STI update

I must say that STI chart actually looks very bullish based on today's price action and seemed to be heading towards the 2500-2520 levels in the coming days.

While the sentiments on China stocks have been affected by the "Bio-Treat" shock Q4 losses, the STI component stocks like the banks and property counters look quite stable at this juncture and could be looking to be the main beneficiary of money getting out of China stocks. Transparency and accountability have always been the key issues surrounding China stocks and most China stocks are down.

Tech stocks seemed to be getting back in favour with Jurong Tech and MMI being upgraded by analysts. It seemed like Magnecomp might be the next stock to watch out for but this stock will be more suitable for investors who can 'hold' rather than for traders due to the low liquidity.

I have been busy designing my school and i just want to get it over and done with so that i can concentrate on my trading again!! I must say while designing a website is not difficult, the toughest part will be to actually maintain it up-to-date!! :) My school will start on 1 Sep 2006, whether it is completed or not is secondary. hehehe. I will build the walls and put in the chairs piece by piece with the 'support' of my little ninjas. good night.

A time to Cheer?

Long Cheer reported better than expected earnings for the year ended 30 June 2006. At the EPS of 11.2 cents, it is current trading at 9.4x and based on DBS latest report on 24 Aug 2006, the projected EPS for 2007F is 16.6 cents. That will translate into a prosepective PE of only 6.3x! (if the projections are accurate).

However the short term technical picture presents a less bullish scenario with the appearance of a doji and overbought indicators (Bollinger Bands, Stochastic, MACD). My short term view is that it will correct down towards the 95-97 cents in the coming days (where the first support is in the middle of the long candle on 23 Aug 06). The stock has also reached its technical objective of 106 from the breakout of its neckline at 87.

While the fundamentals over the longer term looks good, it may be a good idea to hold off your purchase if you are thinking of buying at this juncture. My short term 'bearish view' will be negated if 106 was taken out convincingly.

STI update

As promised, please find the chart on STI updated as of today (I had problem loading it on Tuesday). The parabolic SAR turned bearish today. A close below 2435 will likely see a retest of the 2400 support.

Straits Times Index Update

As promised, i will do a quick update on STI. Now this is very frustating that i cannot update the STI chart!!! why why why... forcing me to set up my own website?! :( (I will try to load the chart tonight from home).

Now i have to describe in words? I think upside for STI is limited as the parallel uptrend and the 61.8% fibo retracement all ends at 2520. With the bearish engulfing pattern on 21 August and the parabolic tightening coupled with bearish technical indicators like bearish divergence on MACD and overbought stochastic, my view is that the probability of a correction happening on STI is more likely than another upward movement. Once the parabolic SAR (bearish) is triggered, a likely target will be 2400, followed by 2360. <--- now you can appreciate why a picture speaks a thousand words!

Learning to Fish

This week is an extremely busy week for me (next week also)! Very the sian. Some of you asked me if there are any stocks to buy, but frankly if i cannot watch the market, i usually wont trade. As a result, i missed several trades such as MMI and Advanced Holdings even though i was contemplating entering these trades at one time. "Someone" actually owed me a lunch because Advanced Holdings crossed 40 cents today. hehehe... one free lunch next week. :P

I would encourage everyone to learn how to fish for yourself. I have been learning to fish for the last 6 years and i can assure you that once you acquire the ability to fish for yourself, you have no fear of the market or anyone. Today, in the world where jobs are no longer secured, i know that even if i get retrenched, i wont go hungry because i have acquired the skills to fish from the market.

Learning to fish is a continuous process and the best time to learn how to fish is when you actually dont need to fish. (just like the best time to look for a new job is when you dont need a job). If you are currently working full time, it is actually the best time to learn how to trade. This is because you dont need to 'trade' for a living. Your family dont depend on your trading to have food on the table. You can choose when you want to trade, you can withstand periods of drawdown because you can cover your losses with your salary (provided you dont kill yourself through reckless trading).

