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China Minzhong: What are we to do?

Friday, January 4, 2013

Some might wonder if it is time to sell shares of China Minzhong and to lock in some sizeable gains. Well, it is back to the basic question of: "What are we after?"

If we believe that China Minzhong's shares are still undervalued, then, fundamentally, it is not the time to sell. However, if we do not care about fundamentals and are in it for a trade, then, that is a different motive which would dictate that we act differently.

To any casual observer, it is obvious that China Minzhong's share price is having difficulty breaking resistance to go higher. Look at the daily chart and we can see why.

Daily chart.

China Minzhong's price movement seems to be losing momentum as the MACD forms lower highs and the CMF shows money flowing out. Continuing price weakness in the near term is not surprising.

Indeed, price could weaken to support at 80c which is where we find the merged 50d and 20d MAs. A much stronger twice tested support is quite obviously provided by the fast rising 100d MA. In the event of a whipsaw in a correction, this MA could be tested once again for support.

Weekly chart.

For someone with a longer term perspective, no analysis is complete without looking at the weekly chart and bulls would like what they see there. Quite obviously, there is a break out from resistance and where is the next resistance level? The descending 100w MA currently at $1.05? Possibly. Immediate support is at 78c. Do a quick risk/reward analysis and it would seem that being long China Minzhong makes more sense in the longer term.

Ultimately, what we decide to do depends on our motivation for being vested as well as our risk appetite. Remember, TA is about probability and never certainty.

Related post:
A Christmas collection of charts.


Technical Analysis For Dummies dumps the confusing jargon and unreadable charts for basic explanations and practical guidance.


Go to:
Technical Analysis for Dummies

10 comments:

EY said...

Hi AK,

I managed to grab one of the old copies of this Technical Analysis for Dummies book this afternoon at $9.48. Just received their shipping confirmation with an interesting note. They personified the book! Haha. This is sooo interesting. I did the same when I sent a gift to a friend some years back. Now I know how it feels like having an inaminate object 'talk' to me. I like it! :D

Thanks again for the recommendation. I spent a couple of thousand dollars attending a TA course a few years ago. On hindsight, should have bought a book instead!

Cheers,
Endrene

AK71 said...

Hi Endrene,

Ah! You are one of the two nimble footed readers who got the super bargain copies! ;)

Yes, your course fee to learn TA sounds about right. My friends paid that much and more for TA courses too. I told them cheekily to pay me half of that and I could teach them too, 1 on 1! Similar disclaimers will apply, of course. ;p

To learn TA, I started with Martin J. Pring's book and his writing was so laborous. :(

TA for Dummies is very easy to read. After you are done with this book, you want to read Michael Kahn's. I provided a hyperlink in the following blog post:
Recommended books for FA and TA.

Then, you are pretty much set. Just needs lots of practice. :)

EY said...

Hi AK,

No, no, no. I wasn't one of the two nimble-finger buyers. I only went to check out the book after you commented that the 2 cheap copies were sold out. I was prepared to fork out $17.36 and was pleasantly surprised to see one on sale at $9.48. Plain lucky! :D

I'm sure you'll make a good teacher. Too bad you have recommended the book. It took away your potential business! LOL~.

Thanks for recommending a second book. I'll have to see if I can finish reading the first one! :P BTW, I do check out a website called the Trader's Podcast (I think) occasionally. I subscribe to their monthly email updates and will click to read interviews with traders on TA and other stuff. Not too bad a source to keep me on track. I can be really lazy sometimes, lacking the motivation in keeping up with the market and learning techniques to become a better trader/investor. So, one of my resolutions for 2013 is to be more on-the-ball. And your blog is a means to this end. Very good, some more got reading assignment now! Hahaha.

Cheers,
Endrene

AK71 said...

Hi Endrene,

Shucks! Oh, well, I console myself by saying that I have helped to fund literacy for some poor kids through my efforts. (Shucks!) ;p

Thanks for solving the mystery for me because I was wondering after replying to your earlier comment how you could have bought a copy at $9.48? Your lucky star is shining on you! :)

My blog is just a place for me to talk to myself. You mean you thought I was talking to my readers all this while??? Take what I say with a pinch of salt. ;)

EY said...

Hi AK,

Well, fret not, I'm sure those of us who are dummer than the dummies might need private tuition! So start marketing your tuition services and I'm certain you'll get lucky! Hahaha.

Talking to yourself??? Oh my, I'll start taking salt in barrels! Err...then where can I buy cheap salt huh? :P

AhJohn said...

:) I reserved a book from library again, no money to buy book and no place to keep book too.

AK71 said...

Hi Endrene,

I fear that I would say "no" to anyone who would ask me to teach him TA even for a fee. I prefer to share through my blog without the pressure of having to deliver quality just because I have been paid. ;p

I remember a reader by the name of "financialray" who suggested that I should conduct classes on investing in S-REITs. That was more than a year ago. I declined. He was indignant when he saw in the newspapers that someone went ahead and did it shortly after. Hahaha..

Cheap salt? Aiyoh. I not into commodities leh. ;p

AK71 said...

Hi Ah John,

I am sure you have the money to buy the book but you are being financially prudent. That is very good. :)

You know you are one person who has influenced me to visit the public libraries again through one of your earlier comments! Really. No kidding.

Soon, I will blog about a recent visit to the library near my current home and the wisdom I gained from a comic book! Yes, I borrowed a comic book! ;)

Anyway, I hope you enjoy the books I have recommended. :)

JCK said...

AK

Is that what they call a rising wedge which is essentially bearish?

AK71 said...

Hi JCK,

Nope. We need to see higher highs and higher lows in a rising wedge. We don't have higher highs here.

If I were to hazard a guess, what we have here is more like a symmetrical triangle and, although not always the case, price action is likely to continue in the direction prior to the formation of the triangle.

If you would like to teach yourself TA, get a copy of the book I recommended in this blog post. It is a good introduction to the subject. :)

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