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Sunday, June 28, 2009

Chart Patterns Abused

Many people have abused the use of terminology such as double top, double bottom, head & shoulder & triangle...etc. These terms are part of a technical toolkit called Chart Patterns. For example, when Olam failed to rally beyond June 2's high ( $2.38 ) on June 15 ( $2.38 too ). Some people have immediately labeled Olam as having double top. This is not correct !
Chart patterns are pictures of trader's psychology reflected in the price charts that have predictive value. There are two major categories of chart patterns namely "Reversal Patterns" and "Continuation Patterns".

Reversal Patterns are considered "major" patterns because they usually required a longer time to form ( minimum 1~ 3 months, often longer ) and are rare ( at major market top or bottom ). Head & Shoulder, Double Top / Bottom, Triple Top / Bottom, Saurcer & V Spike fall under this category. Any "pattern" that has two "tops" which are only 5 ~ 10 days apart will not be a legitimate double top let alone the importance of volume as a confirmation is normally omitted ( by these people who have labeled it as double top ).

Continuation Patterns can be sub-divided into two categories based on time frame - Intermediate ( typically 1 month, may stretch to 2 ~ 3 months ) & minor ( no more than 3 weeks, typically 1 ~ 2 weeks ). All Triangles ( Symmetrical, Ascending, Descending, Wedges, Broadening ) come under Intermediate whereas Flags & Pennant come under minor. By the way, Flags & Pennant are the MOST reliable patterns of all patterns.

Volume is usually very important as a confirmation to the valid formation. In most cases ( except broadening triangle ), volume diminishes as the pattern takes shape ( For broadening triangle, volume expand as the pattern takes it shape ). Time frame is another vital consideration when validating the pattern. Take triangle as an example, breakout should take place between 2/3 to 3/4 from the 'base' to the 'apex'. Many people try to draw two converging lines on the prices and label them as a triangle even if the prices have reached the apex. This is again not correct ! If there is ever a 'breakout' from such a 'pattern', it is just coincident due to market sentiment. Trust me, you are just lucky, it has nothing to do with the mainstream chart pattern study ! It is more likely to be the breaking of a support / resistance or trendline instead.

Chart pattern is a big topic in technical analysis that is not possible to cover with one post. Some trainers charge a hefty sum for a 3 ~ 6 hours session workshop on this. The above is as much I can cover with one post ....


Friday, June 26, 2009

Intra-day Chart

STI Daily Chart : Parabolic SAR buy triggered

The amateur decides the opening prices & day range. The professional decides the closing prices. Sometime, it pays to be patient to watch where the market is going instead of rushing in based on an indicator and get trap.

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Thursday, June 25, 2009

Noble Group

The Market:
No change in my view on STI. It will either trigger Parabolic SAR buy phrase to turn bullish ( another 10 points up will do so ) or edge down to touch 2100 ( over time ). A word of caution, even if Parabolic SAR buy phrase is triggered, the index may still come down to touch 2100 after a brief spike. Parabolic SAR can have whipsaw too. Two additional points to note: CCI is in over-bought. Trendline violation has always been unforgiven historically. So overall, it is a very tricky moment ought to be cautious.... When would I consider safe if STI does turn bullish by Parabolic SAR, if it closes above 2,400.

I have recently come across a wise quote from a book "Mental Fitness For Trading" by Norman Hallett : ā€œIā€™d rather be out of a market (or stock) wishing I was in, than in a market wishing I was out.ā€. Think about it... make sense?

Noble Group
An Ascending Triangle appears to be forming. If valid, minimum target is $ 2.15. This forecast must be taken in tandem with the broad market health! Again ( as I have reiterated many times ), a chart pattern is not a pattern until it is completed & breakout.

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Wednesday, June 24, 2009

"Return Move" or "Pivot Point" ?

