3 bue chips and 1 REIT

Saizen REIT: Still trading sideways.  MFI has moved into oversold territory.  The quarterly report will be released tomorrow in the morning before trading starts.  Volume is very thin today as if everyone is waiting for the report before deciding on what to do next.

F&N:  Uptick in the MFI pushed the index out of oversold territory as the terribly oversold counter seems to have attracted some buyers.  Price action formed an inverted black hammer on respectable volume and has moved away from the lower limits of the Bollinger bands.  If this continues, the correction is over and we might see some consolidation.  Initial resistance is provided by a rising 200dMA at $3.83 followed by the 100dMA at $3.92.

Keppel Corp: MFI continues to rise and seems determined to form a higher high.  This is a positive as it signals the return of some buying momentum.  That the black candle day is accompanied by reduced volume today is also a positive.  As of now, the counter's uptrend is stil intact.

SPH:  A low volume day as price almost formed a white hammer.  MFI has turned up.  Let us see if the symmetrical triangle I talked about yesterday will deliver good news in time.

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Healthway Medical: Almost but not quite.

Healthway Medical looked as if it was going to lose its support at 14c at one point today as almost 10m shares were sold down at 14c and wiped out the entire buy queue.  However, no selldown took place at 13.5c and buyers came back to close the day at 14c. 

The 50dMA support has held up.  This is meaningful as not closing lower today has helped the counter to take the first tentative step away from the lower limits of the Bollinger bands.  It has also broken out of its downtrend resistance.  It is still too early to say if this means that the correction is over but it might just be an early sign.

MACD has crossed below zero, confirming that the upward momentum is well and truly over.  In the next session, if price continues to stay at 14c or higher, we could say more confidently that the counter might be moving into a consolidation phase.

Golden Agriculture: Reversal at hand?

Golden Agriculture is beginning to look more promising.  After forming a nice white candle yesterday which almost engulfed the preceding session's price action, it formed a short black candle today.  In charting terms, this is a thrusting pattern in which the price action moved in the opposite direction of the preceding up day but did not manage to go beyond the midpoint of the preceding white candle.   

The price action also happened on the back of reduced volume which confirms a lack of selling conviction.  MFI has formed a higher low and exhibits an upward bias, possibly indicating increased buying momentum.  The MACD's decline is abating and we want to see the distance with the signal line closing which will happen if a bullish crossover is going to take place.

Golden Agriculture is still trading above its uptrend support despite its price having corrected by more than 20% from its recent high.  That its correction is at an end is quite evident as it has emerged from its recent steep downtrend resistance.  It is consolidating and signs are that price might be getting ready for a move upwards.  Initial resistance is provided by the 50dMA and 20dMA at 52c and 53c respectively.  In an upward move, these resistance are likely to be swept away.  More meaningful resistance are at 55c and 59c.

Small, mid and large caps

The STI gained 51.4 points to close at 2,745.02 on relatively low volume.  This might have been the rebound that stale bulls were waiting for in order to reduce exposure in some index linked counters.

Healthway Medical closed at 14c today and it remains to be seen if this support would hold or would 13c, the next support, be tested.  The declining volume continues to confirm a lack of selling conviction and as the price declines, the chances of supports holding become higher in this light.  With the MACD declining and positioned just above zero, there is almost no doubt that the upward momentum is over.  MFI confirms this as it did not rebound off the trendline support today, confirming a lack of buying momentum.  Now, we have to pay attention to the Bollinger bands.  See how the price action has been hugging the lower limits of the Bollinger bands?  We want to see the price action detaching and moving inwards towards the 20dMA.  That would be the first sign that the correction might be at an end.  This would likely be followed by a consolidation phase.  Strategy: I'm holding on to my Healthway Medical shares and will add to my position again once I see signs that the correction has ended.

