advance!
EdMcGon,
I’m disappointed that you’re such a dip-sh*t
I’m curious about something…if you have bought a stock and it’s going down, what percentage loss do you wait for before buying some more of the same stock?? For example, MRVL has dropped 7.58% for me since I bought it last week and would like to buy more of the same. Thanks a bunch for your help!
Who are these clowns? The posters here used to be respectful I hope they don’t make this into a joke.
Jim, please comments on QCOM.
What’s happening? Rumor has it that QCOM may not be a chip supplier for Apple. Are we still looking mid $50s?
C’mon Jim, stop wasting time researching and just post something, anything, it doesn’t matter…
I’d liike to see Jim give some guidance on QCOM which just tanked in a major way.
I’m disapointed to, the laundrys not folded, the dishes are still in the dishwaser, and wheres my damb lunch?
Give him some time, that speech was loaded.
Jim,
I’m disappointed. Within the past 24 hours, we’ve had two big news stories which impact the markets, the iPad and Obama’s speech, and no comment from you on either item?
Jim,
For a self-proclaimed non-expert in technical analysis, over the past year or so you seem to have a significant number of articles on market technicals. I am sure you are trying to grow as an investor as we all are, but the reason you are my favorite investing columnist is because you would always explain the reasoning behind your analysis in a very thought-out and cogent manner. I find that with these technical posts, this type of explanation doesn’t come though to me.
For example, in the article, you say “There’s decent technical support at 3,000”, but I don’t understand why there is support, or how strong it is, and how to gauge its importance relative to other technical indicators.
My point is that without the typically excellent Jubak explanations, these technical posts become much less useful.