Portfolio strategy.

Done my weekly reading of The EDGE.  Goola Warden, Darryl Guppy and Michael Kahn are people whose articles I enjoy reading.  I have also learned a lot about TA from their writings.  In this issue of The EDGE, all of them have gone decidedly bearish about the prospects of global stock markets.  My own reading of the STI shows that the uptrend is still intact but the index is in a rather dicey situation should it not confirm the reversal signal seen in the last session.  With the US market closing in the red in the last session, the STI has to look to the SSE and HSI for leadership and we might agree that it is not all that promising.

So, what are we to do?  I have taken much of my profit off the table three weeks ago.  I have been averaging back into the market as prices came down to supports.  Looking ahead, I plan to continue accumulating high yielding counters at attractive valuations.  This remains the core of my investment strategy as my long term aim is to acquire a reliable passive income stream from high yields.

Which high yields would I want to accumulate?  After all, you might remember that I revealed a long list of high yields which I currently own.  Please see:  Grow your wealth and beat inflation.

One high yield which I have been constantly accumulating and will continue to do so is Saizen REIT.  Amongst the S-REITs, it is hard to find another REIT with as compelling a valuation. Having said that, there are a few others which I am keen on and I will keep an eye on.  They are AIMS AMP Capital Industrial REIT, LMIR and Suntec REIT.  Any decline in unit prices of these REITs will be an opportunity for me to further secure yields of >10% p.a. from various sources.

I would be looking out for opportunities to partially divest my remaining investment in Healthway Medical as I stated in a comment to this post: Healthway Medical: Dwindling volume.  I said: "Healthway Medical does look like it is suffering from fatigue of late. With more shares being issued and with the lower target price by DMG, it is probably difficult for the counter to form a new high anytime soon."

I will also be keeping an eye on Golden Agriculture.  If the 100dMA support at 48c breaks, it is very bearish.  Any move up towards the 20dMA at 56c in the near future provides an opportunity to reduce exposure.

I still like the long term fundamentals of Healthway Medical and Golden Agriculture.  However, as Darryl Guppy expressed so well: "Markets are efficient at recording the emotional behaviour of participants.  They are less efficient at reflecting the economic fundamentals."  I have also said that it is important to know when to buy but it is also important to know when to sell: Rationale for partial divestment.

Good luck in the new week!

STI: What now?

In reply to a question from a visitor to my blog, Anthony, on whether the decline in the STI is the beginnings of another bear market, I said, "We will have to pay attention to the trend. The STI, despite its current weakness, is still trading above the channel support. The uptrend is intact. The market is just going through a much needed correction."

I have drawn the channel resistance and support in brown color here.  We see how the price action yesterday formed a white spinning top with the high of the day resisted by the 100dMA.  Index movement stayed within the confines of the up channel.  We now have to see if the reversal signal is confirmed next week.  MFI is still declining, indicating a weakening buying momentum and the index seems poised to enter oversold territory as a new low is inevitably formed.

If the STI does break down, there is some way to fall and I expect the rising 200dMA to provide some support.  That is at 2,550 thereabouts next week.  I have also identified two support levels in red based on candlesticks support and resistance.  Let us hope we never have to test those levels.  Then again, Mr. Market pays scant attention to our hopes.

Healthway Medical: Dwindling volume.

Healthway Medical closed at 16.5c after touching a low of 16c on the back of reduced volume.   Without any significant expansion in trading volume, any upward movement in price is likely to be unsustainable.  In fact, the chances of a downward drift in price is a more likely scenario when volume dries up.

The interest in Healthway Medical's rights also hit a low note today as the price touched an intra day low of 7.5c.  This is a far cry from the first day of trading when it traded as high as 9.5c!  This also means that the purchasers of these rights would be able to own more Healthway Medical's shares at only 15c after paying another 7.5c by 9 Feb 2010, the deadline for the acceptance and payment of the rights.  Why buy the mother share at 16.5c then?