STI rebounded strongly today, the rebound was much stronger than I have expected. ( I expected +35 ~ +45 ). Despite the spectatular rebound, volume is not high. The index has now returned to hug the trendline. Will this be the "return move" after it has pierced through the trendline yesterday or a "pivot point" ? The next 1 ~ 2 days' move will unfold the answer. If the index is able to propel further for another 50 points gain in the next 1 ~ 2 sessions, it will trigger the Parabolic SAR buy phrase which is bullish. Otherwise, today may just be the 'return move' ( or 'throw back' ) which mean the correction will continue until the objective of 2100 is met.
Honestly, I am quite netural and I don't need to be correct with my view here. All I want is to make money & not a fortune teller. I am holding long so I do hope that my interpretation of the breaking of trendline is wrong. However, trendline violation is a pretty serious issue in technical analysis and more often than not the objective will be met.


Tuesday, June 23, 2009

Updated STI EW Chart

The wave 4 label has just shown up yesterday ( finally ! ). However, this does not mean wave 4 target is met as there can be recount as we continue to edge down. PTI is still pretty high ( at 78 ). Normally, PTI should be < 35 in order that the correction is considered done. The odds : If STI hits around 2,340, it will turn bullish ( Parabolic SAR ).


Wall Street Near Support

This may be good news since STI & Asian bourses often take cue from US market:

Dow ( Closed 8,339 )
- supports at : 8,220 / 7,800. RSI already in over-sold ( 25% )
Depending on the time frame we are looking, last night's closing was a support itself confluence by two Fibo level ( 50% & 23.6% ).

S&P500 ( Closed 893 )
- supports at : 880 / 830. RSI already in over-sold ( 27% )

Locally, STI has broken the uptrend line established since March 10. 40 days simple moving average was violated too. RSI has not reached oversold yet ( 45% ). Using trendline as a mean to determine the price objective, the target shall be :
2,424 - 2,265 = 159
2,265 - 159 = 2,106 ( or in round number 2,100 )
If it is going to happen this way, it is not going to happen tomorrow or within 2 ~ 3 days but probably the next 2 ~ 3 weeks ( in between there will be technical rebound creating confusion on this stance ).


Monday, June 22, 2009

One Lotter

Today, the market was given a chance to demonstrate its resilience and strength. Unfortunately, it has failed to hold early gain and closed lower. This has brought us back to where we were on last Thursday - the index is still hugging the trendline. Honestly, I am very apprehensive of where the index will be heading. In order to turn bullish, it must hit 2,350. A break below the trendline may see 2,180, 2,100, 2050.
Lately, many traders are bothered by the "one lotter" phenomenon. What is a "one lotter"? Someone who buy up or sell down 1 lot at a time, in the interval of every few minutes, throughout the day. Take a look at Kepland today.... No one know who the "one lotter(s)" is ( are ). But most people believes they are trying to manuplate the counter/market. It seems to me like the 1 lotter buy up is bearish and the 1 lotter sell down is bullish !?


Friday, June 19, 2009

Straits Times Index - Crucial Day!

STI is at trendline support. Today's closing is very critical ! If it closes higher, we may resume the uptrend from here. If it closes lower, this may be the first sign of a trend reversal. In technical analysis, we should always assume the existing trend holds until evident of a reversal. Up until yesterday despite the continued selling, we were fine ( simply put, it was a healthy correction ). But if the trendline is unable to hold, this will be the first sign of trouble ( it will be an unhealthy meltdown ).
As of 9:30am, STI is in positive territory. We need STI to hold on to the gain till end of day. Next week, there will be window dressing by the fund for both month end & quarter end. So I hope STI can hold on to the trendline....


Tuesday, June 16, 2009

RSI Stood The Test !

Welles' RSI stood the test time and again ! The bearish divergence spotted on June 2 has finally kicked into action. Admittedly, my confident level was shaken along the way and thought that I have read the market wrongly ( this is apparently one of my many weaknesses in trading ! ).
The next characteristic of RSI is that the mid-point ( 50 level ) will often act as support during pullbacks & resistance during bounces. We are closed enough to 50 right now ( 52.64 ). Let's see if this works ! I think the chances is high from the perspective of candlestick too. Today's closing look like a possible reversal day !

