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Golden Agriculture: Partial divestment at 59c.

Wednesday, March 10, 2010

If you have been following my posts on Golden Agriculture in recent days, you would get an impression of how TA works for me.  TA can never show us what will happen.  It can only show what might happen and there will always be two possibilities in price movement, up or down, with varying probabilities.  What we can see quite clearly would be things like supports, resistance and trend, amongst a few other things.  TA informs on fair exit prices in the event that price goes up and in the event the price goes down, what are safer entry prices.  If the uptrend is intact, buy at supports and wait to sell at resistance; if the price does not move up but moves back down to support, consider increasing exposure.

Using Golden Agriculture as a case study, let us do a recap:

In my post of 5 March, I mentioned that Golden Agriculture's price action formed a white hammer, closing at 54.5c, suggesting that a trend reversal is at hand.  Initial resistance at 57c, followed by 59c.  On 8 Mar, I mentioned that the white spinning top formed was unlikely to be a trend reversal signal because it did not take place after several consecutive days of upmove in price.  On 9 Mar, yesterday, a doji was formed, another possible trend reversal signal and it was accompanied by a decline in the MFI.  I suggested that if the malaise continued today, the counter might do a gap cover to 54.5c where it will have initial support and I would accumulate on weakness as the uptrend is intact with the rising 100dMA at 50.5c.

So, the strategy?  Divest at resistance of 57c and 59c in case of an upmove.  Accumulate on weakness in case of a move down to 54.5c and 50.5c as the uptrend is intact.  Whichever direction the price moves, we have a plan. My overnight sell queue was done and I have partially divested at 59c this morning, retaining a smallish position in case the price continues to move up.  This is a hedge, which is another one of my strategies.

For anyone who has been following my trading strategy so far, I hope you have made some good money.  Remember, it is never wrong to take profit.

Related post:
Rationale for partial divestment.

11 comments:

Anonymous said...

Dear AK71
You certainly made a believer out of me. Well done on your Golden Agri. I have been following your post everyday for the past 3 months.
Since my last post, I have been monitoring and reading up MFI, MACD and Bollinger Bands to try understand more so that I can see your logic in assessing the charts. I am still learning. I have not traded since CNY as I had been making many mistakes, thereby incurring losses.
Once again, I observe that Indofood is showing an uptrend. Today a big white candle with MFI above 70 (still not over bought), it has crossed the 30days, 60days 90days MA. Near resistance should be at 2.37, then 2.43.Support should be 2.15 and a stronger support 2.11. My 70lots average 2.40, so just monitoring and understand more before I trade again. Since CPO prices are increasing, I thought of holding on the position. What is your views?

Also for Straits Asia, there is a doji, followed a 2 days up, and now a spinning top (as i read now). MFI about 65. Nearest resistance is at 2.22. Again, I bought 60lots on high, average at 2.65, so just watching and learning TA before deciding on game plan. While a few houses recommend a sell call citing unclear profit and change of CEO, the TA chart looks uptrend to me. What is your view? Thanks.

Regards

Blackbird

AK71 said...

Hi Blackbird,

Thanks for following my blog and thanks for the positive comments. :)

IndoAgri is up 15c at $2.32 as I type this. Very nice. Price action was resisted by the 50dMA, $2.17, for the past two days. It has broken free of this resistance and is free to go higher. Next resistance is a candlestick resistance level at $2.39 or so. If $2.39 is taken out, $2.60 is the next resistance to watch. MFI is not overbought yet but it has been forming lower lows recently. Remember, there is no rule to say MFI must be overbought before we sell.

The rising 100dMA is an important support for IndoAgri as the price has bounced off this MA 4 times in recent weeks, verifying that the uptrend is intact. Accumulating closer to the 100dMA would have been very rewarding.

Fundamentally, CPO price is on a longer term uptrend. It will benefit from the longer term uptrend of crude oil as the global economy recovers. We have to remember that fundamentals reflect value. Technicals are about prices. So, they are not the same thing. You might believe that a stock is worth more fundamentally and hold for the long term but technically, the prices will still fluctuate in the meantime. Use fundamentals to decide which stocks to invest in but use technicals to decide on entry and exit prices. Same old technique.

StraitsAsia looks pretty weak to me. Yesterday's white candle took place on lower volume. 100dMA has flattened. 50dMA is turning down. Only the 200dMA is still rising but see how the price did not bounce off the 200dMA? This suggests that the 200dMA is not a strong support. MFI does not show stronger buying momentum either. Near term, any upmove in price would meet with resistance at $2.20, the flat 100dMA. It remains to be seen if the 200dMA could assert itself as a support.

TA takes practice. I am still a student of the subject. Keep at it and it gets clearer in time.

Chu Yeow said...

I've been following your blog closely too since I discovered it last year. I was mostly a buy-and-hold type investor with little regard for TA or FA but you've converted me to learn to be more informed about stock market investing. Thanks for the very clear posts where you also explain your rationale, and please keep it up :)

Of the few stocks you do talk about, I'm invested in GoldenAgri and have also divested partially today at 59.5 cents (I was a little greedy to queue above resistance).

One thing I'd like to know is what tools you use to aid you in your TA? Do you use your own broker's tools or something like ShareInvestor or ChartNexus?