Personally, I see 15c as an important XR support level, followed by 14c.  For anyone who is interested in owning more Healthway Medical's shares at this point in time, buying the rights at 7.5c seems like a better idea than buying the mother share.

DMG and Partners, who initiated coverage of Healthway Medical earlier this month and issued a buy call with a target of 28c has issued a new lower target of 21c yesterday.  They cited the enlarged capital base due to the new shares from the rights issue as well as a share placement exercise as the reasons for lowering the target price.  It may be coincidental but this gels with my XR eventual target price of 21.5c compared with my CR eventual target price of 24c earlier.

Golden Agriculture: Oversold.

Golden Agriculture closed above the 50dMA at 52c, almost forming a dragonfly doji, which is usually a bullish sign.  The MFI declined and dipped into oversold territory today.  We have the conditions for a possible reversal.  Any downside should be restricted by the 100dMA at 48c while initial upside resistance is provided by the 20dMA at 56c.  With all the longer term MAs still rising, although gently, the downside risk for Golden Agriculture seems limited for now.

With recent upgrades of the prospects of crude palm oil (CPO) by RBS Asia Securities and BNP Paribas for 2010, with the former going so far as to say that Golden Agriculture has a fair value of 71c, a floor for the counter at 50c is not unreasonable.

A quick peek at the weekly chart shows an imminent golden cross between the rising 20wMA and the descending 100wMA.  Spotting a probable reversal is always exciting and Golden Agriculture is making my heart beat a little faster.

Saizen REIT: Positive newsflow.

Saizen REIT's CEO bought another 100 lots at 16c yesterday.  Persistent insider buying is a hallmark of this REIT.  A positive development on its loan for YK Keizan has also eliminated the need to draw on a bridging loan which would have entailed considerable interest expense.  YK Keizan's loan would be fully repaid using only internal resources by April.

Saizen REIT closed at 15.5c today.  I might get my wish next week to buy more at this price.  If I am lucky, I might even get to buy more at the 100dMA.  This coincides with a longer term 38.2% Fibo line and is likely to be a strong support.  That's at 15c.

Saizen REIT will be presenting its results on 11 Feb, just before the Chinese New Year.  That gels with my chart reading on a probable breakout timing on the upside.  A narrowing of the Bollinger bands gives some credence to this reading as well.  Initial breakout targets remain at 19c and 21c for now.

Golden Agriculture: Reversal confirmed.

Golden Agriculture closed at 52.5c, confirming the reversal signal given by the inverted hammer yesterday. The critical support at 50c held.  The MACD has a buy signal today with a green histogram after more than 2 weeks' worth of red ones.  MFI is at 29% and this leaves much room for its price to move up if indeed that's the direction in the next few sessions.

A new set of Fibo lines show resistance at 56c (38.2%) which happens to coincide with the 20dMA, 58c (50%) and 59.5c (61.8%).

I did not manage to get any at 50c, the critical support level, but that's ok as I have been accumulating shares of Golden Agriculture as its price moved downwards this and last week.

The fundamentals for crude palm oil remains compelling and I would accumulate shares of Golden Agriculture if its price weakens to supports instead of moving up in the near future.

Healthway Medical: Waiting for a pullback.

Healthway Medical closed at 17c on low volume and a declining MFI.  We can see from the line I've drawn on the MFI that the buying momentum did not bounce off the line which would have meant a strong follow through in the buying momentum.  Let us see if the rising 20dMA could push the price higher as the Bollinger bands begin to squeeze.

Trading volume has been on a downward trend since peaking in the first week of trading in 2010 on 7 Jan.  Conventional wisdom is that if volume does not expand meaningfully, any price movement upwards is unlikely to be durable, especially for a counter with a huge float such as this one.

Looking at the weekly chart gives a more sobering picture.  Healthway Medical's recent candlesticks are largely beyond the upper limits of the Bollinger bands and the MFI is firmly entrenched in the overbought region.  In fact, it is getting more overbought by the week.  I will wait for a pullback before accumulating more shares of this company.

