Shifting Shares (22 Dec) – The Festival of Consumption #GMR #CWD #RCH
Christmas – or the Festival of Consumption – is all about the birth of Christ – or buying gifts for people.
It’s also a time of reflection where we look at our mistakes and highlights, as my friend Simon has done in his excellent review here.
Very often, people like to have one big blow-out before they turn to their New Year’s Resolutions. These will often be something vaguely defined, like “lose weight”, or something more aspirational like “read a book a week”, or “get up an hour earlier every day and be more productive”.
Needless to say, I don’t need to tell you what happens by February. Gyms across the country lure the ‘January Joiners’ in with cheap annual memberships (everyone loves a discount) only for the gym to clear out by February but leave the members locked in.
The free Park Run that is offered globally very often sees an incredibly high number in the first week of January. But these numbers sharply drop off – the attrition rate is high. By week three, very few remain and by week four it’s back to normal. And that’s a free run!
The “lose weight” path starts similarly. Big intentions, with salads on the menu and drastic changes to diet. By the end of two weeks, the person caves and dives straight back into the old lifestyle.
Why it doesn’t work
The reason why these New Year’s Resolutions rarely work out is because rather than look at the root cause, people decide to treat the symptoms. This is like sticking a plaster over a gaping wound.
We need systems. Not goals. Those who are goal orientated are in a perpetual mindset of failure – until that goal is achieved. Then it’s time for a new goal, and it’s failure again until that is achieved.
The person who wants to lose weight would do better by introducing small changes to their lifestyle. Cutting out junk food – and fizzy garbage like Coca-Cola (which, in my opinion, is poison due to the fact a 330ml can has 9 spoonfuls of sugar in plus a chemical that stops you vomiting – but this isn’t a health blog, sorry), would make a big difference with small actions.
Pareto’s Law (known more familiarly as the 80/20 rule), states that roughly 80% of the consequences come from 20% of the causes. That means change is like one big lever – small changes amplify and make a big difference.
So what does this have to do with trading?
Well, if we know that small changes make a big difference – and we want to make New Year’s Resolutions – then why not apply it to our hobby or occupation?
In a trade, we have the entry, the exit, the position size. We can control our take-profit and stop-loss levels; we can control the instrument we trade. We can choose our emotions and how we manage our trade. We have discretion over almost everything aside from the outcome – yet it is the outcome that we focus on. Why are not more focused on what we actually do?
Improving our exits slightly will have an amplifying and compounding effect on our portfolios, because over time this cumulatively works for us. If we start with £100, and compound this by 1% a day – then in a year we would have £3,678.34. That’s a big change.
So, when you’re thinking about your New Year’s Resolutions, or reflections on your trading and investing, don’t take it lightly. The decisions you make over the coming weeks could very much impact your whole life.
Reach was mentioned here a few weeks ago – the old Trinity Mirror. SharePad has it on a PE of 3.4, which is low, and when a stock is rated as low as this very often it’s a value trap. I don’t think that’s the case here, given the price action.
(All charts taken from SharePad)
The stock is looking really good now, and volumes are clearly up. I believe this is very much a stage two stock now and would definitely follow this if only for the chart. I’m long here – and I intend to stay long while the fundamentals and price keep improving. It does look like it’s getting extended, so there may be a short term pull back – but what am I playing for here? I’m looking for a longer and larger move, so I’m happy to give the stock some breathing space when it decides to pull back.
We mentioned Foxtons a few weeks back now, and this week its property cousin Countrywide appears to be making a move.
Could this be an extended stage one base? Let’s look closer.
The stock is over 100% up from its low – meaning that right now there are no distressed sellers, otherwise they’d be hammering that price right back down. We can also see that the stock dipped back down again only to be bought up. Perhaps the trend is changing?
The stock is shifting upwards and currently it only has the 200 moving average and 200 exponential moving average to breach. These are key lines on almost every chart, so they might work as resistance. Traders and investors look at the 200 moving averages because this has traditionally determined whether the stock is in an uptrend or a downtrend.
At the moment, the stock is stuck in a downtrend – but that could be changing.
I haven’t checked the fundamentals of the stock, and I’m not going to either. I don’t want it to cloud my judgement. What matters here is the price, and I have no position yet, but it does go on my watchlist.
Gaming Realms (GMR)
This is another potential stage two that I’ve not seen people mention. That’s fine by me, because I have a small slug at 8p, and I’m happy to average up if the trend is confirmed.
Averaging up is great as we commit more capital to winning positions. If you think about it – why would you want to average down, if the feedback that you’re getting from the market is that “you’re wrong”? I get this for investors, because they are taking a position on the view that the market has mispriced the instrument, but for traders this is a cardinal sin. Don’t do it.