Naspers the Nemesis

Today I decided to do a follow up article to a write up I had posted in November in which I fessed up to not taking a trade because I had allowed emotions to play a role in the decision to execute the trade or not and how the missed opportunity really hurt my confidence when I saw the move coming.

Naspers has been one of the top momentum plays amongst traders in South Africa partly because of its exposure to tech giant TenCent. One only needs to look at it's competitor Alibaba to appreciate how fast the Chinese online presence is growing at rates which by some accounts surpass rational beliefs.  However I'm not here to give any fundamental validation to the price levels we've seen but rather talk about the trading lessons I've learnt thus far from my attempts to capture profits from the often volatile moves. 

Being involved in trading for almost 3 years now I look back and I find mistakes littered around my trading performances and yet if there's one share that stands out as one which sums them all up, mine would be Naspers by far. Let me give you a brief timeline:

One of the first trades I took was Naspers and surprisingly to the short side. At the time there was a lot of noise around by analysts about how expensive the stock had become and that there was an imminent pullback to come. The price at the time was over R400, so I trusted their judgement and not my own being fresh in the game and that turned out to be a mistake which cut me out after a day. So I was wrong, I could accept that but maybe that pullback was going to come and so the wait began...

Fast forward a year and a half later and now the price is staring closely at the R1000 and Kippy the Clown here is still waiting for the pullback. Again analyst begin to question whether these price levels are sustainable and if so the growth trajectory needed to keep it steady. Big scary numbers fly around and suddenly my mind goes into overdrive, perfect plan. Wait for the price to hit R1000 then short it, surely can't carry on growing at these rates...

That didn't work out too well so it was 2-0 to Naspers. Then to add insult to injury the price surges past the R1000 level stops me out goes even higher as if to rub my nose in it. Looking back now I'm grateful for being responsible and having a stop loss. By now I'm frustrated with this wretched stock and so badly want to trade it right like everyone else is doing. So I contemplate and settle for the notion that I'm no top calling hero and if I want to play this one right I'm going to have to ride with the trend not against it.

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So I wait my chance to climb on board the train and my chance comes as the price makes a new high of R1350 and pulls back sharply to R1050. I'm waiting like the wolf outside the piggies house and swoop in determined to make back my losses and more. When the unexpected happens, it falls even further and stops me out...again!!! Argh 

The logic or should I say illogical reason behind the trade is that although it was a good one my mind kept thinking about the losses I had made previously and started to think of ways to get them back with an overgeared exposure. But once again the market proves to be the supreme master and disciplines those who ignore the rules of engagement. 

Defeated, deflated and whatever else you want to call it, I just had enough of this particular stock and just put it down to working against me, so when the time came again last year October I refused to see what was going to go down which resulted in a missed opportunity. Fear had now crept its way through the front door and didn't want to leave. 

So what have I learnt from these experiences? 

1.  The noise created by analysts/traders is enough to make you do foolish things. Follow your own plan and trade the chart not the opinion of others. The trend is your friend until it ends and there's nothing more truthful than that. 
2. When trading any security, always identify the underlying trend and trade with it. There's no point trying to be a hero and calling the top of such a strong stock. When the time and trend is right there will come the a day when shorting is possible but not when it's experiencing such a massive shift in sentiment.
3. Revenge trading gets you nowhere, in fact it leaves you in a worse off position than you were in. Trade based on solid planning and not over past bad experiences in a trade. Every trade is a new trade no matter what happened in the past.   
4. Along the pathway of your journey you are going to find securities which make you and break you. Certain stocks stick out like in my case Naspers or Aspen, find your own and take notes of what works for you and what doesn't. There are trading basics within these securities and much of the knowledge you extract from them will be the foundation for taking things longer term. 

In saying this and watching the price of Nasper getting closer and closer to the R2000 mark I smile with glee at finally realising the error of my ways and capturing the elusive profitable Naspers trade which has escaped me for so long.

 If you would like to contact me you can through my email at cadetrader@gmail.com or if you wish to follow me on twitter and get the latest updates of news, interesting commentary and general trends in the market, my twitter handle is @CadeTradeR if you follow this link it’ll take you directly to my twitter timeline: https://twitter.com/CadeTradeR