Saizen REIT: Still accumulating

I am back in Singapore.  It's nice to have access to the internet without paying more.  It's also nice to be surfing the net with my big LCD screen.  Happy!

My overnight buy queue for Saizen REIT at 16c was filled today.  I would have liked to buy at 15.5c and I still have a queue at that price level.  However, I rationalised that it's only 0.5c.  No big deal.  I am still some way from the target I've set for myself in terms of the number of Saizen REIT units I want to have in my portfolio.  I'll buy in slowly at 16c.  If Saizen REIT does not revisit 15.5c, I would still be accumulating.

Saizen REIT's price action formed a graveston doji today.  I won't be too worried since there was only one trade done at 16.5c and only 7 lots were transacted.  16.5c is now resistance provided by the rising 20dMA.  The flat 100dMA provides support at 15c.  With the MFI forming a higher low, it shows the buying momentum, though weakened, is very much alive.

4 counters

Another down day for the STI as it closed just a few points above the 2,700 support.

Golden Agriculture closed at 50c which I've identified earlier as a critical support.  The black candle day took place with lower volume compared to the last session.  Price action formed a black inverted hammer which, together with the white inverted hammer, are considered possible reversal signals.  This has to take place after a series of down days which is the case here.  We will need confirmation tomorrow.  If the decline continues, the rising 100dMA provides near term support at 48c.

Healthway Medical closed at 17c, forming a dragonfly doji which is usually interpreted as a bullish candlestick.  However, this took place on the back of much reduced volume and a declining MFI which hit 50% today.  The buying momentum is broken but the declining MFI also gives more room for price to move upwards in the event of a reversal.

Q&M Dental is seeing its price retreat, closing at 49.5c, down from the lofty 60c not so long ago on the first trading day of 2010.  It should retreat.  I am not even looking at the charts.  Fundamentally, at 49.5c, it is still very expensive.

Saizen REIT closed at 15.5c, the support level provided by the 50dMA.  Both yesterday and todays' black candles were accompanied by relatively low volume. Rising 100dMA at 15c should limit downside.  15c is also a many times tested candlestick support and resistance level.  I have put in my buy queues.

STI and 3 counters

Asian markets made huge retreats today. HSI and STI are down by 2.38% and 2.54% respectively. The Shanghai Composite is down 2.42% while Taiwan is down by a whopping 3.48%! European markets are all in the red right at this moment.

Where are the supports for the STI? I identified two levels of support for the STI in a previous post. With today's close at 2,740, we are sitting right on the first level of support. Please see:. STI: How low can it go?

With the retreat in the STI happening with such magnitude and strength today, as could be seen in the high trading volume, the next support which is a band between 2,680 to 2,700 could be tested next.

Healthway Medical started the day at 18c only to touch a low of 16.5c before closing at 17c. MFI is declining which suggests that buying momentum is weakening. Price action is directionless at the moment at best.

Golden Agriculture closed at 50.5c as it crashed through the supports at 51.5c and 51c. My overnight buy queues at those levels were filled. The next support level is at 50c, a many times tested candlestick resistance turned support. This support level is critical. . We might see a whipsaw if this support level holds. The rising 100dMA is at 48c.

Saizen REIT's price action formed a solid black candle as it closed at 16c, below the rising 20dMA. My overnight buy queue at 16c was filled. The rising 50dMA will provide near term support at 15.5c next. The pullback is on relatively low volume with. the MFI declining to 50%. The fundamentals have not changed and I will accumulate at the next support level.

Healthway Medical, Golden Agriculture and Saizen REIT.

This is going to be a quick look at Healthway Medical, Golden Agriculture and Saizen REIT.  A quick look is all I might be able to do in the next couple of days as I am on vacation and the internet connection at the hotel is rather pricey. I am writing this after midnight after a nice night out.  I hope I am still writing coherently.