Price of crude palm oil (CPO) closed at RM 2,561 as it continues its upward climb after reaching a recent low of almost RM 2,400.  It looks likely that it will continue to rise and test the trendline resistance.  Given the current weak sentiments, a lower high would seem to be more probable.  Golden Agriculture seems to echo the relatively positive performance in CPO and closed at 51.5c, forming a white candle in the process.  However, this is on relatively low volume which makes the upward move in price less convincing.  This is echoed by the MFI as it stays flat, signalling a lack of buying momentum.  A flat 50dMA at 52c provides immediate resistance.  If this is taken out, a declining 20dMA provides a stronger resistance at 54c.  Strategy: Look to the MACD (blue line) for signs.  Once it closes in on the signal line (red line), that is a sign of a possible reversal.  Of course, to be safe, wait for confirmation as the MACD crosses above the signal line.

Saizen REIT ends at 16c on another low volume day.  There is not doubt that the counter is stuck in sideways trading but the uptrend is intact.  Let us see if the report due to be delivered in the morning of 11 Feb 10 will provide some stimulus here.  Strategy: Accumulate.

Keppel Corporation closed at $8.34 on a white candle day as it's resisted by the 50dMA.  It did manage to safely stay within its uptrend although the diminished volume does not make this convincing.  The overall picture is quite pleasing as the upmove today means that the low of $8.12 formed in the last session is a higher low.  Will the price break resistance tomorrow to test the recent high?  MFI shows that the buying momentum has an upward bias and bulls might breathe a sigh of relieve yet.

F&N today confirmed that it is indeed the weakest of the three blue chips I have been looking at in recent days.  The black candle formed today is accompanied by very much higher volume as price closed at $3.78.  MFI plunges deeper into the oversold territory and the MACD continues its descend and is pulling away from the signal line.  All these means that F&N is terribly oversold but such strong selldowns usually have some momentum.  It would be wise to wait a bit for some signs that the correction is over before going long.

SPH is, technically, the strongest blue chip here.  Today, I made an interesting observation.  Dare I hope?  It looks like a symmetrical triangle is forming in SPH's price action of late.  Look out for the MACD (blue line) closing in on the signal line (red line) as it might mean that it is ready to form a bullish crossover.  This would mean that price would probably break out higher .  With MFI forming a higher low, the buying momentum has an upward bias.  I guess a bit of hope doesn't hurt.

Are the blue chips singing the Blues?

No morning star formation for F&N.  In fact, price opened lower at the 200dMA, $3.80, made a half hearted attempt to rise only to close lower at $3.76.  Breaking the 200dMA is very bearish since it signals the end of a longer term uptrend.  The consolation?  The volume is much lower and MFI has entered the oversold region.  Is there no respite?  It certainly looks like there would be more downside.  Looking at the weekly chart, we see the 50wMA rising and looks set to forming a golden cross with the 100wMA at $3.60.  I might be tempted to buy some at that level then.

Keppel Corp shows relative strength compared to F&N even as the morning star formation failed to materialise.  Price did open and close higher compared to the previous session, almost forming a black hammer in the process.  Closing at $8.24, however, is under the 100dMA which is at $8.27.  This confirms that the 100dMA is now the immediate resistance.  20dMA and 50dMA have both completed their downward turns and seem determined to decline.  Dead crosses up ahead?  A look at the weekly chart shows that the price has been hugging the 20wMA for support in the past three months.  The MACD continues to decline and the jury is out on whether the 20wMA will continue to be a support.  If the 20wMA breaks, there is some way to fall.

No morning star either for SPH but it remains the strongest of the three blue chips here.  Price closed lower at $3.68 and formed a black hammer but not before touching a low of $3.65 to test the 100dMA.  So, is SPH a safe haven?  Nothing is safe if the bear comes back.  Looking at the candlestick supports and resistance, if SPH breaks its trendline support, it could sink rapidly to $3.40 which coincides with the rising 200dMA.  If that happens, I'm bringing out my warchest.

Related posts:
A tale of two blue chips: F&N and Keppel Corp
Is SPH the bluest of them all?