My personal experience (roughly) has been loss-making in the initial 1-2 years, breakeven for the next 0.5-1 year and then positive equity curve from the 3rd-4th year onwards. This is my 3rd year of positive returns and frankly i only trade when i am free. Based on my records this year, i only traded actively for 6 out of 8 months and there aren't actually many trades. The return so far has exceeded 20% but i guess this kind of return may not attract you when all the futures/option trading 'seminars' boast of returns exceeding 100%. However, i am happy with my 20% p.a. target. It is a return i can achieve without excessive risk.

The key to learning to fish is to be still in the game 10 years from today. Start small, learn how to trade, why you enter the trade, set up your own 'trading system' that tell you when to enter and when to exit a trade, put in place money management plan and learn about yourself. Trading is like a mirror. The more you trade, the more you will learn about yourself.

According to Dr Alexander Elder who wrote Trading for a Living, there are 3 areas which you need to focus on when you learn how to trade. He called it the 3Ms. Roughtly it means, Money Management, Mental (psychology) , Methodology. These are the 3 aspects which you need to 'train' yourself in when you want to learn how to Fish. Roughly it means:

Methodology - How do you enter/exit trades. What is your trading system. Devise a trading system that suits you. Set up a trading system that will let you enter a trade during quiet period and exit a trade during hot period.

Mental - How you handle winnings and losses. Do you have the mental strength to stomach drawndown? How to you pysche your brain so that you can perform consistently, able to handle losses and winnings, make money consistently. You can learn all you want about methodology and be well-versed in all the 'chart patterns' BUT if you cannot handle the mental aspect of trading well, (e.g. how you handle your attitude towards wins and losses), you can never be in the right frame of mind to trade. That is why some traders can trade well on paper but when you put him to trade 'live', he cannot do it because he is unable to overcome his mental barriers. Some people just cannot 'cut loss' because cutting loss is like admitting you have lost. If you are unable to overcome that 'cut loss' barrier, you can never be a trader.

Money Management - Do you have a money management plan when you initiate a trade? Money management is like 'knowing when to stop when you are wrong'. If you enter a trade and the market tells you that this is a mistake, your money management plan will force you to 'cut' that position before it spiral out of control. Before i enter any trade, i already know how much i will lose. The key to money management is to make the cut loss 'bearable'. How do you know what is a 'bearable' cut loss. That means if you cut loss of $x amount today and you can still sleep very well, this means it is within a bearable level. If you cant sleep if you lose that $x amount, means it is beyond your tolerance level. The trick is to keep it to 1-2% of your trading equity. I used to have a cut loss level of $500, but i have since shifted that to $1k-$2k.

If you ask me to rank the importance of the 3Ms, i will rank them in the following order: (1) Money Management, (2) Mental Management and (3) Methodology. Methodology is ranked the lowest because it is a skill which anyone can learn (even the hard core Fundamentalist know something about Technical Analysis) but (1) and (2) is something which the pure FA finds it hard to accept. Pure FAs find it very difficult to accept that they are wrong in their analysis, so they are unwilling to put in place a money management plan and as a result, they can never acquire the mindset of a trader.

Happy Fishing.

Its not a Bright World after all!

Nothing can describe the digust with myself with my trade in Bright World (I will spare you what i think about its management). I entered the trade yesterday morning and cut at pre-open this morning. While my equity account is still positive for the month of August, i was actually very angry with myself for this stupid trade. Usually i avoid holding a stock for its result announcement unless i am very sure it will exceed the expectations. I pulled the trigger in Bright World for the following reasons:

• My good friend visited the Company in June in China and gave me a glowing report on the management and company's operations for Q2. His view is that the company will likely exceed the expectations of the analysts.
• Most analysts painted a rosy picture (DBSV and OCBC).

What came out was beyond expectation (you can see the company keep its emphasis on 1st half result and not the Q2 result). The results for Q2 was totally unexpected. The top line hardly met 50% of the analysts forecast (downward revision soon?) and the bottom line for Q2 sucks!!

Last night i already know i would need to 'cut' this morning.... and here i go, cut cut cut. :( No hesitation no second thoughts...

