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Wednesday, April 28, 2010

Straits Times Index - Trendline Broken

As cautioned in my posts dated April 19 & 25, the heavy plunge of Dow overnight should not come as a surprise!

Locally, STI loss 59.64 ponts and penetrated an uptrend line as shown. The downside target for violating the trendline is 2,870. After losing about 70 points in two days, STI is oversold and may head for a rebound first before resuming to edge down to 2,870 ( 2 ~ 3 weeks ).

As STI is still trading above 200 days SMA, the long term trend is still up.

I have in my radar today SGX at $8.10, F&N at $4.80, SembCorp at $4.21, IndoAgri at $2.35.... but at the end of the day only managed to get SembCorp! Anyway, this is likely to be meant for a nimble trade in anticipation for rebound.


Sunday, April 25, 2010

Position Size

Being able to buy at day low and sell at day high to a trader is like scoring hole-in-one to a golfer! Last Friday, I had the privilege to assimilate the joy of hole-in-one from my SembMar trade. I entered the trade at $4.28 and took profit at $4.39 making 11 cents.

For Swing Trade, my profit expectation is usually a few cents. Therefore, ten to eleven cents are more than satisfactory for a nimble trade. Anyone who wonder how a few cents can be considered as profit should review his position size. If the position size is too small, eg: 1 lot, you will need many, many bids to be profitable. To achieve the 'many, many' bids will require a 'long, long' time. Time in the market translates into risk. Conversely, if the position size is large enough, even 1~2 bids can be profitable. Obviously, the time frame required to achieve a few bids will be relatively short.

Over the years, I have learnt to trade at a position size not too small that must take forever to be profitable ( of course, not too large to be over trade ). In term of stock selection, usually on stocks above $1 ( preferably $2 ~ $4 ).

Most of the Swing Trade opportunity identified here are aimed at 8~15 cents and 2~5 days. Based on this criteria, 3 out of my 4 trades last week was good ( F&N, SembMar & IndoAgri were good, Capitaland was bad ).

Dow Jones Industrial Index:
ADX declines from 40 to 30 signaling the uptrend has weakened ( may be heading for a correction from extreme, see last post ). RSI is exhibiting sign of a failure swing ( not complete yet and not confirm yet ). Anyway, there is warning signs for a cautious week(s) ahead.

Straits Times Index;
The long term trend is still up. However, the index need to close above 2,996 ( or round figure 3,000 ) to be bullish. ADX is sending us a caution sign of weakening uptrend since it is declining....


Saturday, April 24, 2010

Directional Movement Indicators

The purpose of technical analysis is to identify the price trend and try to participate in the direction of the trend at an early stage and profit from it.

ADX ( Average Directional Index ) along with DI+ & DI- ( Directional Movement Indicators, some denote as DMI ) are technical indicators developed by Welles Wilder in his book ( 1978 ) 'New Concepts in Technical Trading Systems'. If interpreted correctly, ADX, DI+ / DI- can give important hint on the strength of the current trend and warn of a probable reversal.

Welder compares a stock's trading range for one day to the trading range on the previous day to measure trend. Positive directional movement ( DI+) occurs when the high for a day exceeds the high of the previous day. Negative direction movement ( DI-) occurs when the low for a day exceeds the low of the previous day.

Interpretation for DI+ / DI- :

1. When one of the DI is higher than the other ( eg: DI+ is above DI- ), the trend is in the direciton of that DI ( in this case DI+, so the trend is up )
2. When the DI+ and DI- are converging, it suggests the direction of the trend is now sideways . Like in a congestion area, it may break in either direction ( often, the two DIs come to equilibrium and then part in their original direction ). A buy or sell stop should be placed to safe guard your positions.
3. When a DI is reaching an extreme level, it is often associated with a trend being at its maximum and invariably may slow down or perhaps reverse. This is the best time to take profit or exit a position.

The DIs can be used to create the DX ( Direction Index ) and subsequently the ADX. The ADX indicator is valuable in determining when to apply a moving average trend following system or an oscillator leading indicator.

Interpretation for ADX :

1. When the ADX peaks above both the DIs, it often signals a peak in the trend
2. Low levels in the ADX indicates the market is dormant or trendless. A dormant period is usually followed by a dynamic period.

In an article appearing in Futures Magazine, Ashwani Gujral provided general rules for using ADX. His gudielines include the following:

When ADX is rising and at a level:

Between 15 & 25
- Beginning of trending; use trending indicators (eg: moving average)

Between 25 & 45
- Definite trending; use trending indicators (eg: moving average)

45 or above
- Overextended; watch for trend turning point; use price or pattern indicator

When ADX is declining and at a level:

Between 45 & 30
- Correction from extreme likely; use patterns and trending indicators

Between 30 & 20
- Consolidation; use Oscillators

Below 20
- Low volatility; very short swings, no trend, use Oscillators


Thursday, April 22, 2010

SembMar / CapitaMall Trust

Another Swing Trade opportunity may be here !

