Tea with Mike: Approach to stock selection

There are many ways of selecting stocks. Some people use ratios such as PER and P/B. Some people look at charts, spotting 52 weeks highs and lows. Some look for the highest yields. The list goes on. When I first started, I felt overwhelmed and didn’t really know what to look for.

Over the years, I adopted an approach that is similar to Graham's “large companies that are out-of favour” tactic. I look at alpha cyclical companies during their down cycles and I believed that will offer some margin of safety.

I bought into 2 counters, Golden Agri and YZJ, using this approach. For shipping industry, the Baltic Dry Index (BDI) hit record bottom at 661 last year. The peak was 11,000. Even if one were to take the average, we can quite safely say the BDI was nowhere near where it would be mid-cycle. Shipping down cycle is characterized by a dearth of new shipbuilding orders, collapse of freight rates, and the bankruptcies of weaker players, and all these have happened in the past 1 year. So, I can safely conclude that we are near the trough of a down cycle. Near? Yes, because there is no way to ascertain if we have reached the bottom yet.

Then, we search for alpha companies. These are companies in the sector that have the strongest financial strength and operating efficiency. This is so that our investment does not go to the dogs and get consumed by the down cycle. I shall not go into detail about YZJ, as that itself would be a long blog but, particularly, I looked out for a low gearing level.

Both Golden Agri and YZJ have low gearing levels. More important is the amount of short term loans to be repaid. Down cycles combined with the maturity of large loans is what killed many companies. Even the biggest private shipyard in China, Rongsheng, is facing severe difficulties because of this.

Next, while profits would be affected negatively, there should not be losses, and the companies should be big enough to show resilience in earnings through previous crises. There should be Free Cash Flow (FCF) in most of the operating years too

Golden Agri’s earnings are levered heavily on Crude Palm Oil's (CPO) price, and its production levels. If we look at the last 30 years, 2013 has seen CPO price falling more than 40% from its last peak. Although inventory has been piling up, Golden Agri will not be able to increase its production at the same rate it has been able to in the past. I bought it for its vertically integrated businesses and its economies of scale. For higher production growth, one should, perhaps, look at First Resources.

This approach requires a lot of patience as the sectors are out of favour and there is very little chance that the share prices would shoot up suddenly. Also, as AK always says, cheap could get cheaper and this is especially true in such out of favor stocks. Say ship building and most people would frown. So, there might be selling pressure from time to time but if the companies are fundamentally strong, such selling pressure provides opportunities for accumulation.

I would like to acknowledge that I first got some ideas and information from Calvin Yeo of "Invest In Passive Income". A link to his blog can be found in the left side bar of AK's blog.

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AK's comment:

I was heavily invested in Golden Agriculture at one time, recognising that it was heavily levered to the price of CPO. When CPO price was rising relentlessly, Golden Agriculture was a good investment. I made a tidy sum from it. Mike's approach is valid, I am sure, but one has to be patient.

We could consider investing in Wilmar International which also has an exposure to CPO but it is less levered to CPO production which forms less than a fifth of its earnings. Wilmar has a pretty diversified earnings base. However, if we are looking for positive Free Cash Flow, then, Wilmar would fail our selection process.

As for ship builders, I would also frown when I hear the phrase. However, we can find nuggets in the sector and when we look at what Cosco and YZJ are doing, we know where to look because these yards are venturing into building for the O&G industry. This is what KepCorp and SembCorp have been doing for years. With more rigs delivered, there is a higher need for OSVs and, yes, I am invested in Marco Polo Marine which has the added advantage of a strong moat. However, if we are looking for positive Free Cash Flow, then, Marco Polo Marine would fail the selection process too.

I believe that Mike's approach is probably suitable for anyone who is more conservative since stronger companies in cyclical industries are unlikely to go bust in a down cycle. When the up cycle returns, these companies should lead the recovery.

Thanks, Mike, for offering us your perspective on stock selection. It has provided me with food for thought.

Golden Agriculture: 3 signs of possible weakness.

I am waiting to add to my long position here. There are signs that price could see some weakness in time to come.

1. Formation of a gravestone doji today on much higher volume. This suggests that buyers were unable to beat sellers as market participants mostly chose to lock in gains.

2. Declining volume as price rose. Volume is the fuel that drives rallies. Without volume, rallies would fizzle out.

3. A lower high on the MACD even as price formed a higher high. A negative divergence. Buying momentum is in decline.

Immediate support is at 72c. If this should fail to hold, I expect the 200d MA, a long term MA to be tested. This is currently at 67.5c.

