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Featured Trader of the Week: @uigie

Let’s give a round of applause to AlMar for being this week’s Featured Trader! 

AlMar has been a member of the Investagrams community since 2020, and he is consistent poster who shares his thoughts and chart studies to the community. Something unique about what he shares versus other members is that he often shares bigger picture views of stocks. While others tend to share daily timeframe charts, he often shares weekly timeframe charts

Months ago, our featured trader posted his trade ideas for PSE:WEB. A widely known gaming company, its stock price has been in a downtrend for quite a while.

PSE:WEB has actually fallen by as much as roughly 96% from its peak a few years ago. With a lot of headwinds and sour earnings, a lot of investors have become pessimistic with the stock. After many months of poor returns, it seems that stock may have gotten some life back. In his post, AlMar mentions that the stock could breakout from its long-term downtrend line. As seen in recent trading sessions, PSE:WEB has just taken its first step should it look to perform a reversal. 

TECHNICAL STANDPOINT

In terms of price action, PSE:WEB came from its lows and formed a pocket near it’s weekly EMA100. Once volatility contracted, a strong breakout was imminent as buyers rushed in on the day of its breakout. The stock’s recent move makes it a prospect for a big picture reversal play. Although high volatility is still present in the markets, strongly breaking out from the EMA100 is a big first step along with breaking out of its long-term downtrend line. 

FUNDAMENTAL STANDPOINT

PSE:WEB is a company that mainly revolves around gaming, with it’s primary business being e-Games Stations, or internet cafes exclusively dedicated to casino games. Through the company’s technology, users gain access to hundreds of casino games and even sports betting. Although they are in a lucrative industry, they haven’t had that much success in recent years as they struggle to become profitable. 

What should be my next step?

As the stock has just recently broken out strongly from key levels, prices need to at least hold above the 3 to 3.2 area in order to retain its momentum. The next major resistances would be the 4.5 and 5 levels, with volume by price indicating that 4.5 could be the heaviest level it would need to break. Breaking out of 4.5 should cause the stock to experience less selling pressure, but we need to keep in mind that we are currently in a bear market, and even though the set-up looks good, most traders and investors might look to sell earlier than usual to lock in gains in a tough market. 

Once again, KUDOS to AlMar for being this week’s Featured Trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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CHART your way to PROFITS

Physicians have x-rays and clinical tests. Sailors have their maps and compasses. Us traders have our charts. Especially for short-term traders, charts are essential as they will be present from planning to execution. As part of our mission to aid everyone in their financial journey, our InvestaCharts have always been a core part of our offerings. Our charts offer everything that a beginner, or even an expert, would need to map their way to profits. However, we don’t want to stop at just helping our users to be profitable. We want to provide users with charts that will help them become phenomenal traders. This is why we came up with a premium version of the InvestaCharts that can be used by our InvestaPrime members.

Want to take a glimpse into what new features you can use to chart out your trades? Scroll down below to see the features and examples of how they can be used

  • Delay-free experience

Having delayed data can be a hassle, especially for traders who need to execute quickly. Even a few seconds can become crucial when executing trades during an explosive breakout, what more 15 minutes? Unless you avail of the level 1 PSE data plan or an InvestaPrime subscription, you would be subject to delayed market data by up to 15 minutes.

For example, on the day PSE:EMP rallied, prices quickly soared within a matter of minutes. For Prime users and those who availed of a PSE data package, they wouldn’t have had a problem. However, users with a 15-minute delay, they would see a stock price of 14.04 whereas the price had already risen up to 16.50. 

  • Premium indicators that automate charting for you

As traders grow and gain more experience, simple charting becomes easier. However, who wouldn’t want to have someone else do repetitive tasks for them? As an InvestaPrime member, you will be able to unlock premium features on InvestaCharts that help you automate your charting process.

As a premium user of the InvestaCharts, you will have access to Auto 52-Week Highs and Lows as well as an Auto Support and Resistance that will help you plot important price levels faster.

There is even an Auto Fibonacci feature that will help you save time when plotting your Fibonacci Retracement levels. 

