Avoid these fatal trading mistakes

Tuesday, 22 May 2018
Melbourne, Australia
By Bernd Struben

  • You’re not buying pants
  • The death of probable cause

Yesterday we looked at one of the biggest and most common mistakes investors make.

And that is buying or selling a stock based on what you’re reading in the news.

As a quick recap, here’s what trading veteran, Phil Anderson, had to say about buying on good news:

Absolutely fatal.

Because if you’re buying a stock when you’ve just heard good news, the good news is already priced in.

You’re buying a top.

Phil admits to making that same fatal mistake himself in his early trading days, more than two decades ago.

That was before he immersed himself in the work of WD Gann. And before he developed his Grand Cycle Theory.

It was this theory, alongside years of painstaking charting and market research, that eventually led Phil to his T.I.M.E.D. stock methodology. It’s all about buying the right stocks at the right time.

This same technique correctly identified the eight best-performing ASX stocks in 2017.

And this is the same technique that Phil and his team employ with great success at his premium trading service, Time Trader.

As I wrote to you yesterday, Phil is very proprietary when it comes to this service. He’s poured his life’s work into it, after all. And he’s committed to limiting membership numbers.

However, publisher Kris Sayce has convinced Phil to reopen Time Trader to new subscribers this week. The doors are now open, alongside a considerable new subscriber discount offer.

But those doors close at midnight this Friday. After that Time Trader may not reopen to new subscribers again until next year.

That still gives you a few days to check out exactly what’s on offer. You can do so here. Just don’t wait until the weekend!

Now, after a look at the markets, we’ll examine another costly, common mistake most traders make.

Bargain hunting…


Overnight the Dow Jones Industrial Average closed up 298.20 points, or 1.21%.

The S&P 500 rose 20.04 points, or 0.74%.

In Europe the Euro Stoxx 50 index finished down 1.19 points, or 0.03%. Meanwhile, the FTSE 100 gained 1.03%, and Germany’s DAX was closed for Whit Monday.

In Asian markets, Japan’s Nikkei 225 is down 31.38 points, or 0.14%. China’s CSI 300 is down 0.84%.

In Australia, the S&P/ASX 200 is down 50.10 points, or 0.82%.

On the commodities markets, West Texas Intermediate crude oil is US$72.46 per barrel. Brent crude is US$79.39 per barrel.

Gold is trading for US$1,289.75 (AU$1,701.40) per troy ounce. Silver is US$16.48 (AU$21.74) per troy ounce.

One bitcoin is worth US$8,293.47.

The Aussie dollar is worth 75.78 US cents.

You’re not buying pants

When you’re looking for a new stock to invest in, are you more likely to try to ‘buy the dip’, or do you look for stocks that are trading at new highs?

I’ll admit that looking for bargains can be tempting. And every now and again you may get in close to the bottom and find yourself with a healthy gain. But more often than not, treating the stock market like a supermarket is a mistake.

Take Telstra Corporation Ltd [ASX:TLS] for example.

At time of writing Telstra is down 2.14% in intraday trading, with a share price of $2.74. But its slide is nothing new. Just have a look at the one-year chart below:

chart image

Source: Google Finance
Click to enlarge

Telstra’s share price is now down 37.64% over the past calendar year. Which puts its price to earnings ration (PE) at an attractive 8.55 times. And then there’s the 8.39% dividend yield.

So, is Telstra a bargain? Has it hit bottom?

Maybe. Though I doubt it.

The company is facing intense and ever-increasing competition. And there’s talk that the prized dividend may have to be scaled back.

Also, the current PE ratio is backwards looking. It tells you nothing about how Telstra is expected to perform next year. You’d want to check forward earning’s estimates to get a better idea. And then remember they’re just that…estimates.

Either way, you won’t find Telstra in Time Trader’s portfolio.

Unless Phil’s recommending shorting a stock — profiting if its share price falls — his T.I.M.E.D. stocks are all on upward trajectories.

Here’s what Phil has to say about bargain hunting:

What everybody seems to tell people to do is to “buy low, sell high”.

But actually, when you think about it, how do you know if a stock is low?

If somebody could tell that, there’d be a lot more rich people in the world.

How do you know when a stock is low?

Because if you think it’s low, you think it’s cheap, how do you know it’s not going to go lower and not be cheaper tomorrow?

