Should You Buy Woolworths Limited At This Share Price?

WOW price turns a corner

Has Woolworths Limited [ASX:WOW] bottomed? That is the question on the mind of every existing and potential Woolworths investor.

If we look at the stock’s cyclical data, we can spot that WOW has made a bottom. Whether this bottom will seesaw or sustain into a rally is still hard to say. But the case for a long position in the stock is increasing.

A long-position return over the last trading week was 5.4%. I have had a long signal on the stock since 12 weeks ago, the trading return over that period was close to 0.38%. That is precisely the V-shaped bottom I am talking about.

Woolworths is currently a low performer on my monitoring screen. However, running WOW is still more attractive than not running any position. In terms of risk, the stock is almost reaching an ‘attractive’ status in my book. If the stock can continue to sustain a positive gain this week, it will become an investable stock with a potential rebound outlook.

In terms of the whole market, I have been telling my New Frontier Investor subscribers to not exit the market. I told them to limit exposure if drawdown gets to an uncomfortable level, but don’t leave the market. Why? Because an exit from the market during sell-offs can easily make investors miss the rebound afterwards, such as today’s rebound.

Fear is the number one enemy in a tough market environment. In times of selloffs, it becomes ‘seemingly-logical’ to exit. After all, that helps investors to limit further real losses if things get much worse. And if the market rebounds, investors usually don’t blame themselves too much for missing it, because it is an opportunity cost and it is not real.

A CNBC survey showed most investors surveyed want to park their money in property, bonds and cash due to excessive uncertainty. The rest are split between the QE-driven European and Japanese markets, US tech stocks, undervalued emerging markets. Finally, a very small percentage wants to play the FX angle and invest in China.
It can’t be helped…This is the nature of the market. Many investors will lose out on the rebound. Many will reenter the market to support a newly formed rebound or bull market.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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