  • Premium indicators that give you a strong edge

Saving the best for last, we have developed premium InvestaChart features that will greatly help your trading decisions. Support and resistances are foundational concepts for every trader. Even as we get better, determining which levels hold the most importance will always be the challenge that we will face. Let’s look at how our features can help you with that challenge.

With the Bull-Bear Meter, we can help you determine if the Bid and Ask board is showing signs of demand and supply. A good example of how this can help would be for buy-on support strategies. In essence, buying on support is done because you expect that support area to be an area of demand. It would then make sense that when prices reach near that level, the bids and asks should show more eager buyers. Even if a level looks like a solid support, it wouldn’t mean anything if buyers don’t show up. With the Bull-Bear Meter, you wouldn’t need to check the board manually as the meter will weigh in all the bids and asks for you, telling you if buyers have shown up or not.

Another very useful premium tool that will help traders is the Volume Profile Visible Range. Basically, this tool plots out how much volume was traded per price point. A deeper understanding of supports and resistances would tell you that more volume on a support level signifies that the market deems that area a very cheap place to buy, whereas more volume on a resistance level would signify that there are participants there who have lost money and would most likely want to break even at the least. Thus, you can use the Volume Profile Visible Range to better understand what price levels hold the most psychological impact on the market and its participants. 

They say that the only indicators needed for a trader to be great are price and volume. By being an InvestaPrime subscriber, the premium features of InvestaCharts will no doubt make it easier for you to study price action and will help you take a deeper look into the volume traded behind the prices. 

Want to know more about what we offer? Head on over to the InvestaPrime landing page to look at all the features that we provide to our subscribers!

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Featured Trader of the Week: @thejpahit

Let’s give a round of applause to GeldReich for being this week’s Featured Trader! 

GeldReich has been a member of the Investagrams community since 2020, and he consistently shares his trading plans for his picks. One of the things that caught our attention was the number of details he put into his posts. It is obvious that he really spends time preparing the charts that he shares as he also indicates specific entries and exits along with his convictions for the trades.

A couple of weeks ago, our featured trader posted his trade idea for PSE:PHR. As a company in the tourism industry, investors started to take notice of this stock as hints of an economic re-opening started to pop up. Most are expecting the company to perform better once tourism gets back to 100% hopefully in the next few months.

PSE:PHR actually came from a strong rally from its bottom a few months ago. Although the hype died down for the stock, the price found support above the 0.9 level as the stock went into consolidation. As bearish sentiment was prominent in the PSE for the past weeks, only a few really paid attention to PSE:PHR. GeldReich was one of the few who still looked for opportunities in the stock, and he felt that the consolidation was an opportunity for a momentum play.

TECHNICAL STANDPOINT

In terms of price action, PSE:PHR fell by a significant amount from the peak of it’s rally before finding support – a possible reason why not many traders still looked at this stock for trading opportunities. Our featured trader took note of this as well as he mentioned that the price consolidation actually formed at the lower ranges of the market structure’s Fibonacci levels. However, this didn’t mean that a big move is completely impossible. After finding support near the 0.9 – 0.95 area, volatility, as well as volume, quickly receded signaling that a big move could come. GeldReich also notes that the consolidation formed a symmetrical triangle, with different moving averages acting as key levels. Most notable is the 200 day EMA possibly acting as a resistance level.

FUNDAMENTAL STANDPOINT

PSE:PHR mainly owns businesses that revolve around gaming, leisure, and tourism. It comes as no surprise that the pandemic caused the stock price to sharply fall and that covid restrictions becoming laxer could serve as a catalyst for a rally. With strong domestic demand along with the prospects of laxer travel restrictions and a resurgence of tourism in the Philippines, investors are starting to pay attention once again to this company. Although the financial numbers aren’t there yet, the market is pricing in rejuvenated cash flows in the coming months.

What should be my next step?

Even though PSE:PHR is showing some signs of strength, given the current market conditions it is still not fully advisable to aggressively trade momentum and continuation set-ups. However, this doesn’t mean that outliers don’t exist in weak markets. Looking at the bigger picture, it looks like 2.00 will be the next big level to look out for. Should you want to look for a trade, it would be best to wait for consolidation or continuation pattern to give you a proper entry with good risk to reward. 

