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"The market is a treacherous and fascinating game. I am a player and this is the quiet place i go to pen my thoughts and emotions."

Thursday, August 24, 2006

Journal: Note to Self

JournalInteresting price actions- false breaks? Gotta observe.




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Chart: Fung Choi

ChartThis stock displays the typical symmetrical wedge formation. A break from the upper or lower trendline will signal a bullish or bearish stance respectively.

As we can see from the chart, the wedge has broken downwards with significant volume. I suspect the price will visit the support of 0.695 in the coming weeks.

Hope this helps!
=)


!!!!--------------------EDIT:

It seems I did not use the updated chart to do my analysis. The chart was not updated for today's price action- the price broke down further with even higher volume. Anyways, today's price action confirmed my previous suspicions that the price will test 0.695.

The next question is: what is the new advice I would give base on this new infomation?


I am a firm believer that an over-deviated price action will always result in its return to the mean - this is where opportunity resides. The price broke the 2.0 lower bollinger band with much force. I suspect it will test the previous low of 0.625 before rebounding slightly back to its mean again.


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Wednesday, August 23, 2006

Chart: Want Want

ChartThis stock is a very volatile and thinly traded one. So trade with care!


I will approach this chart from the viewpoint of patterns and trends.

This stock has been experiencing a lot of gaps over the past months. A pattern has emerged: the gaps will always be covered within a few days. Another pattern is that a short term reversal will occur when the price breaks the 2.0 bollinger and rebounds.

Higher lows indicate the short term trend is still bullish.

My take: a gap down to the 1.4 or 1.36 levels will present a good opportunity to buy. The price may try to test 1.55 again.

I hope this helps!
=)



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Wednesday, August 02, 2006

Chart: (Keep 'em coming!) Longcheer.

ChartNeed a second opinion on a chart? Clueless about Technical Analysis? Already did your due diligence on a stock but know peanuts about the timing? YES! You have come to the right place. Learn and compare notes by ASKING me questions or REQUESTING for a chart. I am not expert but I will try to help because I love to learn about the market like you. =P

Niversphere, fellow blogger and fundamentals investor, requested for a chart on Longcheer.

Recently, it rebounded off the 0.695 support and its downtrend line with great fervor. It is bullish in my opinion. But just today it exhibited a bearish evening star plus a slight overdeviation on the upper bollinger. The trader instinct says it is potential short opportunity(gotta check if Phillips CFD has this on the list... =P).

If you are waiting to buy, I suggest waiting for a few more days. I expect a small technical decline the next few days and then a continuation in the uptrend.

As always, I could be wrong. So keep your cutlosses in place, be it for your long or short positions.

Hope this helps and keep the requests coming(so I have content to fill)!!!


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Monday, July 31, 2006

Journal: Note to Self

JournalSuntec: sentimental/proxy play for IMF Singapore Meeting. Starts 14 Sep Ends 20 Sep.
STX: proxy for world trade, correlation with BDI and interest rates.






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Thursday, July 13, 2006

Chart: Landwind

ChartLandwind broke out of its month-long downtrend on high volume and price increase. This is obviously a good sign. However this was an overdeviation from the mean. The price retreated back to touch the short-term uptrend line after hitting the resistance line at 0.525.

The 7 day MA would be a good measure of support. I suspect the 0.525 resistance will be tested again soon.




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Sunday, July 09, 2006

Perspective/Chart: What does it mean to be "oversold" or "overbought" in technical analysis terms?

PerspectiveChartWe all read and hear about the terms "oversold" and "overbought" a lot. "This stock is oversold. Going cheap. Time to buy." "That stock is overbought. Too expensive. Avoid or sell."

Oversold and overbought conditions are defined by oscillators. Oscillators, like the Stochastic, MFI and Williams %R, measures where the level a price is compared to the past XX days. The TA user specifies the number of days(the default is usually 14 days).