STI in retreat: Sound Global, Golden Agriculture, Keppel Corporation and REITs.

STI 2,789.35

- Down 66.42 pts.

STI 2,789.35

- Down 66.42 pts.

Not a pretty sight, is it? Scream in panic? Run around in circles? Sell everything and jump off a cliff like lemmings? There is plenty of fear. What should I do? Stay calm and look out for opportunities. I have spent time looking at various counters and I will talk about a few here.

More than two years ago, I went in big on E-pure, the current Sound Global, believing that the water industry is the logical beneficiary from constant efforts by governments around the world to improve water quality for their people. China is still underinvested in this area and Sound Global is a natural beneficiary.

Sound Global's share price touched a low of 40.5c in the recent sell down. As I got in at 20c more than two years ago, I was wondering if the price could go lower. After all, we can't tell if a bottom has been formed until after the fact. Could we see a retest of 40.5c now that sentiments have soured? We could, of course.

However, seeing how volume was not very high as black candles were formed, the bears seem to be lacking in conviction. I will probably start buying in at 48.5c. Why 48.5c? 48.5c could be a significant near term support as that is also where we find the trendline support and the rising 20dMA.

I also subscribe to the idea that there will be increasing demand for food and oil as the middle class in Asia expands. Golden Agriculture is a likely beneficiary of this long term trend.

The counter's price weakness in the last two sessions was on the back of decreasing volumes. This is again a sign that the bears lack conviction. I would like to get back in at supports. I see immediate support at 62c. In very bearish conditions, we could see gap filling at 58c.

I also want to re-initiate a long position in Keppel Corporation. This is a company I held rather short term long positions in both in the Asian Financial Crisis in the late 90s as well as in the Subprime Crisis a couple of years back.

I would like to re-initiate a long position in the conglomerate, believing that it will continue to be a beneficiary of the global race for oil which is a theme I firmly believe in although there could be short term setbacks.

Further weakness could see a retest of $8.40, a natural candlestick support which broke on 23 Sep after being tested multiple times. I would buy in slowly as there are quite a few gaps which could be filled at lower prices if $8.40 should give way. That volume expanded as a long black candle was formed today does not inspire confidence.

I also have my eyes on a few REITs which are seeing weakening unit prices and rising distribution yields. Prices could weaken further if sentiments continue to sour. I will judiciously add to my long positions to benefit from the sell down. Panic? Not me.


Related posts:
1. Why do I not panic?
2. Sleep well at night with a plan.

Golden Agriculture: 200wMA cleared.

Golden Agriculture closed above the 200wMA in the last session. Cleared of this hurdle, we could see its share price going higher from here.

It is interesting to observe that the 50wMA has been crucial as support, seeing how share price bounced off the line each time it was tested in the past.

It would not be unrealistic to expect any retest of the 50wMA to see strong buying interest.

Related post:
Golden Agriculture: 68c support.

Golden Agriculture: 68c support.

In my last blog post, I said that chances of a breakdown in price are higher. I have been proven wrong by Mr. Market, once again demonstrating the risky business of guessing Mr. Market's future movements.

Golden Agriculture's share price touched a high of 71.5c on very high volume before closing at 70.5c in the last session.

People ask me if the price could go higher? Well, only Mr. Market knows. What we know is that 68c is now support and 71.5c remains a significant resistance. Overcoming 71.5c could see price going higher and we could even see the gap closed at 76c. With such huge volume in the last session, chances are fair that this could happen. A pull back should find support at 68c.

Good luck to us all.

Golden Agriculture: FA and TA.

I retain a very small long position in Golden Agriculture. The price of crude palm oil (CPO) has made a new low for 2011, closing at RM3,040.

"Inventories are likely to accumulate in the coming months, unless prices fall to around MYR2,700-MYR2,800/ton, levels that might spur strong physical demand for the commodity and prompt traders to buy on dips, said a trading executive in Kuala Lumpur...

"June output is expected to rise 7%-10%, from 1.74 million tons the previous month, and end-June stocks could rise by as much as 24% to 2.38 million tons." Dow Jones Newswires, July 05, 2011 07:17 ET (11:17 GMT).

The longer term fundamentals, given the strong and growing demand for the vegetable oil, are still intact. However, short term weakness could present rather strong downward pressure on prices. Therefore, I am exercising caution and not adding to my long position in Golden Agriculture. This decision is also informed by technical analysis.