Once again, KUDOS to GeldReich for being this week’s Featured Trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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Featured Trader of the Week: @skewwyookieson

Let’s give a round of applause to Mercurial for being this week’s Featured Trader! 

Mercurial has only been a member of the Investagrams community since 2020, but that hasn’t stopped him from becoming a very active member. He constantly shares his own views and opinions on his trades, and really anything happening in the markets.

A couple of weeks ago, Mercurial posted one of his trades in PSE:EMP. Emperador is a liquor company that mainly sells brandy products famously known in the Philippines for being affordable, but still great for hangouts. Mercurial saw an opportunity to trade a reversal, and his preparation and efforts paid off as PSE:EMP had a strong price run recently.

After a broad market sell-off, select stocks started to bounce back. PSE:EMP took a bigger beating than the rest as the stock experienced multiple days of big red candles. The downward momentum was very strong until price hit a brick wall at the 12.00PHP/sh support level. The stock then experienced an onset of buyers, forming what looked to be a reversal. Although it took a while after the technical pattern formed, PSE:EMP completed an inverse head and shoulders pattern and broke out all the way past 17.00PHP/sh price levels.

TECHNICAL STANDPOINT

In terms of price action, PSE:EMP came from a strong downward move. As the price was going down, traders started to wonder when the stock would bounce. After a long while, hope came when a bullish divergence appeared right as PSE:EMP right as prices came into the major resistance around the 12 peso per share area. As prices started bouncing back, an inverse head and shoulders was forming. Usually a sign of a reversal, an inverse head and shoulders is completed when the neckline resistance is broken. It took a while for the stock to really surge after breaking through the neckline, but the wait was worth it as the stock price reached levels as high as 17PHP/sh. This is the ideal target for PSE:EMP as this was a resistance level where a lot of trading volume occurred.

FUNDAMENTAL STANDPOINT

PSE:EMP is the liquor company of Andrew Tan’s Alliance Global Group. A staple in the Philippines, Emperador is well known for its product Emperador Light, an affordable brandy that is in almost every inuman in the Philippines. Aiming to grow bigger, Emperador is planning to go global as they will introduce their products to new markets. In order to fund their efforts, they will do a secondary listing, but on the Singapore Exchange, where they expect to raise up to PHP1.5B through proceeds.

What should be my next step?

As PSE:EMP is already at a big resistance level where a large amount of transactions occurred, many are already looking to lock in profits, or maybe even sell all of their shares. For those who haven’t gotten any shares yet at lower prices, it might be wise to wait and see how the markets will unfold in the coming weeks. As there are a lot of headwinds for the Philippine Stock Market, there is a lower chance for breakouts and surges to keep on moving in the same direction as compared to when we are in a bullish environment. The key behavior to look out for should you want to enter, or re-enter, in PSE:EMP would be to see how prices are reacting around the major resistances from PHP18.00 – 20.00. The best case scenario would be for prices to consolidate above broken levels and to possibly creep up higher in anticipation of the company’s foray into the global market.

Once again, KUDOS to Mercurial for being this week’s Featured Trader! Enjoy your 14-day InvestaPrime Access and continue to be an inspiration to the trading community.

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Financial Ratios for Beginners

Introduction 

  • What are Financial Ratios? 
  • What are they used for? 

Examples of Financial Ratios 

  • P/E Ratio 
  • EPS 
  • ROE 
  • PEG Ratio 
  • Dividend Yield 

Experienced investors and bankers talk about Financial Ratios all of the time. You may be familiar with a couple of them like P/E Ratio and EPS, but have no idea what picture they paint. Financial ratios are values derived from financial statements to come up with useful information about a company.

The numbers from the financial statements are used to conduct quantitative analysis and assess a variety of things such as growth, profitability, rates of return etc. The information derived from these ratios would help you create decisions and more accurately predict the performance of a stock. 

There are a lot of financial ratios out there, financial analysts and accountants may use every single one of them everyday, but to help you ease into the concept of Financial Ratios it would be best to focus on these five financial ratios: 

P/E Ratio 

This is perhaps one of the best and most used financial ratios. If P/E Ratio seems familiar to you, maybe it’s because it’s commonly shown in the stock’s summary along with other useful information such as the Open, Close, Market Cap, and Volume. The Price/Earnings ratio is used to value a company by comparing its current share price to its per-share earnings or EPS which we would discuss later.