Kepland :
Admittedly, the weekly candlestick chart ( and the monthly too ) are not so nice ( shooting star ). That's why this counter was heavily beaten from $3 to an intra-day low of $2.17 today. The closing today sat at Fibo 61.8%. Candlestick looks like a reversal pattern. Hourly chart has just turned bullish. I am hoping it has hit the bottom and will reverse from here.

SingTel :
A few words about SingTel .... This counter has always been "used" by the invisible hands to lift the market on a heavy down day. It rose from $2.89 to $3.05 amid the sharp plunge of the index. Take a look at the chart, this is not an isolated case. Take a look also at the weightage of SingTel in FTSE STI... the answer will unfold.


Wednesday, June 10, 2009

Trading Digest

I guess I have read the market wrongly !? But the good news is I did not miss the move this time. Although I have been pessimistic, I was not stubborn about my view and have made provision for mistake. I have accumulated some the past few days and added more today as the market move. It seems like the index is going to make yet another attempt to clear 2,400. If it is successful, we can look forward to 2,600 and most of the stocks should hit new high! Once 2,400 is attained, Parabolic buy phrase will be triggered.
Now that I have turned bullish as the market unfold, I have not totally dropped my cautious view yet unless STI is able to break 2,400 decisively. Failing which, we may still be looking at 2,280 ~ 2,180.



Tuesday, June 9, 2009

The Market / Cosco

The Market:
I visited a few blogs belong to "Da Shi Ji ( master of its class ) site owners, mostly trainers per se. Surprisingly, all of them are taking the current pull back quite lightly as just profit taking. I am, however, more cautious driven by the bearish divergence in RSI as well as the trigger of Parabolic SAR sell phrase. Maybe I am too sensitive? But HSI & DJIA are showing the exact bearish divergence in the respective charts.
That said, I am not implying for a trend reversal. The weekly STI chart is still in Parabolic SAR buy phrase. In fact, the monthly chart has just turned bullish last month based on Parabolic SAR ( although the month to date candle is a small inverted hammer ).

So, I am bearish only for the near term and are looking at 2,180 ~ 2,280. Beyond that, I think the mid / long term trends are still bullish.

Elliot Wave chart shows we are going through wave 4 correction. PTI is still quite high at 88 suggesting more possible downside. Again, I take this as a rough reference only because Wave 3 has been recounted many times now!!

Cosco :
I am beginning to accumulate at a very slow pace as I won't know whether my pessimistic view is correct or wrong. I don't want to be left out if the market prove my view wrong so I am picking up small quantity on each dip..... Collected a few lots of Yanlord today. Cosco, Capitaland are in my shopping list. IndoAgri looks attractive but a bit worry on its failure to hit higher high and worst if it breaks below 1.24 !


Monday, June 8, 2009

Straits Times Index Update

STI failed to close above 2,400 after many attempts over the past 4 ~ 5 days. The index has finally broken down today and break the last significant low at 2,344 producing a lower high and lower low candlestick. Next supports are roughly ( I like to use round numbers ) 2,280, 2,180 & 2100. The latter two levels confluence with Fibo 38.2% & 50% supports.
2,280/2,180 is where I think STI will land.


Tuesday, June 2, 2009

Straits Times Index - Correction Imminent

When Welles Wilder introduced RSI in 1978 in his book "New Concepts in Technical Trading System", he considered divergence the single most indicative characteristic of the indicator. Divergence occurs in overbought or oversold are serious warning that should be heeded. I suspect STI is heading for not just a pull back judging at the degree of divergence spotted!
I am 90% in cash now except with some Swiber that has gotten stuck as a result of the plunge due to placement issue. Will try to get rid of it and stay sidelines.


Monday, June 1, 2009

China XLX