I will use the Stochastic as example here:
The Stochastic measures where the closing price is compared to the past XX days' highest price and closing(lets take XX as 14 days). So when the Stoch is at the "oversold" region of the lower 20%, it means the closing price is very near the lowest price of past 14 days. When the Stoch is at the "overbought" region of the upper 20%, it means the closing price is very near the highest price of past 14 days.

That is all that it means. Reading into it further(like say, going "This means it is too cheap! Time to buy." or "This means it is too expensive. Avoid!") is a fallacy.

The cliche "The cheap will get cheaper, the expensive will get more expensive" demonstrates this fallacy aptly.

Let us take a look at a chart now:

As we can see, during the period the price was "oversold", the price continued to plunge 33%(cheap will get cheaper). And during the period the price was labelled "overbought", the price continued to soar by 16%(expensive will get more expensive).

There are 2 point we can learn from this:

1. We can use the Stochastic as a "momentum" indicator.
The reason why the oscillator pointed to "oversold" for such a long time was because the price kept being the lowest everyday compared to the past 14 days. (ie. the downward momentum has not reversed)

2. We can use the Stochastic as a "reversal" indicator.
The proper use the Stochastic is as confirmation of a reversal. When the Stoch rebounds from the lower 20% mark, it is a sign of a bullish reversal. Time to buy. When the Stoch rebounds from the upper 20% mark, it is a bearish reversal. Time to sell.

Of course, this is not a foolproof method to buy or sell. Notice in the chart, between the blue arrows, the Stoch rebounded from the lower 20% mark. Time to buy. But the price did not soar later. It is a failed break. Did you have your stop-loss in place?

I hope this has been helpful.
=)



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Friday, July 07, 2006

Chart: Luzhou Revisited!

ChartGoody! Another request from you guys!
Please keep them coming.


Tracking the common rebound theme in most China stocks is Luzhou as well. I do not know much of the stock fundamentals but it looks like the corn starch/ethanol interest is still alive and building up. I can hear Bush live on CNBC talking about ethanol right now as I type.

On to the technicals:
The uptrend has been unbroken and volume has been steady.
A major resistance that needs to be broken is 0.92. I expect the price will waiver around this level.
MFI is climbing nicely. More money is coming in than out.
Stoch is in the "oversbought". Many people tend to see stoch's "overbought/oversold" regions as indicators to buy or sell. This is a fallacy. I will write more on this later.
Current the price has overdeviated by 2 standard deviations. If you are interested in buying, I suggest waiting for a fluctuation back to the trend line - buy on dips, do not chase the price. When the price has fluctuated up too much, it tends to come back down.

Hope this helps!

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Perspective/Chart: The Current Common Theme

PerspectiveChartThe analysis of Hengxin's chart prompted me to notice a common pattern that has emerged in the current week. Some of the stocks I monitor have displayed a common breakout pattern in the form of the cup and handle formation.

The psychology of the cup and handle formation can be explained as such:

It is a good example of matching sentiment with chart patterns. It starts with a huge selldown from a peak. then it consolidates and subsequently runs up again till it hits the previous peak. This is the cup. After that, it goes into a sideways motion, often slightly downtrending. This is the handle. Finally it runs up again, completing the cup and handle formation.

Why will the price retreat into a sideways motion after hitting the previous high?
Ah, this is the memory of price. buyers from the last peak and selldown finally saw that they can breakeven after holding for so long and starts to sell. This breaks the uptrend for a while as the buyers start to reconcile with the sellers until the sellers are satisfied with. Then, the uptrend resumes.

Here are some of the current charts displaying this formation:


This formation has been present in many of the china stocks. Open out your ChartNexus software and try to spot them!
=)

Hope this helps!

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Wednesday, July 05, 2006

Chart: Hengxin revisited once more!