If we look at Golden Agriculture's daily chart, the symmetrical triangle is quite obvious. Two thirds to its apex, we could see a movement breaking the triangle in the near future. Up or down? With price finding it hard to recapture support provided by the 200dMA, the bias is towards the downside. With the ADX indicating a lack of trend, look to the Stochastics for clues. It is turning down from the border of the overbought region. Some softness in the counter's share price would not be surprising.

A look at the weekly chart shows that the Stochastics has broken support. A weakened momentum is obvious. If price were to break the symmetrical triangle to the downside, we could see a test of support provided by the 100wMA. 61c? Could happen.

Long holders could be walking on thin ice here. Good luck.


Related post:
Golden Agriculture: Strong resistance.

Golden Agriculture: Strong resistance.

I am still bullish on the long term fundamentals of crude palm oil. The more robust demand for the vegetable oil in emerging economies, especially in China and India, will provide a floor to any correction in price.

A correction? Yes, prices do not go up in a straight line. If prices do move higher, they climb a wall of worries.

The share price of Golden Agriculture is finding it hard to move higher than 68.5c in recent sessions. If we take a look at the daily chart, it becomes clearer why this is so. 68c is where we find the merged 20d, 50d and 100d MAs.

Volume has been relatively thin and we have to bear in mind that share price is moving closer towards the apex of a symmetrical triangle. If volume does not increase with an accompanying push to move price higher, we might see support at 66c broken and price moving lower.

If price were to retest support at 66c, I could buy more shares in the company but it would be a smallish purchase in case price were to move higher. A trend is not over until it is over, after all.

In the meantime, keep an eye on the strong resistance at 68.5c. If that were to be taken out convincingly, we could see 70c next.

Related post:

Golden Agriculture: A steeper trendline resistance.

Golden Agriculture: A steeper trendline resistance.

Has Golden Agriculture's share price turned bearish? I would not say bearish exactly since the uptrend that started on 23 Feb 2011 is still intact. However, the inability to form a higher high is worrisome. Having said this, price could go as low as 66c in the next couple of sessions and the uptrend would still be intact.

Looking at the chart, the trendline resistance that started on 30 May 2011 has immediacy compared to the one which started on 11 Apr 2011. It is currently at 68c. There is more downward pressure in the current timeframe.

Is there no chance of a rebound? Well, although the Stochastics has just risen out of the oversold territory, we could be walking on thin ice here. If we believe in chart patterns, it seems that a symmetrical triangle is forming. If this triangle is valid, we should see a sharp movement in price in either direction two thirds of the distance to the apex. It could happen soon.

If price could find strong support at 66c and in the process forming a white candle which ultimately breaks resistance, there is a chance of further upside in price. If price should break support at 66c on the back of higher volume, we will probably see the start of a new downtrend.




Related post:
Golden Agriculture: Contra at 68.5c.

Golden Agriculture: Contra at 68.5c.

Golden Agriculture saw 90,289 lots changed hands today with 15,147 lots done at 68.5c after market closed.

In my last blog post on Golden Agriculture, I identified 68.5c as the immediate resistance as provided by a confluence of the 20d, 50d and 100d MAs. So, I put in a sell order last night for those units which I bought at 66c yesterday. My sell order was filled, locking in a gross gain of 2.5c or 3.78% in one day. In uncertain times, I suppose it makes sense to lock in gains quickly and not tempt Fate, especially over the weekend.

If 68.5c could be overcome convincingly next week, the next significant resistance is at 70c. I might sell more of my shares in Golden Agriculture then.

Related post:
Golden Agriculture: Bought at 66c.

Golden Agriculture: Bought at 66c.

Been another long day and I just settled down at 11pm or so. Will be another couple of weeks before I settle into a new routine. Until then, I will be blogging sporadically.

Today, my buy order for some shares in Golden Agriculture at 66c was filled. I also have another buy order at 65.5c which was not filled.

65.5c is at support provided by the trendline which started on 23 Feb. So, buying some at 66c, 1 bid above support seems like a pretty safe move. This is seemingly the case when volume has been reducing as price drifted lower. A low volume pull back suggests a lack of conviction on the part of sellers.

Looking at the ADX, we see a lack of trend, strong or weak. Therefore, look to the Stochastics for clues. It has declined into oversold territory. A rebound is probable. Immediate target is at the confluence of the 20d, 50d and 100d MAs at 68.5c. Overcoming this would see a higher target of 70c.

If price were to break support at 65.5c and close lower in the next session, we could see a retest of the 61c low. Good luck to fellow shareholders.

Related post:
Golden Agriculture: Critical support at 67.5c.

