FOCUS on trade managememt, not profit & loss!

I come across a money wallpaper (from Celestine Chua Blog)... it somehow rings a bell in me.

Many times I will focus on the amount of potential profits when I take on a trade! Risk will always be the second priority. This goes against the principle of a trader, whose task is to trade right and minimize risk! Counting paper profits is like counting chickens before they hatch. It is day dreaming and self entertainment! Trading right means 100% focus on the risk for each trade, the probability this trade is going to work out, the entry point, and most importantly the exit point. Exits are where profits are made, not entry! Capital preservation rules... be it investing (think Warren Buffet) or trading.

Focus on trading right and money will come

It is a Small Small world!!!

Last Friday, we see a significant sell down in US equity. As usual, local investors/traders take clue from last Friday lackluster performance, and begin their bear operation on STI index, which significantly breach the critical 3200 support, to hit 3187+ (at this moment I'm writing). Unless STI index overcomes 3200 and 3250 with conviction, the much anticipated Chinese New Year Bull Rally will be delayed. As this is a short trading week, do expect volatility as institutions and retail players take profit to minimize their exposure during the weekend.

Inter-market theme
Take a look at the Dollar Index. This index measures the value of US Dollar (world reserve currency) relative to a basket of other countries, with Euro taking the heaviest percentage. Last week we see US index breaks out from its trading range, and begin to creep higher. This means investors may be getting risk averse and begin profit taking, especially when we see 7 consecutive weeks of gain in US equity markets. If US dollars go up, it will point to the unwinding of carry trades and risky assets. Equity market might be hit! So tread cautiously ahead...

Mixed signal... which way now?

Well, today unexpectedly strong bullish candle close above the high of past 2 days candles. And most importantly, it close above the long term trendline and critical 3200. News have it that the Chinese government may delayed interest rate hike after CNY, giving rise to speculation that a new year rally might be possible. Whether this is the fact or something else, it is hard to give a definite answer and we should tread carefully.

To make money in this market, one can either BUY or SELL. Let's look at this counter Broadway Industrial Group. It clearly breaks below the critical support 1.00 on strong volume, targeting 0.935 as short term target. Worst come to worst, intermediate term is 0.75. Let's eye if this is another LongCheer in the making!

Happy profit, wish everyone have their hongbao!!!

STI is sick... China Gaoxian and LongCheer are depressed!

Today STI opens above the critical resistance 3200 and yet closed the day below yesterday low! This is clearly a symptom of the index getting sick! From a technical view, price has failed on 2 consecutive days to overcome the supply line, and this aligns with my view that we are seeing 3100-3120 region soon. Macro level, we have the following issues like inflation, china interest rate policy, European debts  weighting on investor sentiment. Coupled with the coming of CNY, investors should be careful!

In my last few post, I mentioned that China Gaoxian and LongCheer are both having severe mood swings. And we have witness how they are revealed in the past few market days! When stocks go depressed or sick, they need time for medication, and need rest for a period of time before gaining momentum. Of course, they do recover after a prolonged period while some unlucky one never. Ouch, that hurt!

Always plan your stops!

Be prepared for the ride... DOWN!

A picture speaks more than a thousand words. Let's take a look at the picture attached! As we are approaching Chinese New Year, big players may unwind their positions to minimize portfolio risk when the Asian exchanges are closed. Expected volatility ahead, and hopefully we can see a start of a new bull after CNY!

Let's get prepared for the holiday!!! Happy profiting...

What is your take for STI?

Let's examine the STI index for 2 possible scenario. Rewind back to 2010, the market drops and remain relative flat during the Chinese New Year period, before staging 2 months bull run.

Scenario One:
The market recover, and STI breaks through the critical resistance 3250 and towards the peak 3313.

Scenario Two:
The market cuts through the 50MA and 150MA, break the critical support 3120, and towards 3000.

I believe scenario two having a higher probability of occurring.
Let's see what Mr. Market has for us; you never know how he feels... Maybe he is also in CNY mood!!!

Mr. Market, what are you hiding in your sleeves?

Some analysts and gurus are starting to warn us about a major correction to be due soon in the global equity market. How true can this be? We, as investors and traders, cannot depend on hearsay to play the market. Every decision must be made on sound analysis regards to current market condition & sentiment. I may not be a professional but I will like to share my personal view on our local market: STI index.