思念Thinking of You?

Synear is one of the better IPOs that come along the way... just apply at the ATM and hope you will get it. This should be easier to get compare to getting 4 out of 6 numbers at Toto. My 'conservative' fair value peg it to about 71 cents even though the peers are trading at higher multiples.

Is it safe to Venture?

If you are thinking of jumping into Venture at this moment, it may be advisable to wait for a pullback to the $10.80-$11 mark. The $12 resistance level is where the previous support level is and will be a formidable resistance in the short term. You can see that the doji on 10 August fails to close above that $12 level as well. The doji coupled with overbought indicators may indicate possible short term correction. If it can cross the $12 barrier, it will enter into a strong resistance zone where the next target is at $13.

Venture was a good stock in the past (where price >S$20 in the past) but as it grow bigger, it had difficulty showing the kind of growth which investors have been accustomed to. That is why it faced selling pressures for the last 2.5 years since Jan 2004. Now it is trying to seeks new area of growth through acquistions and has bought into DMX and it is now trying to acquire GES.

Straits Times Index

STI showed a doji today. (yesterday was a close hanging man). I shorted SIMSCI again during the closing time. Although technically you need a confirmation the day after a doji to show 'reversal', i think a correction is on hand for a variety of reasons.

1. Holiday mood ? (Traders dont want to take a position as Wed is a public holiday)
2. Uninspiring corporate results ? (Quite a few companies reported 'below expectations' results, such as China Sky, Advanced Holdings, STX... to name a few).
3. Technical weakness ? (STI near to resistance zone at 2450-2500 and charts indicate weakness in bearish divergence and overbought).

My view is that a possible correction down towards 2420 to 2430 region is on hand in the coming days. A close below 2400-2415 zone would be extremely bearish.

National Day Rally?

Will there be a National Day Rally?
This was an excerpt from OCBC's report today.

In another two days’ time, Singapore celebrates its 41st National Day. Is there going to be a National Day rally? Traditionally, most market players will be looking forward to a rally in the run-up to National Day, but unfortunately, it is rare if historical information is anything to go by.
We have tracked statistics over the past few years and found that since 1990, the market not only failed to stage a rally but in most cases, the benchmark Straits Times Index (STI) actually headed lower. In 12 out of the past 16 years, the STI actually eased down up to a month before the actual National Day. Post-National Day, the market typically opened lower the following day in 12 out of the past 16 National Days.

Why the fairly lacklustre performance? This could be due to several reasons, with one being that most investors use this period to take short regional vacation breaks. More importantly, the event to watch is the National Day Rally speech, which is the highlight in the month of August.Typically, this takes place about 2-3 weeks after National Day and provides insight into the government's direction for the local economy. Depending on the speech, this could bring some cheer to the local bourse, although not to the same extent as the Singapore Budget in terms of corporate incentives and measures.

Increasing, from the US side, we are also seeing signs that the US Federal Reserve has reached the end of its rate hikes. Is the US Fed finally taking a break after two consecutive years of interest rate hikes? Based on recent comments from policy makers, they are signalling that the US economy is slowing, and economists are now not expecting another 25bps hike at the next meeting scheduled for 8 Aug 2006. Based on the latest Bloomberg survey, about 56% of the economists polled are expecting rate to stay at the same level versus about 62% expecting another quarter-percentage point hike in rate to 5.5% in the early July 2006 survey. While a stay in rate hike is positive, a large part has already been priced in.

Traditionally, high interest rate tends to draw interest away from equities. Currently, the STI stocks are offering an average yield of only 3.6%. Previously, when interest rates were low, stocks were attractive for both potential capital gains as well as higher dividends versus deposit rates. In addition, high interest rates also led to higher borrowing costs.For companies that are highly geared or have high capital expenditures in the past few years that were funded by borrowings, higher interest expenses could dent profitability. One key area of concern is the impact of high interest rates on corporate earnings. Even with a pause in US Fed Fund rate, local interest rates have already moved up drastically in the past two years and together with higher oil prices, are factors that could potentially dent corporate earnings, especially for the SMEs.
Recently, we saw concern over high interest rate taking the shine off local property stocks. Singapore listed property stocks have done remarkably well these past few years with stellar multi-year gains. The SES Properties Index gained 38% in 2003, 18% in 2004, 39% in 2005 and at the recent peak this year was up 29%. Since hitting the high in May 2006, property stock prices have tumbled and the index is now up only 12% for the year.Nevertheless, it is still a remarkable 4-year uptrend for the property sector.