Golden Agriculture: Critical support at 67.5c.

Regular readers might remember that I was queueing to buy some shares of Golden Agriculture at 67.5c, having divested most of my long position not too long ago. The reason was because 67.5c was support in an uptrend which started on 6 May 2011.

Did I say "was"? Yes, I did. The uptrend which started on 6 May 2011 has been broken as price closed below the trendline support in the last two sessions.

As the ADX suggests a lack of trend, I look to the Stochastics for clues and it has been in decline. Indeed, it could decline further as volume reduced with price unable to close higher.  Price could continue to weaken. It might look like a low volume pull back but it is not pulling back to support but a break in support.

It would be better to err on the side of caution and seek guidance from the gentler uptrend which started on 23 Feb 2011. Using Fibo lines to complement this, we see supports at 66c (138.2% Fibo) and 65.5 (150%) if 67.5c should give way.

We could see the Stochastics dipping into oversold territory just like it did earlier this year in February and late April. It would be more timely to add or initiate long positions then.

Golden Agriculture: Further growth.

Feeling somewhat groggy from watching two movies back to back but I have some thoughts about Golden Agriculture which I would like to pen. I like Golden Agriculture's business and I like its numbers. I also like its technicals.

I am still in the queue at 67.5c to add to my long position. The neckline of a potential head and shoulders pattern is at 65.5c thereabouts. I would like to accumulate on weakness.

The ADX suggests a lack of trend and the Stochastics in such an instance suggests that price could experience more weakness. Notice how volume seems to be reducing as well in the last few sessions.

Golden Agri targets production growth, more land: Update
Tuesday, 07 June 2011

© 2011 - The Edge Singapore

Golden Agriculture: Accumulate on weakness.

I plan to accumulate Golden Agriculture on weakness. This would mean at 67.5c support as provided by the trendline support connecting the lows of 6 and 25 May 2011. I would not, however, throw in the kitchen sink. This is because if 67.5c should break and if price were to close lower, we could see price going to 65c and the long term uptrend would still be intact. Buy more at 65c is what I would do if that should happen.

The ADX suggests a lack of trend for Golden Agriculture's share price. In such a situation, I look to the Stochastics for clues. With it closer to the overbought region and forming a lower high although price touched a higher high at 71.5c, the chance of a further decline in price is high.

However, the decline in price in the last two sessions were on the back of lowering volume. This paints a picture of a low volume pullback. So, although further price decline could take place, it could take place due to a lack of buyers and not an increase in sellers. Indeed, the CMF shows a decline in buying pressure but not an increase in selling pressure.

Related post:
Golden Agriculture: Watch the 100dMA.

Golden Agriculture: Watch the 100dMA.

Golden Agriculture had another high volume white candle day but price could not close above the declining 100dMA and a long upper wick was formed in the process. This is the second time in the last few sessions which saw the 100dMA broken but, ultimately, remains the resistance to watch.

Could we see price moving higher in the next session, overcoming resistance provided by the declining 100dMA? We could. Could we see price being pushed lower in the next session and perhaps retest supports? We could.

Huh? What am I saying? The usual and that is TA is about probabilities and not certainties. At this moment, the odds are 50-50 that it could go either way.

What have I done? Seeing strong resistance at 71c, the last high, I did a partial divestment today at 70.5c. If price were to weaken from here to retest supports, I would buy more. If price were to move higher, I have more to sell.

If price were to move higher, we could see 72c and 73.5c tested as resistance. Ultimately, we could see gap cover at 76c. Sounds good? However, if price were to move lower, expect immediate support to be at 69c, followed by 67.5c.

No matter how bullish analysts are, I would be cautious here as a possible head and shoulders formation is obvious in the chart. Therefore, without a higher high (i.e. higher than 73.5c), we are still on thin ice.

Related posts:
NOL and Golden Agriculture.
Golden Agriculture: Divestment at 70.5c.

STI, Golden Agriculture, Capitaland and CapitaMalls Asia.

The STI closed 58.06 points lower at 3,110.48. There is probably some pain and some panic in the air and we have the usual doomsayers out in force today. So, going by what I have said, am I a bull more than a bear? I am neither a bull nor a bear. I like to think that I am a pragmatist.

Most of my portfolio is made up of REITs. Today, we see AIMS AMP Capital Industrial REIT, Sabana REIT, Cache Logistics Trust, First REIT, LMIR, Suntec REIT and even Saizen REIT holding up rather nicely. So, I am not really affected by the sell off.

So, what did I do today?