A weak showing

No morning star formation for Golden Agriculture.  Price closed right smack on the 50c support level.  Even though volume expanded to become the highest in the last three sessions, the picture of a low volume pullback is still valid.  That the price touched a low of 49c before rebounding suggests that the 50c support has become porous.  100dMA is at 48.5c and should provide the next level of support.  If this breaks, there is some way to fall.  Of course, if the 50c support level continues to hold up, chances of some upside action will increase.

The low volume pullback picture for Healthway Medical is intact.  Price action tested the 14c support level today before closing at 14.5c.  If 14c breaks, the next level of support should be where the 50dMA is and that's at 13c.  MFI has turned down and looks set to test its trendline support.  Let's see if it rebounds to form a higher low.  If it does, it would be a positive.  Otherwise, it's back to being lacklustre.  MACD continues to descend and is nearing zero.  If it goes below zero, it would signal the end of the upward momentum.

Saizen REIT remains rather illiquid and closed with a gravestone doji at 16c.  The daily MAs are flattening out and indicate a period of low volatility as prices have been trading sideways.  Looking at the weekly chart shows that the price is still trending upwards.  This is the longer term picture.  In terms of fundamentals, Saizen REIT is an attractive longer term investment for anyone who wants to buy residential real estate in Japan at a huge discount and it is comforting to see the chart confirming that the trend over the longer term is still up.

Gold or silver?

I have blogged about gold and how it might be a good idea to buy some to protect our wealth against a backdrop of higher inflation.  For almost a year now, I have been hearing from various quarters that silver is undervalued and from a value perspective, it is a better buy than gold.  Certainly, Marc Faber and Jim Rogers, two of the greatest financial brains of our time seem to think so.  This is not a new idea but it is to me since I have not seriously looked into this before.

Silver is a real asset, with real value, just like gold, as its supply is finite.  Fiat currencies, on the other hand, do not have any intrinsic value and more could be produced at will.  So, we expect silver to at least keep pace with inflation and in an inflationary environment, an investment in silver should protect our wealth from being eroded.

So, I decided that I should do some research on the subject even though I am quite comfortable with my current choices in investments.  If I decide not to buy any silver in the end, I would have gained some useful knowledge anyway, I rationalised.  I found much information and I am now posting what I feel are some interesting findings.

From MoneyWeek, 24 April 09:

Indeed, well over half of the annual silver supply is now used by industry (in sectors ranging from medicine to aerospace), compared to around 11% for gold. In precious metal upswings, it tends to outperform gold: the "same drivers as gold driving a smaller market ensures that", says Franklin Sanders of The Money Changer.......

.....Once sentiment turns, however, silver can tumble rapidly...

From Mineweb, 5 Nov 09:

The longer term trend channel for silver began on March 21st, 2003 at a low of $4.35 and has upper resistance of $51 and lower support at $12. Such volatility has always been very high because, with the silver market only about 2% that of gold, even a small amount of money flowing into silver has a huge impact.


The medium term trend channel began with a lengthy March through August 2007 consolidation base of $13 - $14 and currently has upper resistance at $32 and lower support at $13.


The Gold:Silver ratio has ranged from 14.9-to-1 in January 15, 1980 at the time of the record high gold and silver prices to 99.8-to-1 on February 22, 1991 when the price of silver was particularly depressed.


The current short term trend channel began in November 2008 at $8.79 and currently has upper resistance at $22 and lower support at $15.50.

Silver is currently trading at the higher end of the Gold:Silver ratio since 1980.  Silver is now US$15.15/oz while gold is US$ 1,052.20/oz.  This gives us a ratio of 69.45 to 1.  This is closer to the historical high of 99.8 to 1.
So, there seems to be some truth in the claim that silver is undervalued now and that it is a laggard in the realm of precious metals or it could also mean that gold is simply too expensive.  Some hedging might not be a bad idea.

There is a very easy way to gain exposure to silver in Singapore through a Silver Savings Account with UOB.  I might just start an account.  Just like gold, I will probably be buying silver with an aim to protect my wealth with the increased likelihood of higher inflation in the coming years.  It will not be for trading.

