Tuesday, 17 February 2015

How to Set a Target Price?

How to set a Target Price?

Famous questions on different forums " Pwede na po ba ang 10k gains?, Icollect ko na po ba ang 30% gains ko kay X? Ano po sa tingin nyo ifollow ko ba ang recommendation ni COL?. Those questions can be answer by different concepts in investing and trading. I have my own ways in setting the target price :

First: Check the time you bought the stock and potential upsides from brokers recommendation ex. If I bought COSCO last year @ 7.50 entry point and the brokers recommendation Fair Value is 12 then at the current level I will not touch or sell it.
Before you buy a stock, you should know the time frame. If you consider yourself as a Value investor then you are doing buy and hold strategy, as per financial advisors most of their recommendations is to do PCA method or Peso Cost Averaging Method, this works if you picked a fundamentally sound company.

Second: Positioning, If I bought a stock for the purposes of trading then it is easier for me to buy or sell. I don't look at fundamentals or fair valuation of the company. Candlesticks charting and indicators applies in this scenario.  A good example of this is PX,

Here is a borrowed graph from PAM Academy on the day it was recommended to buy, and announced to collect after 10% gains @ 9 level before the pullback:

For short term target gains, I used to collect at more than 10% , if there is a volume and continuous hype, I kept them until 20%.  I sold at a good amount of gains.

Third: Taste. We have different taste of gains. "Baka 10% or 20% ay pwede na kasi you are richer na ng 10% or 20%". Sometimes, greedyness can lead to IPITness. Again, taste also differs from the position you are holding or capital allocated.

Everything falls back to your PAM- Planning, Actions and Mindset.

Sincerely yours,

Jonathan I, Ruiz

P.S. For PAM Academy enrollees, we have valentines treat, click here: Financial Freedom .

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