We have see how STI index fails to break critical resistance of 3250 for the last few days. And we have also seen the poor performance of STI compared to other markets. Looking into the 30 component stocks that made up the STI index, internal indicators are showing overall weakness in majority of the blue chips, with only 13 out of 30 struggling to support the STI index. Macro level, inflation is hitting Singapore hard, with analysts placing estimate of 4% due to rising oil and commodity prices. On a global scene, government might in their effort to curb domestic inflation rise interest rate which generally has a negative impact on equity.

In brief, there might be a high chance of a correction close to CNY. All eyes should be on the critical support 3100 - 3125 in the next few weeks.

Below are some of the stronger blue chips that stand against the tide!

1. SEMBCORP MARINE LTD
2. SEMBCORP INDUSTRIES LTD
3. OLAM INTERNATIONAL LIMITED
4. OVERSEA-CHINESE BANKING CORP
5. NOBLE GROUP LIMITED
6. NEPTUNE ORIENT LINES LIMITED
7. KEPPEL CORPORATION LIMITED
8. JARDINES STRATEGIC HLDGS LTD
9. JARDINES MATHESON HLDGS LTD
10. HONGKONG LAND HOLDINGS LIMITED
11. GOLDEN AGRI-RESOURCES LTD
12. GENTING SINGAPORE PLC
13. FRASER AND NEAVE LIMITED 

From thinking to doing... I am a Determined Amateur!!!

Today I was on the train thinking where I will be 2 years down the road. Will I be just another aspiring amateur hoping to make it big one day OR will I slowly evolve to be a professional trading for a living? What ultimately do I want to achieve with this blog? Is there a goal to achieve?

Many thoughts flash across my mind, both positive as well as negative one! I may be a millionaire one day living a life I dream, have a big bungalow, enjoying every moment with my loved ones, no boss to report to etc. Then suddenly fear crept in! What happens if I do not make it? Should I spend this time doing something useful? A lot of questions keep mounting, and slowly confidence starts diminishing. I feel scared… An invisible voice tells me that I’m not young anymore!

The train reaches Somerset, and I wait for my friend who was late. I went to Epic Center, and saw many people walking to and fro in front of me. Are these people thinking where life is 2 years down the road? Or do they just spend it as if time goes on forever? Yeah, forever 21 is just opposite from where I stood. Can time be freeze at 21? Ha-ha…

All these while I was looking for something, something that will reveal to me the secret of trading. You call it the Holy Grail. There isn’t one! No one and no books in the entire universe will have any clue what will happen to the market the next moment! It is just a game of probability, something my good friend I met today tells me is gambling, where the only difference is inaction in the market can kill you. Suddenly, I realize my true self. I’m a perfectionist, and even though I told myself my method works, too often I find myself chasing after gurus who say they have successfully crack the code. I start comparing their success rate and % Return with my own. I lack the faith and perseverance to stick with my method! Suddenly I remember all successful traders are successful because they believe in themselves and their method, and are in sync with it consciously and subconsciously. Today, I decide to put all things aside for a moment and do a self reflection post. This blog is a record of my personal commitment.

By the last day of Dec 31^st 2012, I will have in my possession the skill of trading consistently for a living, which will come to me in the form of a rising equity curve during the interim.

In return for this life skill, I will focus my attention on trading right, accepting imperfection in the market, accepting trading as a probability game, having total faith with myself and my trading methodology, having great patience to wait for the market to come to me, having sound risk management to protect my capital, acting swiftly with confidence, and learning from past mistakes in the capacity of a trader.

I believe that I will have this skill in my possession. My faith is strong that I can now see my account growing consistently. I can see and feel the sense of achievement being a profitable trader. It is now awaiting transfer to me at the time, and in the proportion that I keep to my commitment in return for it. 

Trader K

Are you GAOXING? Happy?

Chart talk: China Gaoxian

This strong baby has been going wild after its breakout last year October. The question that everyone should be asking: Is she still healthy now? So lets take a look at the technical chart. Volume has been strong for the past few months till last Friday when we saw a gap down and a breach of the trendline. If you have noticed, there is a mini double top (see picture). Immediate minor support stands at 0.40. If it fails, price may target 0.35 (50EMA) or worst 0.30 (trendline support). Investors should consider some profit taking or tighten stop.

Let's parade at Orchard!