Related posts:
Gold as an insurance against inflation.
101 investment choices.

Is SPH the bluest of them all?

Some readers are disturbed by my write up on F&N and Keppel Corporation yesterday.  Well, if I had long positions in those counters at this point in time and if the positions were big and if they were bought at recent highs, I would be disturbed too.  Would they become blue black chips?

So, are there no bastions of strength left, seeing how F&N and Keppel Corporation are in precarious positions?  Aren't blue chips supposed to be the strongest of them all?  Well, the color blue ranges from a very light baby blue to a very dark midnight blue.  Things are always relative, remember?

I have mentioned quite a few times in my blog and elsewhere that my favourite blue chip has been SPH for quite some time.  I like their core business.  I like the Paragon building.  I like how they have diversified into property development.  I like their relatively high NAV.  I like their relatively low PE.  I like their current assets.  I like their relatively generous dividend payouts. Relative?  Relative to other blue chips, that is.  I also like the fact that Dr. Tony Tan is at the helm.  So, the fundamentals are good.  What about the technicals?

Technically, SPH is less volatile compared to Keppel Corporation and is more similar to F&N.  SPH is very comfortably positioned in its uptrend. Unlike F&N and Keppel Corporation which are both hanging onto their trendline supports for dear life, we see SPH forming a white spinning top in the last session, closing at $3.70.  Trendline support which I have drawn in orange is at $3.59 thereabouts.

The white spinning top looks like it's setting up for a possible morning star formation.  Sounds familiar?  Price will have to open above $3.72 and close higher in the next session for this to be valid.  I have drawn a trendline resistance in brown color.  This connects recent highs.  Any move up in price should meet with resistance provided by this trendline, currently at $3.76 or so.  Not much upside?  Looks like it.

What about the downside?  I am not delusional.  I do not think that SPH is immune to negative sentiments. The MFI continues to decline and at 35%, it is not oversold yet.  The index has been forming higher lows and if we connect these lows, we see a gently rising support line.  The probability is greater for the buying momentum to continue weakening towards this line.

As buying momentum weakens, a decline in price might see the orange color trendline support tested.  That would be a nice level to buy some.

SPH is my single largest investment in a blue chip company for a few months now.  I am in no hurry to divest and would in fact buy more as it weakens to support.

A tale of two blue chips: F&N and Keppel Corp

A late night chat with La Papillion in his cbox led to a comparison between F&N and Keppel Corp.  I decided to do a TA on both counters to see which one has relative strength.

F&N's close at $3.83 is supported by the rising 200dMA and the trendline support which I have drawn in orange color.  Further decline in price would mean that the uptrend is over and it's a double whammy for F&N as the 200dMA which is an indication of long term trend would be violated at the same time. A quick look at the weekly chart indicates the next support to be provided by the 100wMA which is at $3.65.

Using two sets of Fibo lines, we see that the $4.00 mark has two Fibo lines which are very close to each other which indicate that it is an important support.  This is further confirmed when we realise that it is a many times tested candlestick resistance turned support as well.  Breaking this critical support on 2 Feb was a very bearish sign.

The MFI continues to decline and has formed a new low.  It is nearing the oversold region.  That the volume has been diminishing as the price weakened in the last two weeks is a positive for the bulls.  There is a chance we might have a candlestick formation known as the morning star if the price opens higher than $3.89 in the next session and closes higher.  For those who have bought some in the last session or two, good luck.

Keppel Corp's chart, relative to F&N's, shows some strength.  Overall, Keppel Corp's price is being held down by a gently rising 200wMA. Everytime its price approaches the 200wMA, it would pull back. The 200wMA is currently at $8.87.

The buying momentum has not weakened as much as F&N's as could be seen in the MFI.  The index has been forming higher lows and recently formed a lower high.  However, breaking the 100dMA support on high volume to form a doji at $8.18 isn't exactly comforting. 

