Trade by headlines

When it rains in Brazil, buy coffee futures.

Recently, it rains too much in SE Asia, so buy rice futures. I do not trade futures, so I miss the opportunity and unfortunately there is no equivalent ETF.

However, I benefit on two major trades as follows.

A magazine article pointed out coal should be bottomed but it could have another 20% down. I placed 5 orders and 4 got executed. I had to dip into my credit line. Made $5,000 on the same day. My theory: retail investors and hedge fund managers read the same article, but acted later the day - all the meetings with their wives and fellow managers caused them some change. I made about 22% average on the 4 stocks in two weeks as of last Friday.

Update as of 4/ 26/12. The coal stocks did not do well. The run up could be due to the magazine article.

Another article from the same magazine said same on copper and FCX. I placed the order but copper was up by 8% on Monday. Hence I did not get the order executed. Once a while a market order is good.

On the same week, CROX lost almost 40% in one day. I bought some and made about 10% profit today by selling it. CROX's fundamentals are no good and it does have the history of roller coaster ride in its stock price.

I predict the 4 coal stocks have a long way to realize its potential value, so I keep them. It could be a year, two or even three years.

This style of investing is trade by headlines. I practiced it before and more today. The market currently favors this style to me for the following reasons.

* The market is volatile.
* Retail investors are willing to get rid of the losers for year-end tax planning.
* Fund managers use it for window dressing.
* Investors are not rational and follow the market blindly.
* We have so many good news and bad news.
* The media influence the market.

-----
I've missed applying the same trick to the rise of Apple. I should have bought the stocks of its part suppliers. Hope learn it and take advantage of future similar circumstances.



(c) TonyP4 2011. Written in 10/31/11. Updated 04/26/12.

#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.