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Healthway Medical: To buy or not to buy?

Sunday, February 6, 2011


 I received a call from a friend earlier today and the conversation went like this, to the best of my memory:

Fren: Hey, are you still vested in Healthway?

AK: Yes, I have some shares left.

Fren: Not selling?

AK: Well, you know I sold off most of my stake a long time ago. Whatever I have left now are either from the rights issue or regular scrip dividends.

Fren: Consider buying more?

AK: If I do buy some now, it's more for trading.

Fren: Why?

AK: I've blogged about it. Go read my blog. Haha... The numbers are not very good. http://singaporeanstocksinvestor.blogspot.com/2010/11/healthway-medical-3q-2010-results.html

Fren: Well, the price went up to 17.5c a while back, you know, but it is back down now.

AK: Yes, I know. I bought some at 15.5c and sold at 17c in December last year. This was because of some news that there could be a new investor.
http://singaporeanstocksinvestor.blogspot.com/2010/12/healthway-medical-and-first-reit-good.html

Fren: Hmmm.. I read somewhere that we should invest in Healthway Medical now.

AK: Really? Any reason given for the call?

Fren: Well, I want to hear from you because I know you used to be big on Healthway Medical.

AK: Yup. I was but that was in mid 2009 when it was really undervalued. Not now. You know this. I blogged about it.
http://singaporeanstocksinvestor.blogspot.com/2010/02/healthway-medical-updated-valuation.html

Fren: The blog I went to says that we should buy shares of Healthway Medical because Singapore healthcare stocks are hot now and most of the healthcare counters' share prices have shot up. Healthway Medical should be next.

AK: Hmmmm... It sounds rather speculative to me.

Fren: But you are still vested, right?

AK: I always try not to divest all my investment in any company just in case the price goes up further. However, you must remember that whatever I have left is fully paid for with gains from divesting most of my stake in the company last year. So, if I show any interest in the company's performance, it is mostly academic.

Fren: So, you don't think I should buy?

AK: Haha.. This is the question I fear most. Fundamentally, the numbers have been rather dismal. The management has sold a very compelling proposition to investors. Could it deliver? Full year results should be announced sometime this month. Wait for it.

Fren: OK, then, what about a quick trade since you made money in your trade recently.

AK: Honestly, I was just lucky that my chart reading that time turned out right. I could do a TA for Healthway Medical later. Check my blog this evening.

We talked a bit more about other stuff before hanging up. I forgot to ask my friend which blog he went to. I guess it is not important but the conversation shows how much influence blogs could have and I have to keep reminding myself whenever I blog to be very careful and not make sweeping statements. If blogging means saying anything we want just because we feel like it, we are not any different from, er, anyway, here is the chart for Healthway Medical:


From the MFI, there is no doubt that this counter is oversold but that is gradually being corrected as we see it forming higher lows. So, the selling pressure has eased. A quick look at the OBV confirms this as it has mostly flatlined.

The MACD seems to be poised for a bullish crossover with the signal line in negative territory and we have a buy signal on the histogram. However, note that the signal was on the back of very low volume. So, I wonder at its strength. The 20dMA is completing a dead cross with the 50dMA and this is at 15.5c, exactly where the price closed in the last session. Could be a strong resistance. Conventional wisdom is to sell at resistance in a downtrend. Trendline resistance would be at 16.5c in the next few sessions.

However, if a higher low is formed in the near future, and it seems that there is a chance of this happening, we should look out for signs of possible reversal. I am not adding to my long position here. I will wait and see.

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