Of course, it is possible that the price action is setting up for a morning star formation as well.  This will transpire if next session sees the price opening above $8.20 and closing higher.  In the next session, we will also have confirmation if the 100dMA is now a support turned resistance at $8.26 thereabouts. 

I have drawn the trendline support in orange color and just like F&N, Keppel Corp is resting on the trendline and if price weakens further in the next session, the fast rising 200dMA is at $7.75 and should provide support. 

Both blue chips, in my opinion, have a strong thrill factor at the moment. To those who are vested, sit tight for the ride and good luck.

Related post:
Revisiting Keppel Corporation.

A capital question: how much to have or how much to use?

I remember reading a book titled "The Swiss Family Robinson" in my school going days.  It was one of many classics such as "Black Beauty" and "Call of the Wild".  

It is very strange but most people who are younger than me by just, say, 6 or 7 years have never read these books before.  Classics, they are.  Anyway, I digress.

The book in question is about how a family got shipwrecked on an island and had to to use whatever was available there to build a life for themselves and over time, they did quite well.  Very resourceful family.  The father would praise his children if they came up with a good idea by saying: "That's a capital idea!".  

I have yet to come across anyone in real life who would use the word "capital" in the same way.  It might be a very English or a very archaic usage since the book was written in the 19th century.  

Now, that brings me to the topic of this post: capital.  Specifically, capital for investing in the stock market.

Now to do my impression of Forrest Gump: 

"My mama told me that I must pick the right people when I want to talk about stocks which are undervalued as not everyone has the ability to buy."  

Very true but it is hard to identify the "right" people, you might agree.

So, there is an advantage about sharing ideas in a blog.  Visitors who come to my blog are probably interested in investing and making money in the stock market and probably have the means to do so.  

I hope I am right and not being delusional on this point though.

I like the saying that we can bring a horse to water but we cannot make it drink and I've had more than my fair share of horses which do not drink.  Maybe, they were actually camels and my ageing eyes mistook them for horses. 

I digress again.

Back to the topic.  

Now, having some capital is one thing, a question often asked is how much do we need to have exactly before we start investing in the stock market? I have been asked this a few times before.  

A hairstylist asked me if S$10k was enough.  The concept of "enough" is relative like so many things in life.  Very few things in life are absolutes.  However, the question of whether something is "enough" is a very prominent one in life.  

How much to have?

I will use a real life example which happened to someone I know as an illustration.  He had only $5k in savings and went into the market in 2008.  Even with the market running up in the last one year or so, his initial investment is still worth less than $5k today but having used up all of his capital in 2008, he could only watch silently as the market recovered.  Well, he wasn't very silent about it but you get the point.

Then, am I suggesting that if we had only $5k in capital, we should not participate in the market, that we should have more capital before buying shares?  

No. Spare cash that is not needed in the near future or is not part of an emergency fund (e.g. 6 months worth of expenses to be put aside in case of unemployment), should be made to work harder for us.

It is, quite simply, a question of proportion.  Of course, with only $5k, the choices are more limited but the idea is the same as for someone with $50k or $500k.  

Don't plonk all of it down at the same time on one counter or a few for that matter. Always hedge since nothing is ever for sure.  

The question is how much to use for each trade, 10%, 20% or 30%.  

This is up to the individual.  The idea is to reduce risk and taking small steps reduces the probability of a fall.

There is nothing wrong with a $1k value for each transaction and in the process incurring a 3% cost (based on a minimum of $28 brokerage fee per transaction plus other costs) if you were to make more than 10% per annum on that decision.  Nothing wrong at all.  

Rome was not built in a day.  

Wealth building takes time, realistically.  More haste, less speed.

Over time, as our capital grows due to increased savings through employment, capital gains from investments, dividends from investments or some other means, we should not forget this very simple concept.  

"How much to use?" is very often a more pertinent question than "how much to have?".  If you think about it, it applies to other aspects of life as well.

Related post:
Excuse me, are you an investor?