1. Bought some Golden Agriculture shares at 68.5c a piece. You might remember that I said I sold all my shares in this company by mistake. I really want to keep some of its shares, believing in the longer term future of crude palm oil. The share price closed at 69c today.

I am not firing all my guns yet because we have to be wary of a potential head and shoulders formation. The neckline of this formation approximates 65c. If 65c were to be tested successfully on lower volume, we could add more aggressively to our long positions believing that, probably, the longer term uptrend is still intact. Of course, there is no way of knowing. So, I hedge by buying at supports. 66.5c support, if tested, would see me buying more. After all, buying at supports in an uptrend is conventional wisdom.

2. Although the trading volume of Capitaland increased today compared to the session before, it is still quite low if we compare it to 11 and 12 May which were black candle days too. Today, a black spinning top was formed and this is a reversal signal.  It needs confirmation, of course. Well, will price move lower? It could, of course. Keep an eye on $3.08, the previous low. It has to hold up in order for price to have a better chance of a near term rebound.

I bought more shares at $3.10 a piece today. This is a hedge as a retest of the previous low is a relatively safe entry as I am, after all, buying at supports. However, bearing in mind that supports can easily become resistance in a downtrend, the additional investment is a smallish one.

3. There is some similarity between CapitaMalls Asia's chart and Capitaland's. The volume is relatively lower compared to the volume back when the previous low was formed. I am also on the lookout for a possible positive divergence between the MACD and price.

I bought more shares at $1.60 a piece today as there seems to be a lot of fear in the air.

Golden Agriculture: Divestment at 70.5c.

I am feeling the effects of age as it catches up with me or, perhaps, I just have too much on my mind lately.

It was my intention to divest partially at resistance and to keep some in case price should go higher. This has always been my style. Today, I made a mistake and sold all my stake in Golden Agriculture at 70.5c, the immediate resistance.

It makes sense to sell some at 70.5c not only because it is where we find the declining 100dMA, it also makes sense because of the declining volume as price tried to move higher in the last three sessions. A pull back would not be unreasonable.

Indeed, with the ADX suggesting a lack of any strong trend and the Stochastics showing signs of overbuying, we could see a pull back. A pull back would find immediate support at 68.5c. Breaking that could see price going lower to 66.5c. In a pull back, we want to see a higher low formed.

Of course, we could also see price moving higher although the candlesticks formed in the last two sessions, together with declining volumes, are somewhat uninspiring. Next resistance is still at 72c. Good luck to all still vested.

Golden Agriculture, Sabana REIT and AIMS AMP Capital Industrial REIT.

This is going to be a very quick post. Well, I hope it would be anyway as I am really tired today from work, mostly housework. All the housewives and maids have my deepest respect.

Golden Agriculture

Golden Agriculture provided some excitement today as patience finally paid off. A wickless white candle was formed on the back of much increased volume, breaking resistance provided by the 20d, 50d and 200d MAs in the process.

Immediate resistance is found at 70.5c as provided by the declining 100dMA. The strong buy up momentum today could probably spill over to the next session. We could see 70.5c tested and even broken. If it were to break, we could see the next resistance at 72c tested.

72c was a resistance level tested many times in the first half of April last month and it even broke briefly. Could we see price forming a higher high this time? Well, the upward trending channel suggests that this is a possibility but taking some profit at resistance can't be wrong either.

Sabana REIT

My thesis that Sabana REIT is going through a basing process could be right after all. The Stochastics is turning up from oversold territory while the MACD has turned up to close the distance with the signal line in negative territory.

So, no matter whether we believe Sabana REIT's unit price is range bound or trending down, support is obvious and downside is pretty limited for now.

90c remains the support to watch while continuing upward movement in price could see gap closed at 93c  and that would be the resistance to watch.

AIMS AMP Capital Industrial REIT

High volume white candle day. If we believe that price action saw the formation of a reverse head and shoulders pattern earlier in the year from February to April, we could see price going higher as the neckline at 21c has, once again, been overcome.

Could we see price breaking out of the downtrend this time round? Resistance at 21.5c remains rather formidable as it is provided by the 200dEMA and this was what prevented the unit price from moving higher in the second half of April last month. We shall have to wait and see. Good luck to fellow unitholders.

Well, this effort at a quick post took me almost an hour. I failed in my attempt. ;)

Related posts:
Golden Agriculture: Eyeing 96c per share.
Sabana REIT: Still waiting for a 10% yield?
AIMS AMP Capital Industrial REIT: 4Q FY2011.