ChartBearing in mind the little chart requests I get, Hengxin is quite popular. The last time I had a request for this stock was from mininvestor, when the chart was on the verge of a breakdown. Well let's take a look at it again:

Now it is quite the opposite, the chart shows that Hengxin may be on the verge of a breakout! A writeup on Hengxin can be read here by Niversphere.

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Monday, June 26, 2006

Other: Long Lumber Lah

OtherI overheard a short conversation my grandma had over the phone recently. It is very funny and I thought I should share it. It goes like this:

"Hello? Hello? Huh? Hello? Huh?
Heeelllo.....?
...
...
...

Long lumber lah!"

Not quite what you expected right? Haha.
=P

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Monday, June 05, 2006

Journal: Range-bound or Rebound?

JournalLooks like the STI closed down today. However, looking at the top volume and a few of my watchlists, the picture is mixed and green in my closely watched list. I usually view a variety of watchlists and the top volume to gauge the generate intra-day trend of the market. Last 2 weeks were indiscrimately red in most cases, so today's mixed bag must a signal of some sort. I take this to be a sign that the market is sorting out the cream from the chaff.

In a market decline, all stocks fall indiscriminately. However as the dust settles and people re-evaluate their positions and portfolio, the mixed price movements will reflect what is good and what is not. As an example, we can see the strength shown in the food stocks(which I am personally watching closely) and weakness in the transport stocks.

Back to the topic, "Range-bound or Rebound?". Of course the correct answer will be "Who knows really?". =P
My personal opinion is skewed towards range-bound. The market needs some time to sort the good from the bad. Also, I think sentiment is still very cautious after such a decline. People would rather err on the side of caution and not participate rather than risk getting burnt again. I view the 14-day MA as a good resistance level. A breakout of this level and subsequent break down would be a signal to sell.

Hope this helps!
=)

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Saturday, June 03, 2006

Chart: Asiapharm and Luzhou

ChartGoody, more chart requests! Keep 'em coming, guys! =)
I love having to look at charts!



Asiapharm broke out of its declining short term trend with little fanfare last week. MFI trend is still down from more than a month ago. On top of that, a bearish double top was seen last month. However the recent trend for the past 2 weeks seems to be one of consolidation between the resistance of 0.80 and support of 0.75.
My advice would be to stay on the sidelines till a clear breakout enters the picture. If you are more adventurous, you would be inclined to trade the range of 0.75 and 0.80. =)

After its IPO, Luzhou saw months of slow uptrend: long periods of consolidation followed by sudden short up spikes. Then, it broke out upwards rapidly and crashed just as fast to its pre-runup levels. Like Asiapharm, it broke its recent short term downtrend with no sudden activity. I suspect this consolidation will last as long as its previous ones with the range of 0.645 and 0.715.

Come to think of it, my previous chart of Hengxin also saw the start of a consolidation. Perhaps this will be the case for most stocks next week: a range-bound trading week.

I hope you found this useful!
=)


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Chart: My first chart request!

ChartWow! My first chart request is from mininvestor.
Thanks, mininvester! =)

Since this is a recent IPO, there is not enough data to derive meaningful indicators. As we can see, the MAs, bollingers, RSI, etc are still not meaningful. So we work with what is available: the candlesticks, trendlines and formations.
There is nothing special about the candlesticks, although I see hints of a consolidation.
The trend is down.
The most dominant feature of this chart is its formation. The chart has formed a descending wedge formation. This is a bearish formation. When the support of 0.41 is broken downwards, most traders will see this as a shorting opportunity.

My advice is to wait a little long if you want to enter. This is not a good time to enter yet.
Hope this helps!
=)

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Perspective/Chart: When to buy? When to sell?

PerspectiveChartToday I would like to introduce my system of entry and exit. Like many other methods, it involves the elements of selection, timing and cutloss.
However, there is an additional element of testing, which I feel not many people in the market practise enough.

