I have recently published a video to look at the market crash and provide a strategy to invest when the market crashes either because of pandemic or GFC. Australian Market (ASX) took 10 years to get back to its GFC highs before the investors could cherish the new highs pandemic crashed the whole market again.
I am not a fundamental analyst to understand the strength of a company or filter out the most undervalued stocks yet solid shares. I will show you how you can combine both Fundamental analyses with technical analysis to buy shares during the market crash even though you are not a Fundamental analyst.
With every crisis comes opportunity, I want to share my investment strategy and philosophy with the hope to bring you out of sideline and encourage you to start investing.
Also, I am not your financial advisor and the content in this video is generic, and based on my experience, it may or may not apply to you. That being said if you want to understand more in managing your portfolio and buy bargain shares when the market plummets then watch this video.
Over the past few years I have been investing and trading in Australian Share Market, Earlier this year all my long positions have closed as they hit stop loss. I was forced to change my investing strategy. Now when I look at the profits (26% up) I feel glad to have quickly adapted to the market conditions and changed my strategy.
In here i will explain step by step about this strategy.
ASX 200 was making all-time highs, it has even crossed 2008 high. Late in Feb this year market has gone into panic mode, In a span of one month, it has dropped 38.5 % quickest turn around from bull market to bear market all my long positions got closed.
When ASX 200 has consolidated sideways for 4 days I thought markets will now recover and I have placed my buy orders above this candle. , they never got executed. I knew I was looking at something that I have not experienced before also I have decided to take advantage of this unique situation.
So Basically I am a Technical trader and I don’t believe in fundamentals as I feel no matter what the fundamentals of a company are, it will always reflect on the price, but at this point in time, I felt the need to screen shares based on fundamentals.
If you are not an expert like me then I will show you how I have overcome this limitation. I have come up with this selection Criteria, in order for a stock to be considered.
- Firstly stock should have been trending (higher highs and lower highs) before 21st Feb, this tells me that there has been underlying strength in the stock. This was the only Technical criteria I have looked for.
- I have relied heavily on Fundamental analysis because for a company to survive this crisis it has to have strong Earnings and low debt
- Finally, it should be in a sector that has little or no impact and the future prospect should be recoverable.
- When I was doing my research I have come across shares like webjet and flight center but I was not sure on their recoverability [Images]
- I personally don’t have that much experience in fundamental analysis, I always faced problems in getting data to screen and never had enough time to go through each stock.
- So to solve this problem I have outsourced it, I have signed up for services that offer recommendations based on Fundamental analysis like Intelligent Investor, eureka report, and Morning star.
- I would screen through the debt that the company is holding to filter further, I know most of the companies will raise capital but the current debt companies have will make or break them this year.
- Since the market will be uncertain from this point on I was will to hold the positions for longer, and I know that when it recovers the profit will be worth it.
- And the last factor I was looking for was to distribute in different sectors.
Even after the above criteria, I have ended up with too many choices.
So as part of the research articles in Intelligent Investor, for instance, the Intelligent investor would recommend a buyable share based on their capital, earnings, etc. I will take that price and capture the price at which the stock is trading this gives me discount %.
The discount percentage would tell me how much cheap the stock is compared to the value. And lastly, I would also look at the falling percentage from the peak of Feb this year, as part of technical analysis I know that the price would retrace at least 50% before it continues to lose value.
Once I had the list i entered based on technical analysis of a daily chart.I feel glad that i have adapted my investment strategy, which used to be only on technical analysis.
I didn’t know if that the market will do a V shape recovery or W shaper recovery, I still don’t know how it will recover but I have split my capital into 2 lots, the idea was to invest the first lot now and then invest the later half on the second pull back.
I placed the buy orders on high of the candles where it has consolidated. For instance, I have bought JHX at 20.76 slightly above high of this candle as I saw consolidation.
In the past I used to sit on side if there is market uncertainty, Psychologically most of us prefer and safety to risk-taking. Now I have learned to embrace risk and uncertainty.
If you are sitting on the side due to uncertainty in the market, identify your risk comfort zone, and come up with a strategy to embrace risk.
You can also view the video content of the post below