Anonymous said...

Dear AK71,

Many thanks for your informative posts re Golden Agri! I was very fortunate indeed to have placed a limit order @56.5 on Mar 8th with a stop @53.0, and I hit the profit target today at @59.5. I must say that your posts played a role in my decision to enter into this trade!

I was initially hesitant as the payoff appear to be no better than 50-50, but your posts alerted me to take a closer look at CPO price trend, which provided a nice fundamental support to this (otherwise) purely technical trade.

Perhaps at some point, you may want to consider blogging abut the importance of minimising your commissions? I found this to be an often overlooked part of trading basics. I did not care much about commissions until I learnt the importance of keeping detailed trading records. This drove home the point that in 2009 alone I paid $12K in brokerage, which could have been minimised to around $9K if I had used another broker with lower commissions...

AT



AT

la papillion said...

Dear AK,

I've never used TA before, but after looking at your blog, I was amazed at how good this TA tool is. Of course, nothing is 100%, but it really gives me a better control over my investment decision - when to buy/when to sell.

Thanks AK, for your excellent post! I'll continue to visit your site and learn from your insights!

PS: Are you going to conduct a course for us newbies? Sign me up!

AK71 said...

Hi Chu Yeow,

Thanks for being a regular visitor and the encouraging comments. :)

I have a friend who also queued to sell at 59.5c. One bid above resistance is ok. Good chance of hitting if things get pretty bullish which happened today. Congratulations! :)

Golden Agriculture is one of those counters which are great for trading, I feel. I will now wait for a chance to accumulate again at supports.

The charting program I use comes free with my brokerage account. It is provided by ChartNexus. You can also download ChartNexus for free online, I believe. Very easy to use.

I clicked on your name and visited your blog. I don't understand what it's about but you have been doing it for almost a decade! Huge following too. Looks impressive. :)

Make lots of money in your investments and I look forward to hearing from you again. :)

AK71 said...

Hi AT,

I am very glad that you entered a trade in Golden Agriculture and, most importantly, made money. What's more, you made money in just 2 days! Perfect timing. I waited for weeks. ;)

I try not to have a position in any counter based on TA alone. More often than not, I end up losing money. I'm not a very good trader that way.

I feel more comfortable knowing that the fundamentals of a company I'm investing in is strong. It gives me the added confidence to go in big and to hold on with conviction even if it goes through some rough patches. As I am not a pure TA practitioner, I don't do cut losses. This makes FA all the more important for me.

Crude Palm Oil (CPO) is something I've been following for a long time and some of my earlier posts are on the subject. It's a cyclical thing and mirrors global economic performance like other commodities.

As for minimising the brokerage fees we pay in our trades, who we choose to do business with is quite personal. Also, I think there are some blogs which alredy talk about it. Off the top of my head, I think DBS Vickers has the lowest fee for online trading at $18 minimum per trade. No, I'm not with DBS Vickers. My account is with Lim&Tan as you could tell from the charts I put up. ;)

Once again, congratulations and come back soon. :)

AK71 said...

Hi LP,

Ahem... you are pulling my leg. ;) Nice one but I appreciate the encouragement. :)

I don't think I'm qualified to conduct any investment courses. My friends and I joked about it once. It would be nice to make some money from something I enjoy doing but I don't think I'm there yet. ;)

Chu Yeow said...

Hi AK,

Thanks for the detailed reply. I'm impressed that you do take the time to reply to most of the comments hehe. Yup I've been blogging for a long time now (not so often lately). You probably won't understand the latest posts because they're fairly technical IT industry posts. I'm a web developer by trade but I blog mostly about Firefox, iPhone app development.

I use Lim & Tan as my broker too but haven't really explored the charts beyond looking at the candlesticks and MAs. I'll dig deeper into it and also continue reading up on other technical indicators that I'm not familiar with.

Also checking out the ChartNexus free tool now. I didn't know it's the same one Lim & Tan is providing (it does seem to have more functionality).

Thanks for your reply and may we both hit our targets for our investments :)

Chu Yeow said...

@AT Regarding your question on saving brokerage fees, like AK said, DBS Vickers seems to have the best rate if you're willing to pay cash upfront. I'm not willing to go through so much trouble for an $18 brokerage fee though :)

I picked Lim & Tan because they give out loyalty points that you can cash out. About 25+ points per transaction which is $2.50. If you're an NTUC income member I believe there're even more perks (I'm not a member). Plus my broker there is very responsive and also forwards relevant reports and articles so I'm quite happy with it.

AK71 said...

Hi Chu Yeow,

I kinda guessed you are an IT guy. I know who to contact now the next time I have software problems. ;)

This might be a personal blog but I try to run it like I would a business. So, I try to reply to comments in a timely manner. It's also common courtesy, I suppose. :)

You are right about the free ChartNexus program having more tools. I was using that initially before Lim&Tan tied up with them (which makes it very convenient for me since).

What I miss is the ADX which I was using before but not available in the Lim&Tan version. Well, we adapt. We don't need all the TA tools available.

You are right about all the perks with Lim&Tan. I get NTUC Link points with every trade and I get to redeem them to offset my brokerage fees. That makes me happy. :-)


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