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"E-book" by AK

Second "e-book".

Another free "e-book".

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Raffles Education: A new low.

Friday, December 3, 2010

What started out as a promising up day for the STI was not to be as the index sank almost 1% at closing.

In Singapore, share prices lost early gains to end weaker on Friday following concerns over interest rates. Traders said the market firmed with early gains in regional exchanges as strong US economic data boosted sentiment. But prices pulled back later after China said it would tighten monetary policy next year, suggesting further interest rate hikes to cap inflation.
Read article here.

My portfolio is largely unaffected except for a small long position I have in Raffles Education. This was something I purchased a couple of months ago in early October as I identified a positive divergence between the rising MACD and the falling price on the daily chart. A reader at the time suggested that I could be a bit slow in identifying that divergence and it turned out that he was right.

26c looked promising as a possible double bottom with volume on 3 Sep, when 26c was first touched, very high but volume had been very low when 26c was retested recently. A picture of low volume pull back was also rather clear. Well, today's expansion in volume took out 26c and threw a spanner in the works. 26c was just a floor.

Do I see price falling further? Price touched a low of 25c and this is where we find the 138.2% Fibo line before closing at 25.5c. This could be another floor and should provide interim support. The MFI and RSI have been forming lower highs, suggesting a reduction in demand and buying momentum. However, they are both in negative territory now which could give pause to the selling momentum.

Would I sell now and take a 10% loss? Let us look at the weekly chart.

Since early June 2009 when the counter hit a high of 70c, trading volume has been declining as price retreated. As each floor (support) was broken, the trading volume became lower. The MACD has also been gently rising since mid December 2009 as price continued in its downtrend.

To talk about a reversal is surely early days yet but the signs are that further downside could well be limited. When all the would be sellers have sold, we could see a reversal of fortunes. In the meantime, a long term downtrend is still in force and this is not for the faint hearted.

So, I would not sell my small (money losing) stake in the company. Also, I tend to overlook counters which I am not vested in. Stay invested and I would continue to monitor the company.

Related post:
Raffles Education: A trading opportunity.


Ao said...

Hi Ak71,

It is me again. Even though I mentioned that you could be a bit slow in identifying that divergence, I also did a small trade.

I learned my own TA. Hence, I do not trust my own TA as I did not have someone to guide me. I guess I am too used to school method of teaching.

May I know how did you learned TA? Did you learn it from someone? :)

AK71 said...

Hi Ao,

A friend introduced me to TA and I picked up the rest from books, reading The EDGE and checking up Investopedia. Totally self taught. So, I am still paying school fees to Mr. Market. Haha... ;)

My best investments are still those which combined FA and TA. I am not that good at pure TA.

koori said...

hi AK

i'm in a similar situation as u but with this counter called 'hoe leong'

AK71 said...

Hi koori,

I took a look at Hoe Leong's chart. I see what you mean. ;)

The weekly chart for Hoe Leong shows the 200wMA at 23.5c. MFI has also formed higher lows. Support is at hand.

There could be a rebound. Good luck. :)

Ao said...

Hi AK71,

I when to analyze Raffles edu chart again. I realized that there was contradicting signals between MACD bullish divergence vs descending triangle. May I know what is your take regarding MACD divergence vs ascending/descending triangle?

AK71 said...

Hi Ao,

I could be wrong but I do not see any descending triangles.

This is from Investopedia:
A bearish chart pattern used in technical analysis that is created by drawing one trendline that connects a series of lower highs and a second trendline that has historically proven to be a strong level of support.

The second part of this definition is missing in the case of Raffles Education's chart.

For an example of descending triangles:
Descending triangle.

Ao said...

Hi AK71.

Wouldn't we get a descending triangle if we join the top of 17 Mar 10 with the top of 2 dec 10 as the trendline and with 0.265 as the proven support level?
The price retested the top of the trendline on 21 Sept 10 and from 21 oct 10 to 1 dec 10
The price tested the support level on 9 June 10, 31 Aug to 6 Sept and on 23Nov 10 to 2 Dec 10.

AK71 said...

Hi Ao,

I see the first bit which is a downtrend resistance line connecting lower highs.

However, for descending triangles, I would want to see each low testing the strong support at 26.5c but it was not the case.

I might be too pedantic. :)

Anonymous said...

Hi AK71,

Raffles Education closed at $0.25 today, a low last touched on 3 Nov last year. What's your reading on it now?

JT Geog

AK71 said...

Hi JT Geog,

My reading has not changed since my last blog post. Raffles Education's downtrend is intact. No reversal in sight yet.

However, I am not cutting losses because I feel that further downside is limited. :)

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