This can be used to compare a company to its historical record. A high P/E ratio signifies a company’s stock is overvalued, meaning investors are expecting high growth rates. Companies that have a net loss do not have a P/E ratio since nothing would be put in the denominator. 

EPS 

EPS is another common financial ratio because it tells us about the company’s profitability. Earnings Per Share is derived by dividing the company’s profit by the outstanding shares of its common stock. A company with higher EPS means that it is considered profitable. Investors consider stocks with higher EPS as stocks of greater value since the company has shown to have higher profits relative to its share price. EPS can be in different forms such as excluding extraordinary items or discontinued operations, or on a diluted basis. 

ROE 

Return on Equity calculates a company’s financial performance by dividing net income by the shareholders’ equity. ROE is a measure of profitability in relation to the stockholders’ equity. An ROE value of a particular stock is good or bad depending on the ROE of similar stocks. The rule of thumb is to

target the ROE that is just above or equal to the average. Growth rates and dividend growth rates can also be estimated ung ROE. 

PEG Ratio 

The price/earnings to growth ratio is one of the more unheard of financial ratios as compared to the ones that I have talked about. The PEG ratio is derived by dividing the P/E ratio by the growth rate of its earnings for a specific period. The PEG is useful in determining a stock’s value while also considering the company’s expected earnings growth. It is considered to give a better picture than just the P/E ratio. The difference between the two is that the PEG ratio adds in expected earnings growth into the formula. It is usually used as an indicator of a stock’s true value. 

Dividend Yield 

This financial ratio shows the amount a company pays out in dividends per year relative to its stock price. This is a very good indicator for investors who are looking to position themselves for the long term. Compared to the other financial ratios, this financial ratio is more straightforward in what the result of the ratio tells us. It is worth mentioning that higher dividend yield doesn’t automatically equate to a good investment opportunity as high dividend yield can be attained by declining stock prices. 

In sum, just like indicators and many investing strategies, different financial ratios are more useful to specific types of investors. These are very useful when making decisions and add an extra layer of thought before going into a position. These tools provide an inside glance at the position of the company you are going to invest on. What technical analysis and fundamental analysis cannot predict may be seen when comparing these financial ratios.

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Unconscious Incompetence Stage: A Superhero’s Journey

This 6-episode series that I will be releasing in Investadaily will be about how we are progressing as a trader based on observations from the journey of high-level traders and by checking how they react in the social media. This is also based on the four stages of competence.

First, we will talk about the infancy stage or the Unconscious Incompetence Stage. I will be calling this as the Superman Stage. This is where most of the traders experience the beginner’s luck and the Superman Syndrome. This is not only experienced by new traders but also veteran traders who seek growth by either trading a new market or using a new strategy. Every time a trader tries something new, he/she will get back to this stage. The difference between a new trader and a veteran trader on this stage is how fast they can get out of this phase.

Common characteristics of traders on the Unconscious Incompetence stage

  • Superman Syndrome

In trading, Superman Syndrome is a highly deadly disease that will kill a trader’s port if not treated. This is where most of the traders vastly allocate their positions, leverage their port and focus on the rewards. They are on a high that they think they are invincible. Most new traders who gained from their first few trades have experienced this while others who have not, either quit or are still finding that euphoric feeling through adding more positions to their losing trades or overly sizing their positions to trending stocks without any plans.

  • Validation

The need to experience the profits and the validation to prove that what they are doing is right is what fuels them during this Unconscious Incompetence Stage. Since the experience is new, there is still doubt at the back of their mind and the only thing to create confidence is the validation from others that what they are doing is right. 

  • Highly Volatile Emotions

A trader who is extremely invested in a trading idea or, for lack of a better word, is head over heels in love with a certain stock is exposed to a very emotional ride. Traders who are constantly deliberating to every comment, group chat or any other type of social media is a big sign that they are still at the infancy stage. Even a superhero is awfully emotional when he is aware of his superpower, how much more a trader who experienced profits just by pressing that buy and sell button?