If not ‘buy low, sell high’, then what?

Buy high…sell higher.

Now there’s a lot more to it than that. Among other things, Phil and his team look for patterns of accumulation, and then a trigger, before getting into any stock.

You can find out how they do that…and much more…right here.

The death of probable cause

On a completely different note, I’m off to the 6th annual Friedman Conference this week.

The conference takes place from Friday to Sunday — no rest for the wicked — in Sydney. I’m not sure if there are any tickets still available, but if so…and you can make it to Sydney…I encourage you to check it out.

I’ll let you know next week what some of the speakers have to say about the threats to our liberty here in Australia, and what we can do about it.

Speaking of which…

Two such threats are rearing their heads in the news this past week.

The first threat is gaining a lot more notoriety than the second one. That’s because this issue could affect everyone who walks into an Australian airport. Whether you’re flying or not.

From ABC News (emphasis added):

New powers to allow Australian Federal Police (AFP) officers in the nation’s airports to demand identification without cause are “best practice”, according to Home Affairs secretary Mike Pezzullo.

But he has been unable to name which countries have and use similar powers.’

Sheesh, do your homework, Mike! Ignorance may be bliss, but you’re the Home Affairs secretary, for God’s sake.

Honestly, I was surprised to learn that this wasn’t already the case in Australia’s airports. But my principles mandate I take stand against any unneeded expansion of police powers.

Australia’s airports are some of the safest in the world under the existing — and extensive — powers already furnished to law enforcement. Do we really need over-empowered armed agents marching around demanding to see our papers?

The second threat to Australians’ civil liberties is actually much greater than the requirement to show ID at the whim of airport police. But the pushback among our pollies and the mainstream media has been muted, as it — purportedly — only impacts the rights of criminals.

From The Age (emphasis added):

Former bikie enforcer Toby Mitchell is one of the state’s [Victoria’s]  first criminals to be served with the new firearm prohibition order introduced to help police combat terrorism and gun crime.

The order was issued to Mitchell on Thursday, and means he can now be searched at any time without a warrant until the order expires in 2028.

Police can also search his property and vehicle and even those in Mitchell’s company under the far-reaching powers introduced by the state government last September.

It is expected that as many as 3000 criminals, including underworld figures, around Victoria could eventually be subjected to prohibition orders under the new regime…

Police do not need to form a reasonable belief an offence is being committed, which was required under the former Firearms Act provision. They need only suspect a target has a weapon.

If officers find drugs or evidence of other crimes during a firearms search, they can prosecute those offences.’

It’s easy to write this off because Toby was a former bikie enforcer.

Scary right?

But according to the article, he’s never been convicted of any firearms offences, though he has been shot at.

And authorities are looking to add 3,000 people to this prohibition order list.

If that happens to be someone you know, even if you don’t know they’re on the list, your rights go out the window too. Your car, your body, and even your house can be searched just for being near them.

That in and of itself means far more than 3,000 people will lose their most basic rights against unreasonable searches.

Not to mention that when a power-hungry government agency tells you they’re going to put 3,000 people on a list…it’s almost certainly just the beginning.

Gun crimes in Victoria were down last year well before the new draconian powers came into play. But I expect if they fall again in the years ahead, the government will happily point to its new powers to search and seize without probable cause as the reason.

I reckon the same argument could be used to fight the new war on illegal tobacco. Or perhaps tax evaders. Or…

In the mailbag

We’ve had more mail coming in as of late. Thanks to everyone for writing in.

I’m (again) short on time and long on words to address some of those letters today. I’ll do my best to get to a few tomorrow.

In the meantime, keep writing in. Whether that’s on your own stock picking methods, your musings on civil liberties, or Trump’s ‘bull in a china shop’ approach to global diplomacy…we always enjoy hearing from you.

Just drop us an email at letters@portphillipinsider.com.au. If we publish your letter we’ll only use your first name.

And finally, the latest on China’s influence peddling, from The Australian Tribune:

Will China’s Aid Skew Cook Islands’ Elections?

China’s growing influence over its neighbours has become a major issue in the upcoming 14 June elections for the tiny Pacific nation of the Cook Islands.

Between 2006 and 2016, China has spent $66.3 million on aid to Cook Islands, as reported by ABC.

When you compare that with the $39.3 million spent by Australia during…’

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.