Selection:
Some traders may not filter their stocks based on any criteria and prefer to trade solely on the basis of Technical Analysis. I am fickle and sometimes I do that as well but most of the time I try to trade stocks that have already passed my criteria of Price/NAV, PE, earnings growth, Price/cash, Debt/Equity, industry outlook and Div yield. When I trade, I am aware that some trades are more risky than others if I do not filter them via a selection criteria first.

Timing:
Mechanically, I usually rely on the MAs, Stochastics and Bollingers. These represent the principles of "Support/Resistance", "Overpricing" and "Overdeviation". Additionally, I also look out for MFI divergences and candlestick patterns to reinforce this system. And finally, I put these criterion into context by observing the prevailing trend(ie. higher highs and higher lows, or lower highs and lower lows).

In an UPTREND,
  • The MAs act as a source of support. Stochastic indicates if the stock has been overbought. Bollinger indicates if the price has overdeviated from the mean.
  • Bullish/Bearish candlesticks provide confirmation that the short term trend has reversed.
  • So a buy signal is generated when the price hits the MA of your choice AND a Bullish candlestick pattern has formed. A sell signal is generated when the price recovers from the upper bollinger, the stock has been overbought AND a bearish candlestick pattern has formed.
In a DOWNTREND,
  • The MAs now act as a source of resistance. Stochastic indicates if the stock has been oversold. Bollinger indicates if the price has overdeviated from the mean.
  • Bullish/Bearish candlesticks provide confirmation that the short term trend has reversed.
  • So a buy signal is generated when the price recovers from the lower bollinger, the stock
    has been oversold AND a bullish candlestick pattern has formed. A sell signal is
    generated when the price hits the MA of your
    choice AND a bearish candlestick pattern has formed.
Most of the time, not all the indicators will be triggered at the same time so it is up to the trader to make a judgement whether to take a position or not.

Cutloss:
The cutloss is an exception handler. Your cutloss receptors should be up all the time once you have taken your position. Suppose you took a postion but the immediate result was counter to what you had expected, what should you do? You should allow a margin of error to occur before you hightail out of your position. You followed your system to the letter and yet the market disagreed with your opinion. Take that small loss and accept the fact that your system is not perfect before you inccur the mother of all losses!
The cutloss can be an absolute % loss you are willing to take or it can be based on time or based on indicators or candlesticks. Whatever your criteria of cutloss, the main reason should be a non-response to your timed position. You entered the position expecting the price to head somewhere. If it did not then obviously your system had failed! RUN AWAY!

Testing:
Now suppose you are the risk-averse type(and yet you choose to trade...). A prudent move for such a cautious trader would be to test your hypothesis. You saw all the indicators in your system pointing to a BUY. What should you do? The logical step would be to plunge head first into a buy position and expect the price to increase soon. But the prudent trader will do this:
  • Take a small position first. Say, about 30% of what you originally wanted to use. So if you had wanted to trade an amount of $20,000, you take a position with $7,000 first.
  • Wait for your position to turn positive. Then add to your position as the price indeed moved in the direction as you predicted. If not, wait for your cutloss to be triggered.
Now you have risked only 30% of your initial capital and benefited fully if your system was correct. Of course, the more confirmation you need(ie. the more the price moves up), the less gains you will make because you waited till the price increased before taking the position fully. It is like the uncertainty principle in theoretical physics: the more certain you are of a particle's position, the less certain you are of its speed. The more certain you are that your are right, the less gains you will make.

I hope this has been helpful to you.
=)


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Friday, June 02, 2006

Journal: Start of a Rebound?

JournalToday was a good day. The US market's impressive gains spilled over to the local scene. I usually start the day with a visit to this CNN money page to get a feel of what the local market's direction will be for the day. I think the next few days will be good days to hold some long positions.

However, the trend since April is still down. My mantra while this is still the case is "sell into strength". The signals to sell can be derived from MAs or bearish candlesticks, while the buy signal can be derived from lower bollinger band or bullish candlesticks. On an uptrend, sell signals can be derived from the upper bollinger band or bearish candlesticks and buy signals from MAs or bullish candlesticks.

