Buying in a Down Market
January 21, 2009
KSE is at present time performing worst than most other Stock Exchanges around the world.
Most experts and informed persons are fearful that it may still go further down.
The general advise is:
Stay out of the KSE Market. Do not buy anything.
At KSE among other valid reason for the continued Down Trend is the fact that a lot of shares are being offloaded as Distress Sale. Banks and Financial Institutions and also some Brokerage Houses are selling Shares belonging to their clients who are behind on the payments. A number of CFS Financiers and some Brokers are also in a difficult position and their shares are being sold to square the positions. This is perhaps the main reason for this continued selling even at these very attractive rates. Unfortunately it is causing a domino effect and as more selling comes, market moves further down and this creates problems for more weak holders. Until this cycle stops, we may see the selling pressure. It is also possible that a large number of share maybe changing hands without the consent of the seller as the Brokers do not seem to have any other choice.
There are always some people somewhere who have extra money. One thing that successful investors like Warren Buffett do is to wait very patiently and Buy Stocks when they are Down… Way Down.
KSE shares are at the present time… Way Way Way Down.
We feel this is also a great opportunity for Smart Patient Buyers and Investors with lots of extra money sitting somewhere idle. to start their research and find some of these Buying Opportunities.
The Right and Intelligent way of Evaluating the shares for buying, when the market is Down Down like our KSE is to first pick about 10 Sharesof Companies that are in business without any issues and also have good products or services that people NEED. They must have something to offer or sell that people really NEED. This criteria works in all Economic Conditions but it is MUST in bad economy. The company must have products that people NEED and not just some products that people want. This is the First Criteria and most important.
The Next two are Technical Factors…
First is to look at the 52 Weeks Low of the Shares that we have selected. Look for shares that are at or very near the 52 week low. Now this is very difficult as at the present time, KSE is in a very difficult situation and most of the shares are at or near the 52 weeks low. So really do not know how to improvize on this requirement.
The second technical is to look at the 200 Day Moving Average. Similar problem again at KSE… Most, perhaps all shares are below the 200 Day Moving Average… Many are way below the 200 Day Moving Average. So the improvized thing to do is to look at the shares that are Way Way below the 200 Day Moving Average Curve. Remember the First Criteria is our selected companies are in business and have products that people NEED.
The above research and homework is good but not enough in these challenging times.
We now need to look at the Company’s Books, Balance Sheets and Earning estimates and future Growth potentials. Everyone is not good at understanding these complex accounts so please get some help from your Forum friends. Some of the friends including Hafeez Butt Saheb, Cdeeky Bhai, Zia Bhai, Alam Bhai, Salman Bhai, Aly B, Ahsan Bhai, Asif Now Bhai, Abdul Basit Bhai and Abdul Mateen Khan the Great have been known to guide and assist forum friends when requested. And then there are many others
This will take a few days and eventually you will be able to finally select one or two Shares that you will feel comfortable Buying and Investing.
Now comes the time for Action. Your Desires and your Beliefs will be fulfilled with your Action.
There is no sense to Rush. Calm Down. You have already decided to Invest. Now Watch…
Watch the market… Watch the Trend… Watch the Movement in your selected Shares… Watch the Volumes..
If the Trend is Down… Wait… Yes Wait… Remember you can always buy as you have made the research and comfortable..
Now the time will come to take the Action. You will feel comfortable. Listen to both your Head and also your Heart. You will get the Green Signal.
Go For it… BUY about 25% of your target quantity…. wait a little.. an hour or a day or few days… increase your position in lots of 25% … and once you have Invested in your targetted amount or quantity… Relax… Do not worry about anything. Just check back in a month or if you are strong in about 3 months. Remember, it takes courage to Buy like the Truely Successful Investors. Luck has the habit of favoring the Brave. InshaaAllah things will get better and you will enjoy the rewards for your patience and reasearch and courage.
Good Luck
Taufiq
