some thoughts: Europe and some TA issues

Do I really think a depression is in store for Europe?

Europe is not a country but many nations. Some are extremely prosperous, Sweden/Norway, and some are suffering from the collapse of their dreams, Greece.

The central bank of Europe is coming slowly to the conclusion that it must manage the area as a nation, complete with interest and currency manipulations. Can the European central bank manipulate these to stave off the worst?

Much depends on how the major economic powers, i.e. USA and China, respond to them. China and the USA do not want to see Europe collapse or even go into depression.

The only people who think this way are the "captialist fundamentalists" who naively think that any failure in economics should serve as a "moral" lesson. Moral lessons are given to countries like Indonesia and Thailand (1997) to keep them doing the dirty work for the global economy. There is also an element of racism in this.

So, frankly, I don't buy the "Europe is headed to depression" scenario. There will be political upheavals but nothing on the scale of the 1930s when the NAZIs came to power in Gemany. Europe has problems, but it is a member of the club. The club helps out other members so long as the "failures" show a correct amount of contrition and determination to change.

Basically, I think people who see Europe collapsing are probably not looking at the over all global situation, including the power, problems and interests of China. Nor are they looking at history. In other words they are fearful and fear is a symptom of ignorance.

Of course, one can be ignorant without fear. I must admit as an independent thinker in the tradition of Descartes, Hegel, and Zizek that I might be wrong. Perhaps the system of the club, and by this I mean austerity enforced by the IMF and its supporting nation states, will force open a crack in the global economy so large that everyone will be sucked into the abyss. Possible, but considering history, doubtful.

Regarding technical analysis.

I bought fairly heavily NOK at 5 USD per share on February 10. This is my first foray into value investing. According to HGSI, NOK's book value is approximately 5.5 USD/ share. Others have it a bit lower but none lower than 4.5 per share. The company issues a .26324/share dividend. As an investor I'm protected to the downside by this, and I know that if NOK blows up, my stock has value, not projected/forward value.

It does however have some strong upside. It is in partnership with MSFT. It has patents and new technology. The phone business is extremely competitive, but Nokia has a partnership with sufficient clout to protect it from the relentless attacks, legal and otherwise, from desperate competitors. Moreover, didn't Google acquire its partner Motorola? Could such a acquisition be in the cards for Nokia? Perhaps. Perhaps not. The Finns are pretty proud of Nokia from what I understand.

In any case, I have missed two very substantial bull moves, the latest commenced on Dec 20 and continues to this day. Some say we're at the top. Since the move has taken 4 months from October 4, I think it possible that a correction is possible. This is one reason I chose a laggard instead of a leader. Mike Scott has been extremely accurate in his judgment of the recent uptrend. But I'm late to the CAN SLIM party. (I hope to never be so late again).

In any case, since 2-10-2012 my investment in NOK, including some options, is up over 10%. The EV rating of the stock has moved from around 5 to around 50. There is massive institutional buying. Friday, the stock rose 5.37%.

With a stock like this, one must watch the news. The news has not been all good for NOK. But what interest me is that some very bearish news was released Friday, about 8.30AM PST, and it did not stop the stock's move upward.

Using technical analysis, I see a recent gap that will be filled when and if the price rises to 5.63. I plan to sell off some at that point and buy back in at the pullback. This is a difficult decision because it involves selling-- an activity which always reveals the impermanence of all things. I'd rather enjoy the perfect stock choice as an artistic/aesthetic state of being, like a painting on my wall, but alas "all things must pass."

This bring me to technical analysis. I predicted that IWM would pull back to the previous close prior to the gap up. Following my own logic, I set my buy on automatic and bought IWM/TNA at 81.18. I bought and sold several times over the week, and it worked just fine.

I'll post this and see how it looks.

Thanks everyone for the stimulating arguments.

Nick;

I have no opinion on NOK -- never traded it -- neither do I play the value came often.

But a couple of thoughts, based your post.

. if you are worried about the downside then you could look at some options. For instance buy the APR 5 put and sell the APR 6 call. This can be done for close to even money. That combination will remove the risk till mid april.

. but also I ask myself -- why this trade - was it meant for a quick 10% gain -- or did you have higher ambition. Was it for years and years -- or for a quick break out. If the later - then I would not call it 'value investing' - not even 'value-trading'.

I know you earned the right for a couple of successes, but success is not always found by closing a winning trade. I think trading success is mostly found in sticking to the original plan and repeating that plan as often as possible. (that of course only if the original plan is found in a well anchored trading logic).

Enjoy the weekend,

Ernst

I'll take a very very serious look at your suggestion for options tactics. I'll begin by looking up the strategy in Saliba's [U]Options Spread Strategies[/U].

Regarding value investing, I remain vexed by the problem of selling. My solution is to split the baby in two at 5.63. I'd rather ride NOK to 15 or even 35/ share. There is always something to learn. Just as there is always uncertainty.

Nick