I expect this month to be quiet as it is the holiday and world cup season. Mostly the punters will come out to play while the rest of us are away.

=)


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Thursday, June 01, 2006

Study/Other: Just for Laughs- oldguy VS the AGM

StudyOtherI just had to mention this series of hilarious posts by oldguy in the canslim forum: http://www.canslim.sg/forum/viewtopic.php?t=29

Here is an appetitzer:
Market is listless and really no eye to see some pennies falling like there
is no tomorrow.

So decided to attend Amara Holding AGM. Wow !

So so so crowded...so many aunties and uncles (including myself)
compare to last year , there was fewer attendees.

Some old familar faces never have chance to meet and chit chat
again. Are they falling ill because of age ? Or they got no more shares with
them already.

Surely u know , what are they here for. Hotel buffet refreshment leh.
So it's true...a come back of ugly S'poreans.

I smart leh, get coffee first and chop sofa seat to relax 1st.
Then comes the aunties uncles loaded with ton of food with their hands
but short of using their head.

Beg me for seat hoh..OK loh stand up and give to u loh after seeing u
so old already like my parents.
Thank me ? Don't need because u come , I go and get food.
Buffet mah...got refill what !
Why so hassle to go and push and squeeze with those sorry people
and u dressed so killing leh.
Wait food stain your dress how ?
Quarrel ah...go ahead loh. Free for all.

U fight loh, I go and get more food for my expanded stomach loh.

Yam! Full tank already. Leave now and go shopping hey.

Ok lobby already...wait a minute. Need to piss...find toilet.

No toilet sign ah ! Ask the hotel worker there..somemore wear suit
sure he knows....that way.

Ok,trust u and follow u finger pointing.

Sir, Stop here and where r u going? Another wear suit worker asked me.

I answered. Toilet where.

Not this way,it is at that way,pointing the way where I come from.

What ! that guy pointed this way and u ask me to go back.

Ok loh ,I go back. But where is the toilet. F......K up.

I will find myself. Look at the lift sign....got swimming pool at 6th floor.

Swimming sure need to change what so got toilet to piss loh.

U see I smart leh.Got swimming pools,got gym , got bikinis
but no see topless leh.

Never mind,old already. What I actually want to see.

U guess ? Cool Twisted Evil Evil or Very Mad


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Wednesday, May 31, 2006

Prespective/Chart:What is the common pattern?

PerspectiveChartPop Quiz! What do the following patterns have in common?






Marks to you if you answer all of them are bullish signs. Bonus marks if you named them: double bottom, cup and handle, inverse head and shoulders, engulfing and morning star. More marks if you stated that they are reversals(except for the cup and handle).
Now the interesting common factor among them I want to point out is this: if you took each pattern and combine all the candlesticks in each pattern from start to end into a single candlestick, you will get this:

Yes all the bullish reversal patterns, boiled down to their essense, are bullish hammers. That is the gist of a reversal isnt it? Under the backdrop of a downtrend, the price suddenly plunges and then reverses its trend and recoups all its losses in more or less equal measure.


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Saturday, May 27, 2006

Chart: The Case for Optimism

ChartTechnical Analysts will usually view RSI and MFI Divergences favourably. Such patterns usually mean impending reversals.
RSI measures the values of up days versus the values of down days. If RSI is increasing, it means the up values are greater than the down values. MFI is a similar indicator. The difference is that it takes volume into account and weights the values based on the daily volume.
So MFI is a much more powerful indicator than RSI. An increasing MFI literally means more money has been flowing into the stock than out.

From last week, I have managed to spot a number of MFI Divergences. Here are a few charts:

In the case of People's Food, it formed a base with heavy volume and was one of the first few stocks to reverse its bearish stance. I look forward for the gap to be covered.

Next week will be an exciting week.
As always.
=P

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