Golden Agriculture: Doing a flip flop.

When Golden Agriculture confirmed the 52c support yesterday, I said that "I would have liked to see the volume expanding more convincingly as well as to see a more enthusiastic candlestick instead of a doji. The confirmation, to me, at least, looks just a tad unconvincing." 

Today, 52c has become resistance again.  This needs confirmation next week.  Since I talked about volume yesterday, what about today's volume?  It's only a tad more than yesterday's.  So, the sell down is unconvincing either.  This is beginning to look like a narrow rangebound trading pattern with neither bulls nor bears gaining the upper hand.  The crucial support level at 50c was retested today and held firm.

Strategy:  I have already added to my position at support.  Longer term uptrend is intact.

Healthway Medical: Accumulate on weakness

Healthway Medical managed to close unchanged from the previous session at 15c after opening at 14.5c.  Is this a sign of real strength or is it an illusion?  Thin trading volume with a rising MFI suggests that the weaker holders are being shaken out.  Healthway Medical may very well test the 38.2% Fibo support identified earlier and that is at 14c.  The fact that this coincides with the rising 50dMA lend credence to the claim that 14c is likely to be a strong support.  Worst case scenario is a retreat to the 100dMA at 13c which is also a many times tested candlestick resistance level and is, therefore, likely to be an even stronger support level.

Strategy:  I will accumulate on further weakness as I see limited downside.

Saizen REIT: Still accumulating

Saizen REIT touched 15.5c today again on low volume and I was lucky enough to get some from my overnight queue. 

I have drawn two trendlines: a steeper one in orange color (Uptrend 1) and a gentler one in brown color (Uptrend 2).  Touching 15.5c today, Saizen REIT tested the uptrend support of Uptrend 1 and rebounded to close at 16c.  Not only is 15.5c a trendline support, it is also the 50% Fibo support.  Downside risk exists but looking at the diminishing trade volume, a huge price movement downward is unlikely.  The 100dMA which is about where the 38.2% Fibo line is should provide strong support at 15c.  In the most bearish scenario, I do not see Saizen REIT breaking Uptrend 2 which is at 14c, thereabouts.

MFI did not rebound off the 50% mark as I thought it might in an earlier post.  Instead, it is moving closer to 20%, the border of the oversold region.  This is good, in a way, as when the rally comes, there will be more room for price to move up before it becomes overbought.

Strategy:  15.5c is a nice entry price with limited downside.  I will continue to accumulate on weakness.

Strategy update: Healthway Medical and Golden Agriculture

Healthway Medical:  Price closed at 15c on even lower volume.  Closing at 15c, however, has not broken the downtrend resistance.  So, the bulls have to keep their bottle of champagne for now.  The larger picture has not changed though.  As volume continues to decline, the low volume pullback theory strengthens; selling lacks conviction.  MFI, a momentum oscillator, continues to rise which suggests buying momentum is gaining, although slightly. 20dMA has completed its downward turn and seems ready to fall, suggesting short term weakness.  However, the 50dMA (at 14c) and 100dMA (at 13c) are still rising which suggest that the trend is still up over the longer term. 

Strategy: Unchanged from yesterday.
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Golden Agriculture:  That the 50dMA at 52c is resistance turned support has been confirmed as the price action closed at 52.5c today.  I would have liked to see the volume expanding more convincingly as well as to see a more enthusiastic candlestick instead of a doji.  The confirmation, to me, at least,  looks just a tad unconvincing.  MFI did rise above the oversold region which shows that buying momentum has again turned positive.  Let us see if the buying up follows through.


Strategy: I bought more at support (52c) and now look to selling if the expected rise in price takes place.  Strong support is at 50c and, if that fails, the 100dMA is at 48c.  As usual, I would sell at resistance levels as the price goes up in such an instance, with initial resistance being at 56c (20dMA and 38.2% Fibo).  If 56c is taken out, price action is likely to retest 59c, a many times tested candlestick support and resistance level.