Golden Agriculture: Eyeing 96c per share.

Are you rubbing your eyes? Are you pinching yourself? 96c per share for Golden Agriculture? What's the price now? 67c per share. Wah! Quick, put in a buy order for Wednesday! Wait a minute, who came up with that target? OCBC Research. The link is provided here:

OCBC ups Golden Agri price target, keeps buy.OCBC said it raised its earnings forecast for Golden Agri by 22.7% for this year to reflect improving margins and after it reported strong quarterly results.
Monday, 16 May 2011

© 2011 - The Edge Singapore

I have been bullish on crude palm oil for a long time and, in recent weeks, I increased exposure to Golden Agriculture. The long term uptrend is intact and if anyone is thinking of going long here, the long term support provided by the rising 50wMA is currently at 65.5c. I believe that this is a relatively safe entry price if it should be tested again. If it were to break, the next support is provided by the rising 100wMA at 57.5c this week. That is some way to fall. So, one has to be mentally prepared.

The share price has been trapped between the 20wMA and the 50wMA for more than 4 weeks now. It could be due to the spectre of the sharply declining 200wMA. Could it force the price of this stock downwards? It could but it is also interesting to note that the rising 50w and 100w MAs would probably form golden crosses with the falling 200wMA towards the end of 3Q 2011 or early 4Q 2011. So, stronger performance in the next few months could be on the cards as per OCBC Research's opinion.

On the weekly chart, it is easier to see that a symmetrical triangle is forming. A symmetrical triangle is usually a sign of price consolidation. A break below the support on high volume could see the next support provided by the rising 100wMA tested. A break above the resistance on high volume would be good news for the bulls. However, expect resistance at 70.5c and 72c thereabouts to weigh in before that.

The outlook for crude palm oil is benign. Demand from India and the Middle East will likely pick up ahead of Ramadan, underpinning prices. China may also need to restock in the coming months. Source: Dow Jones Newswire, May 16, 2011 07:46 ET.

My strategy to accumulate on any weakness remains unchanged.

Related posts:
Golden Agriculture: Excellent results.
Golden Agriculture: A picture says a thousand words.
Golden Agriculture: Accumulation mode.

Golden Agriculture: Excellent results.

Golden Agriculture reported a sterling set of results as expected. My faith in the company was not misplaced and my expectations were met. Year on year, revenue increased 134% while net profit increased 161%. Quarter on quarter, net profit increased 47%.

I have mentioned before that I like how the company is expanding its downstream operations to be closer to consumers. I also like how it is expanding its business in China to diversify its customer base away from Indonesia. Its Chinese operations saw a year on year increase in net profit of 220% while its Indonesian operations saw a year on year increase in net profit of 159%.

However, it is clear that its Indonesian business is still the more profitable one as it has a gross profit margin of 43%, up from 33% a year ago, while its Chinese business has a gross profit margin of only 7%, up from 6% a year ago. Could gross profit margin of its business in China be improved further? I am hopeful that it would.

Golden Agriculture's share price formed a white spinning top in the last session on the back of increased volume. This could be in response to the company's excellent results which were announced mid-day. It is easy to see that immediate although weak resistance is at 67.5c. Stronger resistance is at 68.5c and if this were taken out, we could see 70.5c tested next. 70.5c is also where we find the declining 100dMA and the upper Bollinger band. So, I expect this to be a strong resistance.

We want to see 70.5c taken out convincingly and we want to see the price form a higher high. The last high was at 73.5c. If a lower high should be formed, we could see a head and shoulders pattern. That could be ominous.

See presentation slides here.

Golden Agri profit doubles to record on surge in palm oil. Net income rose to US$230.7 billion ($287 billion) for the quarter ended March 31 from US$88.5 million a year earlier.
Friday, 13 May 2011

© 2011 - The Edge Singapore

Golden Agriculture: A picture says a thousand words.

A picture says a thousand words and that is really the appeal of technical analysis. This is, of course, if we are able to interpret the picture and sort out the signs.

I keep saying that the long term uptrend of Golden Agriculture is intact. Well, it is still intact. Take a look at the weekly chart here, starting from the week of 27 Oct 2008:

The counter's share price is retesting the long term trendline support which coincides with the rising 50wMA. Since the week of 17 Jan 2011, trading volume has declined. The black candles formed in the last three weeks have relatively short bodies, suggesting a tight range of prices.

The spring is coiling up and tension is building. Immediate upside target is 70.5c while a failure of the trendline support could see price going down to 57c which is where we find the rising 100wMA.