China Hongxing: Downside target?

On 6 Mar, I had a post titled, "China Hongxing: Another S-chip bites the dust."  In that post, I said: "Analysts are downgrading the prospects of the company en masse despite the company reporting a net cash position of 22c per share. The share price closed at 14c on 5 March. CIMB-GK and Kim Eng Securities even ceased coverage of the company altogether."

In 12 Mar, Lim & Tan Securities, remarked that although China Hongxing's price has declined, at the current level, it is still expensive compared to peers.  "While Hongxing has declined 14% since we downgraded it to a Sell on 2 March ’10, we see no reason to change it due to its still demanding valuations and potential for more market share loss..."

Technically, I mentioned that "..14c is currently at the channel support. However, if this breaks, the next support is at 12c and a stronger one is at 10c. Any upmove from 14c is likely to be just a rebound from oversold conditions and would meet with resistance at 16c, thereabouts, which is provided by the descending 20dMA. If, in the unlikely event that the 20dMA is taken out, very strong resistance is provided by a confluence of the 50d, 100d and 200d MAs, which are at 19c, thereabouts."

The decline in China Hongxing's price seems to have halted and rebounded as it was supported by the channel support at 14c.  The decline in price has been accompanied by a decline in trading volume.  The Stochastics has just turned up from the oversold region.  These indicators suggest that downward pressure is limited but it might be a temporary respite.

A broader head and shoulders pattern which stretched over a duration of about nine months is now quite obvious.  This, coupled with the obvious downtrend of all the moving averages suggest that more downside is on the cards.  Accumulating at supports in an uptrend is a good idea.  Accumulating at supports in a downtrend is a different story as supports could quickly become resistance.

Using Fibo lines, we see that 14.5c is a 123.6% support.  Unless there is an upmove with meaningful volume in the near future, a test of the 138.2% Fibo support is most likely and that is at 13c.  Thereafter, the 150% Fibo support is at 12c. Further downside cannot be discounted as a valid head and shoulders pattern would see the ultimate downside target somewhere at 10c.

The following video clip is quite funny.  It has a twist in the end.   I thought since this post is about a sneakers manufacturer, why not?  In case you are wondering, no, I'm not working for Microsoft and they are not paying me to do this.  Enjoy:



Related post:
China Hongxing: Another S-chip bites the dust.

Healthway Medical: A retest of recent high.

Healthway Medical moved from 17.5c to retest the recent high of 18.5c in the last session but failed to move higher, establishing 18.5c as a strong resistance in the minds of market participants.  This is all the more significant when we remember that the price action was accompanied by volume more than four times that of the previous session.  This might be a bit more than disappointing for shareholders looking forward to the formation of a new high.  The nagging question on their minds: Is it a sign that distribution has started?

Technically, any price movement up or down without significant volume is seen as unsustainable.  What about significant volume without any significant price movement?  Usually, it means we have a stalemate between the bulls and the bears.  Neither camp is willing to give the other any satisfaction.  That the price managed to inch up 0.5c at the close was a small victory for the bulls.  That 18.5c remains a significant resistance was a small victory for the bears.

Looking at the MFI, the decline has halted and formed a higher low.  The buying momentum stopped weakening although it has not strengthened enough to form a new high.  Now, look at the OBV.  No sign of distribution.  Instead, accumulation has spiked.  This is bullish.  Finally, the sell signal on the MACD has been negated.  All signs point to the bulls having the upper hand, for now.  However, we have to remember that these are lagging indicators.  TA can never tell us what will happen for sure.

So, in the event that price does not move up but declines instead, we should have a plan.  The uptrend is intact.  So, my usual style is to buy at supports.  Initial support is where we find the merged 20dMA and 50dMA.  Connecting the two previous lows yields a trendline support that coincides with these merged MAs at 16c.  This should be the initial support and also a strong one, albeit in the short term.

Related post:
Healthway Medical: A beautiful symmetry again.

Saizen REIT: A symmetrical triangle?

On 23 Feb, I had a post titled: "Saizen REIT: Obvious uptrend."  In that post, I said, "... given the trend of the longer term MAs, the downside is very limited from current levels. Any upward push in price will meet with initial resistance at 17c and if this is overcome, the recent high of 18c might be tested..."

Well, the initial resistance of 17c was not overcome.  In the last session, Saizen REIT closed at 16.5c after touching a low of 16c, forming a dragonfly doji. OBV is flat which suggests a lack of significant distribution or accumulation.  The MFI has dipped into oversold territory.  MACD's sell signal has not been reversed.  Lethargy is a signature of Saizen REIT's price action.

I have drawn a trendline resistance connecting recent highs and a trendline support connecting recent lows.  What looks like a symmetrical triangle took shape with its apex sometime in April.  Symmetrical triangles are not the most reliable patterns in charting but, if valid, a price action in the prevailing trend is not far off.  In this case, the trend is UP.  The ascending MAs make this quite obvious.

My decision to accumulate Saizen REIT from 13c to the current price is informed by a thorough FA with the understanding that it is terribly undervalued. Even if the REIT's portfolio of YK Shintoku were to be foreclosed and even after all the warrants are converted into regular units, Saizen REIT would still have a NAV of 29c per unit. At 16.5c, it is still a good 43% discount to NAV. I have blogged about this quite extensively and shan't dwell on the fundamentals too much in this post but I will say this again, "Think contrarian!"

A video interview with Marc Faber (Posted Mar 12, 2010 07:30am EST by Peter Gorenstein):



"If you are going to put money to work in stocks both market watchers think Japan is the place to be. After a 20 year bear market and despite high-debt-to-GDP levels, the pair think the market has become too cheap to ignore. Always a contrarian, Faber believes the lack of interest in Japanese stocks makes it one of the most compelling buys in the world. "

Related posts:
Saizen REIT: Obvious uptrend.
Passive income with high-yields: Saizen REIT.
Japan's debt issue and Saizen REIT.

Golden Agriculture: Waiting for support.

Having sold almost all of my investment in Golden Agriculture two days ago, I am now waiting for the price to correct to supports before buying again.

We have a sell signal on the MACD today after the price declined for two days, closing at 56.5c, after touching a low of 55.5 today.  The ascending 20d and 50d MAs have merged and should provide initial support at 55c.  I have also drawn a line connecting the previous two lows which would give an indication of where the trendline support is in the next session, 54c.  If this uptrend is violated, the ascending 100dMA would be called upon as support, 51c.

Even though we have a sell signal on the MACD and even though the MFI shows lower highs and lower lows, suggesting a weakened buying momentum, the price decline has been accompanied by lower volumes.  If we look at the OBV, we do not see any obvious distribution activity either, which is a contrast with what we observed for the month of January after the price peaked at 65.5c.  For anyone thinking of accumulating at supports, the low volume sell down plus benign signs in the OBV provide positive confirmation.