CapitaMall Trust
A potential Ascending triangle breakout. Price objective on successful breakout is $2.35.

F&N / Capitaland Update:
Sold half of my F&N today with 20 cents of profit, holding another half for further upside since Parabolic SAR has just turned bullish.
Cut Capitaland yesterday at $3.94 losing 4 cents ( broke 40 & 200 SMA ). Although I could have cut it when rebound which should be soon, I was concerned about the weekly chart which is showing a shooting star. The idea is to cut losses quick and let profit run. Will consider to enter again at $3.75.

Indo's fan may get ready to enter too. Swing Trade setup!

SI Station or NextView?
For those who wonder which one to pick, the answer is clear - definitely go for SI Station! NextView is so primitive as compared to SI Station.


Monday, April 19, 2010

Market Volatiliy Return

Dow dropped 125 points on Friday. Usually, triple digit move like this does not come in isolation. Over the next 2 ~ 3 weeks, we may expect more triple digit up and down move. Volatility translates into trading opportunity as well as risk. Nimble action is advisable!

Locally, STI closed above the 20 SMA and a resistance turned support line. Swing trading setup suggest a possible technical rebound after three days of drawdowns ( period of successive losses is called drawndowns ). However, STI always take cue from Dow so it is hard to conclude whether the setup will be invalidated by Dow overnight performance. Immediate support and resistance are 2,880 & 2,997 ( or simply 3,000 - gap resistance ).

Should there be a technical rebound, the counters below show pretty nice setup:

Dow Chart :
Key support at thick blue line ( 10,770 )

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Thursday, April 15, 2010


Breakout from downtrend line as well as trading above 200 days moving average. It has risen quite a lot already the last couple of days. Wait for throw-back to enter....



Breakout from Symmetrical Triangle as well as trading above 200 days moving average, chart pattern target is $ 1.90. Word of caution, this counter has extremely low liquidity. May need to hold for 6 ~ 9 months.


Tuesday, April 13, 2010


Very nice swing trade setup!
Trigger at $4.25.
Minimum target is last swing high - $4.40 ( more likely to be beyond )
Cut loss at $ 4.15.

Note: If prices continue to dip, the setup will be carried forward awaiting new trigger level ( previous day high ). The setup is valid for as long as prices within the blue/red MA.


Midas - Ascending Triangle Breakout

Target : $ 1.38
There may be 'throw back' after breakout, good for entry.


Thursday, April 8, 2010

Market View

Straits Times Index
STI has risen 109 points in 4 straight sessions prior to today. The retracement we see today is to correct the overbought situation and RSI divergence. I believe this is healthy and provide good opportunity to buy on dip based on Swing Trade setup ( when prices dip to buy zone between 20 & 40 MA and CCI < -100 ).

The long term trend of STI is still bullish. I believe it will retest 3,000 in the near future and thereafter head toward 3,200.

ADX is showing sign of over extended while RSI exhibits a minor divergence. Key support at 10,770.


Tuesday, April 6, 2010

IndoAgri - Point & Figure Analysis

Below is the Point and Figure ( P&F ) chart of IndoAgri

The three horizontal blue lines ( A, B, C ) enable Horizontal Count. The target for Horizontal Count C is $4.30 ( this will be the multi-years long term target ).

The thick blue vertical line enable Vertical Count to measure breakout target. The target for Vertical Count is $3.10 ( this will be the multi-months mid term target ).

Point and Figure is a pure price charting method that does not take time & volume into consideration. This apply to the price target too where there is no way to determine the time line. Obviously, don't expect prices to rally from the current closing to $3.10 or $4.30 in a straight line or anytime too soon. It will take time and probably a bumpy ride but eventually will get there unless sentiment change ( major reversal ).

More about Point and Figure can be found here.


Monday, April 5, 2010

F&N, IndoAgri

System buy signal ( green arrow ) surfaced several days ago but I did not pay attention and missed the big move:

However, Point & Figure shows bearish resistance trend line penetrated by two successive double-top** buy signals. Thus, entry for long term investment is never too late. Be sure to only buy on dip though because 1) it has risen so sharply, profit taking is inevitable 2) the box size is $0.25 with 3 box reversal ( ie: any pull back lesser than $0.75 won't be shown ).

** Note the '-' I use. This is different from the 'double top' ( without '-' ) in classical line, bar or candlestick chart pattern. The latter has bearish implication but the former ( double-top ) is a P&F buy signal.

IndoAgri :
Awaiting for it to break $2.37 before propelling higher!


STI - Fresh Buy Signal

STI rose by 25.36 points today to close at 2,968.38. It has surpassed the last significant high at 2,947 on January 11. All of my charts, namely Kagi, Point & Figure and Candlestick System, are showing fresh buy signal today. While short term profit taking is inevitable after the index has risen by more than 80 points Friday & Monday combined, the long term trend is definitely still bullish!