Chart talk today... Orchard Parade Holdings

There has been some excitement on this counter will it breakout with strong volume in October 2010. Right now, price is trapped in a congestion, forming what we called Ascending triangle in technical study. Immediate resistance stands at 1.70, which withstood 4 attacks from Bull recently. Volume has not been impressive on these few raids, showing the lack of participation from big players. Price stands quite strongly against the attack by bear last Friday, as you can see from the tail of that candlestick. An insider bar was formed on Monday with small volume. From these observations, in order for price to hit the mid term price target of 2.00, there must be huge volume to overcome the supply line. If price fails to hold above the orange dotted line (see figure), the pattern is not valid. Another warning sign is this counter is starting to lose momentum and showing divergence. Immediate support is 1.50 (fib38.2).

Happy profit!!!

Mr. Market is discounting news... he is much faster than anyone out there!

On last Friday, there are 3 news that everyone should be aware of. First, all European bond auction went smoothly and both China and Japan have expressed their support for euro zone by purchasing their debts. Secondly, China central bank has raised reserve requirement ratio by 50-basis point due to raising inflation in domestic market. Lastly, the Singapore government had announced a series of measures to cool the property market due inflow of hot money. Singapore stock market, which works on a discounted mechanism, immediately price this news in and we see STI index falls to a low of 3224 before closing at 3245, which is still below the 3250 critical resistance. US market closed last week in green, and there is a return of confidence in the market. As such, we might see bull entering and pushing STI index higher.

I was having lunch with my colleagues and happens to talk about this stock AURIC PACIFIC GROUP. I'm not very sure about the business of this company, but the stock is giving me some hint from its recent price movement. This counter hits a high of 1.66 back in 2007 before taking a free fall and plunge to a low of 0.44 in 2009. Let's take a look at the daily chart below. Towards the end of Dec and last week, we saw a few high volume transaction, which suggests someone might be accumulating this counter. It seems like the stock has breakout from its consolidation base and moving towards previous double top resistance of 0.74. I set long term price target as 1.00, and mid term price target at 0.85. Do check for volume when price hits 0.74 as who knows this can turn out to be a triple top.

If you ask me whether this is a good buy, I will say yes and no. Because there are a lot of factors (e.g. investor horizon, risk appetite, holding power, fundamental play, technical play) to consider before putting money to risk, thus one should still based on his/her decision to enter the market. Everyone takes full responsibility for their portfolio, isn't it?

Many profits to everyone!

Telecom... who is the strongest on chart!

I notice something interesting on the price behavior of Singapore Telecommunication industry (i.e. Singtel, Starhub, and M1). Guess who is the winner in terms of technical strength! It is M1!!! Let's briefly go through the chart for these 3 brothers and determine who suits you the investor the most.

Singtel
Price has been fluctuating between 2.90 to 3.30 range. If one is looking at price appreciation, this counter is a no no. If you are an income investor, this could be a good counter since price is stable and it pays dividend! It is like take some low risk investment with a steady income stream.

Starhub
Watch support around 2.50 - 2.52. This counter is displaying sign of fatigue and may need a rest soon. Worst come to worst, expect price to hit 2.40 on bad news. Though this counter pays dividend* like Singtel, one must be able to stomach the price volatility. *Highest dividend yield among the 3 brothers.

M1
Price has break out from consolidation base and reach new high. And it comes with dividend. Capital appreciation, with dividend, and new high! Perfect combination...

Round and half number... Longcheer is not cheering up!! :(

Well, just a quick recap on STI index... While regional indexes rally today, STI performance has been weak. Bear in mind that it has not yet close above 3250, which is the nearest resistance! And since the STI index is made up of 30 heavy weighted blue chips, it indirectly suggests that most of them are either reaching their fair value or slightly overvalued, making them less attractive to smart money. If smart money is tired of these heavy chips, most like they will target mid-cap and penny stocks. Hence, I would see more money making opportunities playing those smaller caps in H12011.

Alright, so what is round and half number? We learned about rounding up in elementary maths, and the reason is to simplify calculation. The same logic applies here when dealing with stock prices. It is easier for the human brain to process number like 3.00, 4.50 than some numbers like 3.13, 4.74 etc. Hence these numbers have a psychological impact on us, making them important numbers to watch out for. Remember last year 2010, everyone is keeping their eyes on the critical 3000 level for STI index. Now you know why!

Coming back to LongCheer, what is happening to our long time baby? Well, it has not been cheering up lately, and is setting into depression! It is technically very weak, so hopefully someone will step in and give it a boast at 0.60 - 0.62. But it is going to take some time for it to recover from chronic weakness. Rest well, and remember to cheer up! (Look at those mood swing.... eeeEE)

I need some excitement, give me Volume!

