Be A Contrarian - Buy When Nobody Wants To Buy
The greatest profits are made using this contrarian strategy:
Buy When Nobody Wants To Buy & Sell When Everybody Wants to Buy
Buy when nobody wants to buy.
This does not mean buying when everybody is selling. It means when a market has fallen and all the selling has subsided and there are no real sellers and buyers, then you buy.
Sell when everybody wants to buy
This is simple. When the stock is churning and volume is heavy with a lot of buyers & sellers and the stock is reaching a peak, this is when you sell.
Lets use an example we are familiar with MTD Infra. The chart shows the previous BUY & SELL periods. Will history repeat itself? If it does, then the BUY period is shown & if volume does dry up and there are no buyers, thats where the Contrarian buys. Your chances of making extraordinary profits come from such buying not from buying at or close to peaks.
Dare you be a Contrarian? We'll try an experiment shortly and buy some of these stocks and watch what happens.
Note: Also read this post on further clarification on this strategy:
http://talkingstock.blogspot.com/2006/07/buy-when-nobody-wants-to-buy-refresher.html
posted by Dr. Siva @ 5:26 pm
5 Comments:
hi Doc,
let me first commend you for an extremely interesting blog - simple, concise and well-written in what can otherwise be a dry topic... kudos
while i’m not completely conversant in the art of TA, i do find it useful to match the picture against the story that’s being told on my trading screens by the blinking numbers and the changing colors.. you’d be surprised by the many mismatches i’ve seen.
i hope you can elaborate more on and discern whether the few stocks that you’ve blogged on is in either a distribution or accumulation phase.
the reason i see this as important is the fact that operators for the ramped stocks are really not that keen to make trading profits from the market. Their no. 1 priority is to Distribute their holdings to the market - be it 5m shares or 25% share cap in Iris case - that’s where the big money is.
In the case of mtdinfra, the sharp price fall after continously high volumes can also mean that the distribution exercise is almost complete (the logic being why support the price after i’ve almost completely distributed?) and thus to do a contrarian buy on the subsequent return of low volumes can be meaningless - there’s no more flames to the wok..
doraiddd, thanks for your kind words. As for accumulation, I believe syndicates accumulate at the bottom & when they have cornered the shares they push it up to entice the public to enter b4 distributing to them. H'ever, volumes when the prices fall badly are impt too. So if prices fall badly but on low volume there must be some significance. It may just be the public panic & sell down fast & with no buyers prices fall quickly. In this case syndicates may also be caught with their pants down & they may not be able to sell. That may be one reason they will soon push the stocks back up again. In Dow charting they call the final distribution a selling climax when there is very large volume & prices reach a peak. This did not happen on Friday. Vols were lower than normal & there was no peak in prices. I believe this was panic selling by the public which means a good chance that prices will rise again soon. Also syndicated stocks will always come back into play, they never die!
doraiddd, like I said the syndicated stocks are back in play...see Iris. They just never can die.
thanks doc. you really do excellent work!
Iris will be continously in play as long as HE still holds abt 25% of share cap and can only distribute a few % here and there.
However, as a trader, it makes me uncomfortable to know that at least 85% of my buying volume comes from HIM.
lets hope that iris will uptrend to be like kosmo and mobif but if distributed successfully it'll be like ipower, ifca, sersol, syf et al.
so the question i ask myself everyday is "can HE distribute all at this price?"
and HE also trying very hard with same game on satang, polytwr, sugar, oilcorp, lhh... doesnt HE get tired?? i know i am..
btw epf has been gradually selling mtdinfra, just another 65m to go....
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