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Noble Group: Caught a falling dagger?

Friday, July 15, 2011

Today, for the first time ever, I became a shareholder of Noble Group. I will confess that I do not understand the business and that going long here is taking on quite a bit of risk. Then, why did I do it? Let me share with you what's on my mind.

The share price of Noble Group is, undoubtedly, in a downtrend. I drew two trendlines, one connecting the lower highs and one connecting the lower lows. A down channel becomes quite clear. I see the channel support at $1.78 and that explains why I put in a buy order at that price, which was filled in the late afternoon today.

That a big black candle formed on the back of heavy volume is very ominous and it would not surprise me if the share price were to sink even lower next week. So, why take the risk of going long now? Why did I not cancel my buy order? After all, it was only filled late in the afternoon.

Well, the fact that the share price tested channel support alone would not have enticed me to enter. The MACD which looks like it has a nice chance of forming a higher low is an important factor too. Therefore, even if the price were to sink lower, as long as the MACD forms a higher low, we would have a positive divergence.

Am I not pre-empting then? Yes, I am and, yes, I agree that disciplined traders should not do that. I have said before that I am not a good trader and this is still true. After all, there is a chance that the MACD could form a lower low which means no positive divergence.

If the share price were to move higher next week, I would use the declining 20dMA as a guide to determine a price for divestment. Price could move higher to test resistance as provided by the trendline as well. I guess it is up to the individual to decide how much risk he is willing to take and how much gain is enough for him.

In the event that the share price were to move lower, I would not rush to average down my price, I would wait and see how things develop. Losing money in a trade is not as bad as losing our cool because of one.


Hwang said...

Just curious, wouldn't it be better if you go for shipping trust instead?

AK71 said...

Hi Hwang,

You might want to read this:

FSL Trust: Where to from here?

I am giving shipping trusts a miss. ;)

Anonymous said...

Dear AK,

Commodities stocks are much more volatile compare to REITS & not for the faint hearted :( I know you bought Golden Agri (I used to) but you buying Noble caught me by surprise ;)

Your entry price is really a "good buy". I bought mine at the peak price of $3 when it was going CB. Since then, the price has been going downhill.

In my humble opinion, this is an undervalue stock. Therefore, I have been buying as the price is declining.

Wish you lots of good luck in Noble!


AK71 said...

Hi KM,

I really do not understand Noble's business. Well, more accurately, I have not made a strong effort to understand it and I do not have an inclination to do so.

Going long here is really based on some pre-emptive TA. I can only wait and see if Lady Luck would smile on me. Thanks for the well wishes. :)

Anonymous said...

Hi. I'm new to stocks. May i know how come your MACD is different from my chart in iocbc? my macd red line is below the blue line. Thanks

AK71 said...

Hi Anonymous,

Er.. I have absolutely no idea.

Could you include your name or initials in future comments? Thank you. :)

Darcy said...

Hey AK!

How's things? I too caught the falling dagger on Noble. Got in at 1.8 and averaged down at 1.73. I just divested at 1.8. Reason for doing so is because the share has shot up 5% since her 1.715 low.

If you have the time, looking into Noble's agricultural segment might be helpful. I am long commodities especially agriculture as food prices can only head higher with lesser farmers around.

Have you been following the US debt ceiling and euro debt issues?

AK71 said...

Hi Darcy,

I am waiting to see if Noble might hit $1.90/share. Haha ;)

I listen to Jim Rogers and I am sure he is right about agricultural products. However, investing in Noble is investing in a company which is exposed to the sector. How well the company will do is only partially affected by how well the sector does. ;)

I have been following macroeconomic news. I find them fascinating. However, with my very rudimentary knowledge of economics, I can only guess at the ramifications.

Darcy said...

Thanks ak! Looking at noble's movements today, you still take me back to school =) Have you read any of Jim Rogers's books?

Darcy said...

Sorry for double post. If you don't want to make this public its fine.

How do you know when to cut loss? It's easy to know when to sell when prices are trending up. But in the case of a down trend?

E.G Noble. You made a purchase at 1.78. The very next day it went down and formed a 2.5ish black crow with a low of 1.715. If indicators did not show a possible reversal, when and how would you have cut loss? (there were not much moving averages to look for support.)

AK71 said...

Hi Darcy,

I have not read any books written by Jim. I have only watched him being interviewed on TV and online. :)

I almost never cut loss as prices are on the way down. I will only cut losses on rebounds if they happen and if prices test resistance.

I talked about it here before:
An elaboration on my methods.

Wish me luck. ;)

Bill said...

This is what they do !

Do you still have Courage Marine?

AK71 said...

Hi Bill,

Thanks for sharing. :)

I divested most of my shares in Courage Marine when news of its dual listing was announced earlier in January, if I remember correctly.

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