WIG (pol. Warszawski Indeks Giełdowy, which is main index on Warsaw Stock Exchange) and S&P 500 are two indexes that I constantly monitor while trading stocks. As you may not know, currently I trade only on Warsaw Stock Exchange, but watching S&P 500 is very important, because most times WIG behave very similar to S&P 500.

Recently, I closed all my positions on stocks taking some serious losses. I didn’t have enough time to watch daily all stocks I picked and react when it was necessary. When the trend is not clear or even worse when trend is opposite to your position, ‘buy and keep’ strategy is definitely not an option. It wasn’t easy to take such a serious loss, but now I know that I saved my money from further losses.

Let’s take a look at both indexes and see how they look like from technical point of view. I don’t want to go too much into details, only basic and simple overview.

S&P 500 with SMA 100. Starting in second half of 2006 SMA100 is going up indicating uptrend. In October SMA 100 is flat. Index reached maximum and from there SMA started to slowly go down. It was the beginning of downtrend. As you can see, SMA still moves down.

Now we take a closer look in shorter perspective. There is a strong support near 1270 points, which worked well in past three times. Last days this support stops more losses. Now, the movement in upward direction is very likely, however resistance in half of black marubozu from Thursday is important. Breaking this resistance would be a nice signal to continue upward movement.

As you can see, it is very possible that there would be short-term upward movement on S&P 500. However the situation on WIG is a little different.

First, short look at WIG with SMA 100. Looks similar to S&P 500. What is interesting, that WIG reached own maximum in July, before S&P 500.

In shorter perspective situation is worse than on S&P500. WIG broke the level of minimum from January. The support didn’t work; therefore further movement in downward direction is possible.

Now it would be very interesting to watch both indexes and compare their behavior, but until there are strong signals for upward movement, I’m mostly away from the market. Right now I keep almost all my money on saving accounts and I invest in…

…this is the subject for another post.

I have already presented some basics how to use moving averages and how to calculate them. Today, I want to show you that we can also use this technique to look for resistances and supports.

Wasting time is not the way to go, so let’s take a look at some examples:

S&P500 - SMA15 supports multiple times.

S&P500 - SMA30 supports sometimes together with SMA15, sometimes after price breaking SMA15

NIKKEI - SMA 50 - Acts both as a strong support during May and June 2007 and resistance since December 2007

Dow Jones Industrial (Candlestick chart) - SMA30 - works not only with closing prices but also with lowest prices.

As you can see, moving averages as a supports and resistances are quite good to use when analyzing indexes. In general, this technique works better on shares with higher volume. Why? When there are more transactions and more experienced investors, it is difficult to artificially make a strong price fluctuation that would cross moving average. Moreover, there are more investors who also use this technique. They are looking for similar places as a supports and resistances and they are placing orders based on this.

It is very interesting what price we should take for such analysis. Usually, I take closing price as it is most important price. But very often the lowest or highest price during day touches certain moving average and since then the price continues movement in opposite direction. This you can see very often on candlestick charts. You shouldn’t also expect that price will always precisely touch moving average. Stock market is not a pharmacy.

Which moving averages to use? I prefer 10, 20 or 15 for short term; 30, 45, 50 for average term and 100, 200 for long term analyzing.

Remember, you shouldn’t use only one tool for investing. Support it with something else. In this case, it is very good practice to look also for candlesticks that signal a new direction of price movement.

The Path to the Pegasus Letter is the winner of my Entrecard Contest I run in May. As a price, there was 1000 EC, 125×125 banner spot on my blog for 1 month and blog review. Credits and banner spot are already delivered, now it is time for a review.

What it is about?

If you are a new visitor to The Path to the Pegasus Letter, you might be confused for a while by not knowing the subject of the blog. I didn’t find any about page and there is no simple tagline explaining what this blog is about. Anyway, when you start reading any of the posts for a while, you will get sure this blog concerns investing, finances and money – few of my favorite topics.

User Experience

The blog has two sidebars, left and right, mostly filled with ads. Personally, I prefer sidebars only on the right side, but it is a matter of taste. The most useful things there are Blog Archives and, if you are an Entrecard user, Entrecard plugin.

What I definitely like is a big, clear space for main content – posts, especially a lot of posts right there on The Path to the Pegasus Letter are long. There are no ads within posts which is another advantage concerning posts reading.

On the other side I really miss an easy access to labels and some kind of ’top post’ or ‘best of’ page. These things are usually the first pages I visit on any new blog I read and can really help to find out if the content is interesting for me.

Content is King

Here is exactly how this blog snuck into my RSS reader. A quality content presented in an interesting style. Ok, maybe typography is not exactly the way I like it, but this paragraph is not about that. I mean a writing style. I really do enjoy reading such posts, especially when they provide value. And posts on The Path to the Pegasus Letter definitely do this job. Maybe I can’t always agree in 100% with author’s opinion, but this only stimulates me to deeper my knowledge about finances and stock market and it also provides an additional perspective to the topic.

Summary

If you are interested in stock market and finances, you should give it a try. Of course, not everybody would find this blog interesting and useful, but somehow it made a way to my group of investing blogs I read regularly. Maybe The Path to the Pegasus Letter will also fit to you. Enjoy.

Do investors pick up girls?

Of course, we do. We can even use similar rules and ideas both for investing and picking up. These four are my favorite:

Accept the failure.

You can’t always succeed. No matter if it concerns investing, approaching women or anything else in life. Failure is something you must accept. The sooner you will do this, the better for you. Remember, each failure gives feedback. Use it wisely. Don’t blame yourself and be angry. Try to find out where the reason of your failure is and how you can avoid it in future.

Have a good opener.

Opener is a short gambit which you use to initiate conversation with a woman. It should create small interest in you and help to continue interaction. Some guys claim that it doesn’t matter what you say, but I don’t thing you can say absolutely anything. A good opener is a good opener. It is very important as it has to buy you more time.

When it concerns investing, it is very important to gain, right after opening a new position. When you lose at the beginning, sometimes it can have a bad psychological effect on you. Negative emotions appear and it is likely you would perform wrong actions based upon them.

Stop when things don’t go your way.

If things are not on your track, quit quickly and gently. Don’t make yourself an idiot around the woman. Show your value, be a leader and build attraction towards you. If you are standing on you head to grab her attention, it is definitely not a good sign. In best case, it will finish with LJBF (let’s just be friends). We don’t want that.

Similar rules are on the stock market. Cut your losses. You don’t want to keep stocks which suck your money away.

Approach many women.

Approach many, many, many women. Different (of course, attractive) women, at different places and different time. The more attempts, the higher chances of success. Of course, you need to accept possibility of failures. Otherwise, it would be very difficult to follow this rule. By approaching many women, you will get a lot of experience, build confidence and master your openers.

Doesn’t it look like kind of diversification?

photo credit: Scott Ableman