How do you differentiate a true breakout from a false one? The answer is in Volume. Volume shows the intensity of buyers and sellers behind a stock. You can think of it as "Energy". A breakout must be accompanied by strong volume (or excitement) to push through the resistance (i.e. supply line). So how "excited" must the volume be for one to conclude the breakout is valid? For me, I will compare the current breakout volume from past volume trend when price approach the same level? If current volume is greater or equal than previous volume, chances that the breakout is valid will be greater... So nothing is absolute, because trading is a probability game.

This is the STI index for yesterday where price close 3241, just right under the critical 3250 resistance line. Eyes are now on the European countries where both Portugal and Spain will auction their bond today and tomorrow respectively. Stay tune...

In life or anything, we seek balance. Extreme excitement is the recipe for bubble formation... Don't get trapped at the top.

Ouchs, this hurt a lot, Mr. Market!

STI index drop almost 1% today on concern of European debt and possible China raising interest rate to curb domestic inflation, wiping out a large percentage of last week gain. In my last post, I point to 3250 as a major support which is breached forcefully today, with price targeting the next minor support 3215.

In addition, I notice that a lot of the counters in my watchlist are showing sign of slowing momentum, with majority showing large divergence between price and volume. Although one should not trade solely based on divergence, it does however put forth a warning sign to recent run-up (i.e. institutional players are not joining this run-up).



Divergence Explained:

It is all about NEWS...

Last Friday, we saw some profit taking action and which pause the rally of the past few days. The good thing is STI index manages to close above the support 3250, but investors still need to be wary as some weird things is happen on other asset class.

Lets take a look at the metal commodities: Gold and Silver. The price of 2 charts has broke the critical trendline that provides support since Nov (for gold) and Oct (for Silver). On the weekly chart, the bearish engulfing candlestick shows further price decline in the week coming. Below I provide possible level to watch out for these 2 precious metals. The implication of such a move means the USD Index will strengthen, since the two assets shares a negative correlation ship.

 

How about news trading in our local market? Kim Eng opens for trading on Friday with price gap up and closing at approximately 12.5% premium over the last closing price $2.70. The news of Maybank proposal to acquire a major stake of Kim Eng at offer price $3.10/share has sent this counter gap up, bringing up share price of similar counters like UOB Kayhian and GK Goh. Since things are "clear", sell on news! Smart investors are most likely vested, and so for those who have a bigger risk appetite, nibble and go...

 




Happy profit!!!!

The rally continues... Are you onboard?

Will STI Index hit the much anticipated 3312 in November 2010 and continue the bull run? I think that is the question on everyone mind. Taking a look at STI index performance today. STI is now 3279, where 3280 is a minor resistance point. Looking at the breadth, buying has been healthy with advances greater than declines. Based on improved sentiment and easy credit, that is quite possible within the next 1 month, though investors are most likely to take some partial profits off at the 3300 point, pausing the rally to allow more people to be on the boat.

Today, lets take a look at another fallen star, our local stock exchange: SGX! Things are not looking good for SGX after the super run up last year due to news regarding acquisition of Australia Exchange. That great move is highly news driven, and so when the news die down, the rally loses steam and retrace to 61.8% from its swing high. The next immediate minor support is 8.20, and should this fails to hold the bears, watch for the critical 8.00 level.

That is all for today! Happy profits for everyone!

Another good day!

Let's start off talking about Commodity. Gold and Silver take a beating, which give the US Dollars a lift. There is strong inverse correlation between the movement of commodity prices and US Dollars for those who don't know. In Singapore, STI closed right at 3250 which was highlighted yesterday! So on the bigger perspective, we should see STI climbing and break last year high.

Today, I will speak on 2 Blue chip which falls despite overall improved market sentiment, namely WILMAR INTERNATIONAL and SINGAPORE AIRLINES.

WILMAR INTERNATIONAL
There is breakout on strong volume from the mini consolidation flag on high volume. Price will most likely eye the critical support 5.30.

SINGAPORE AIRLINES
Big volume with a massive bearish candle bar. Watch out for key support 15.

Welcome to 2011 - The year of the Rabbit

Happy New Year to everyone reading this blog! 

Market:

Let's take a look at the STI index. Price has evaded the most worried zone of 3100-3130, which spell serious problem if break (head & shoulder). The last few days of 2010 had seen the index strengthening, and today price has broke the much anticipated 3200. Market breadth is impressive, with 4 advancing stock per every 1 declining. We might witness the start of a new bull phase, so ready your reserves and watch your target!

Happy trading!!!