However, one trend worth noting is that since May and together with the most recent round of rate hike, property stocks also took the biggest hit, down about 18% from the high. In a high interest rate environment, property stocks are vulnerable as mortgage rates move higher and we are already seeing the early signs of this being reflected in lower property stock and REIT prices.

Besides property, other segments of the Singapore equity market are less affected. Oil-related companies have seen robust orders in the past 18 months and this more than mitigate the impact from high interest rates and these companies are still poised to enjoy strong corporate earnings growth.Banking stocks have benefited from growing Asian economies and are still seeing healthy loan demand. The surge in 3-month interbank rate is also likely to be positive for banks, especially DBS with its large deposit base. Banks are also growing non-interest income from other fee-based activities. We believe that the big-cap stocks are fairly cash-rich and less affected in a high interest rate environment. (Carmen Lee)

To market to market to buy a fat pig?

Hi master,
i have a question regarding pfood's recent action .... volume has been high but price has not moved and in fact, kind of languishing ...... is this a sign of accumulation or distribution? what is your take? i suppose it's difficult to determine , but appreciate your views.
thanks,
chocofles

Last Thursday, OCBC technical chartist issued a trading buy call below S$1 before market opens. The price gapped up strongly at $1.03 in the morning but amazingly (or shockingly if you are holding the shares), the share price closed very weakly at 1.01. Looking at the large volume of 11m shares traded, i would view it as a bearish sign and the price chart looks weak to me. I would place the resistance at 1.05 and the support at 95.

Despite its cheap valuation based on historical results, I tend to side with the bears for now. One of my concern is the declining margins due to weak prices for hogs. The Q2 results that will be announced might present a clearer picture. However, Pfood's investment in Pine Agri is doing so well, so that might help to support Pfood. A break above 1.05 will head towards 1.10 while a close below 99 cents will mean a good chance that the 95 support will likely be tested again.

Ninja Portfolio Update

I closed off all my positions today. I sold Landwind at 50, Pacific Andes at 72 and Luzhou at 77. I guess not that bad for a 3 days work but it could have been better if i had stuck to my trading plan. I wanted to sell first thing this morning but decided to wait and see if there is follow-up buying following US positive close last night. The exact profit amount is S$2,302.45

I am angry with myself for missing the trades on China Fishery, Hyflux and possibly LMA..... Back to 100% cash again. S$102,302.45

I havent got a time to pen down my thoughts on my subscription plan yet. 24 hours is really not enough for me...

Fly like the Wind

I bought Landwind at 47 before market close yesterday. Some of you who have followed me in at 47 cents already exited at 50 cents today. I present 2 possible target prices depending on your time-frame. Enjoy the flight.

This is a nice braised porridge

I initiated a buy in Luzhou (泸州）儒粥 yesterday at about 735 cents. Some of you must have got it as well. Anyway, the chart and the 'target price' is here for your reference. I cant remember which house covered this and the target price. Caution: The 84 cents target price is for reference only because i usually get out way before it reach there.

China Milk - I sold my China Milk at 97 today. Too many China stocks now.

Landwind - Initiate a buy at 47 yesterday. Still look okay to me. Need to break 48.5 to run.

Pacific Andes - I am playing the likely good results announcement ? Frankly dont know why i buy this. I had bad experiences playing this one. hehehe.

Today is a new beginning!

Today is a new beginning! :) I got this feeling that many stocks will run liao! National Day Rally?

Anyway, i bought China Milk at 92, Luzhou at 735, Pacific Andes at 69. Will tell you if i add any more.