How will the Unconscious Incompetence Stage end?

Like in any movies, Superman will deal with many challenges including a face to face with Lex Luthor or worse, a comet of Kryptonite. The only to end this is when a trader experiences a big loss or a series of losses that will shatter his confidence.

Like a kryptonite spear piercing on their flesh, they will feel that burning sensation once they see their port turn from green to red. In the movies, we only see Superman win in the end but if you analyze the movie, there were a lot of Kryptonians who perished. Just like in trading, many will quit and will not survive but to win, one must also do what any Superhero did to defeat the enemy.

How to overcome the Unconscious Incompetence Stage?

If you have watched any superhero movies, most of the superheroes overcome their challenges by being humble, assessing what they did wrong and accepting that they simply do not know everything yet. Yes, NO ONE KNOWS EVERYTHING YET.

The problem of traders who are stuck on this stage is that they do not know what they do not know. This is because of Ego constantly whispering on their ear telling them that they are always right and that they already know everything about trading just because of one jackpot trade or a series of winning trades. Only by being humble and starting to understand the basic concepts of trading will traders overcome this stage.

If you are trapped on this stage, my proposal is to humble yourselves and focus on the basics. Even Superheroes need a break and learn the essentials in controlling their power. As Spiderman said, “With great power comes great responsibility”.

Contributor:

Full Name: Jan-Angel Echano
Investagrams username: @Soral

Channels:
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About the Contributor:
A passionate trader who aims to share the reality, the HOWs and the WHYs in trading. My goal is to help traders and investors like me to continuously improve and refine our skills to the path of mastery.

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Bottom-up Approach: An edge to navigate the markets

Amidst the Stock Market crash across the globe last March of 2020, novice traders have turned a blind eye in the markets since then. It somehow makes sense. The pandemic has caused tremendous financial damage across the world.

Although, the financial markets, especially the US stock market, started to rise a few days after the market crash of 2020. In the context of measuring the March low and the September high, the $NDX rose 84%, the SPX rose 63.5%, and the DJI rose 61%. Within six months, the stock market presented loads of opportunity to those traders who used the Bottom-up Approach to navigate the markets.

As introduced by Mark Minervini in his book “Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market, ” the Bottom-up approach is a type of method in selecting a stock. It is where a market participant shifts their focus on individual stocks first, then its respective industry group or sector, then its separate market index.

Through this approach, the index and any adverse event do not discourage the market participant from trading. If you have applied this method during the April recovery, then the said trader would have maximized the US market’s up move.

Figure 1: Example of a VCP pattern

The key to identifying market leaders through the bottom-up approach is to spot names hitting 52wk highs or All-Time highs exhibiting a VCP pattern in its price behavior. It is a pattern that displays contraction in its volatility from its previous data to the following or present data.

Moreover, the said stock should be in the confluence of a surge of volume when creating a new move on the upside. Various names that have hit such parameters in a respective sector will often be the leaders.

Also, during a bear market, spotting names that are creating new highs with enormous volume, while the market is doing otherwise, is a good indication that when the bull market comes, the stocks that were unveiling such features are bound to become the overall market leaders for that period. They correct the least during a general market correction and rebound the fastest during a market recovery.

On the other hand, the Top-down approach is the opposite of that of the Bottom-up approach. This method’s problem is that a market participant gets discouraged from the overall indices and market sentiment. The top-down approach would limit the trader from the outliers or the potential market leaders that would move oppositely to its respective index.

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If a said market participant adheres to the Top-Down approach, the chances are that the specific trader has loosely participated in the April 2020 rally. Wherein, these types of traders may have only grasped 5% of the overall opportunity that was offered by the financial markets.

There is no right or wrong approach to trading the financial markets. As Mark Douglas always exclaims, trading is an activity that offers the individual unlimited freedom of creative expression. Although aspiring market participants should be aware of the pros and cons of both methodologies.

Although professional traders use the bottom-up approach, wherein a trader does not rely on the opinions of other market participants; instead, they rely on their own bias towards individual names. 

Are you a trader who employs the Top-down approach or the Bottom-up approach? Let us know in the comments section below!

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