Healthway Medical closed at 17.5c on Monday, the same as the previous session last week.  It is showing resilience as expected.  However, the price moved to touch a high of 18.5c before closing lower.  This formed a candle with a long wick on top.  If you have been following my blog, you might remember that I dislike such candles.  Price is unable to close higher on a day with much higher volume.  Not too positive, you might agree.  OBV and MFI are flat, suggesting a lack of conviction either way.  The MFI is hovering under the overbought region and that suggests that any upside in the immediate term might not be very durable.  Fundamentally, I am not convinced that Healthway Medical should trade at anything higher than 18.5c which is what it is worth, post rights, if it trades at the same valuation as Raffles Medical Group, both in terms of PE ratio as well as P/B value.

Golden Agriculture's bullish reversal candle in the last session was not confirmed on Monday.  It has also formed a candle with a long wick on top which I dislike.  Price closed lower today at 53.5c.  However, unlike Healthway Medical, volume was much reduced yesterday with MFI declining to the 50% level.  At this level, there is more room for price to move higher if a reversal comes along.  Of course, MFI could continue to move lower and if the price decline stalls or moderates as this happens, it is actually a positive. OBV continues to decline but more gently, suggesting that distribution might be moderating. I would accumulate Golden Agriculture at the next support levels I identified in earlier posts.

Saizen REIT's price closed unchanged and it seems that the rising 20dMA is providing some support at this point in time.  Volume shrank while MFI continued its decline.  OBV has flattened.  What is interesting is the declining MFI.  This suggests a lack of buying momentum but if this continues to lower without any corresponding decline in price, it is actually a positive.  I would keep an eye on this.  Saizen REIT is still a counter I will continue to accumulate at supports.  This REIT, I firmly believe, is going to be re-rated upwards in time and when that happens, the market will recognise its value in the usual way.

Have a good Tuesday, everyone.

Grow your wealth and beat inflation

In some interviews earlier in the year, Marc Faber said that the meteoric rise in global stock markets in 2009 was a once in a lifetime opportunity to make a lot of money and that 2010 should be a year of capital preservation (ie. not to lose money). Marc also said that, on average, it is still possible to get about 10% gain from the stockmarket this year.

People who know me would know that I have a lot of respect for Marc and I take his advice to heart. However, I believe that if we use fundamental analysis and choose to invest in companies with strong fundamentals that are still below their intrinsic value, coupled with technical analysis to determine fair entry and exit points, we could make more than 10% capital gain this year.
Stockmarket analysts.

Does this mean that we have to take on risk? Of course, there are risks involved. There is no free lunch in this world. Risk has to be managed, not feared. Easier said than done? After all, it's only human to feel fear.
Risks and rewards: TA and FA

Then, let this be an inspiration: "The rich would act in spite of fear. The poor would let fear stop them." I read this in a book while browsing in a bookshop recently. I cannot remember the title now. If we are petrified by fear, we would never do anything in times of adversity.  At the height of the bear market when the VIX was making new highs, when everyone was fearful of buying more shares, that would have been the best time to gradually accumulate shares of good companies.
Bungee jumping, anyone?

Convinced?  So, what do we do?  There are many suggestions by financial analysts on what to do with your money depending on your risk appetite and how to get better returns than fixed deposits in the banks. Frankly, to get better returns than fixed deposits is quite easy. A one year fixed deposit now pays as much as 0.8% per annum, the last time I check. There are also suggestions to leave our money in money market funds which pay 1.3% per annum, thereabouts. Lower risk than equities and higher returns than fixed deposits, though not guaranteed.

For me, the more important thing is how to get better returns that will protect us from the wealth erosion effect of inflation! A rather benign inflation rate could be about 3% per annum. So, if we leave our money in the bank, more than the contingency cash required for six months of expenses in case our regular source of income is terminated, we are doing ourselves a grave injustice with an interest of only 0.125% per annum in the banks. If we leave our money in a fixed deposit or a money market fund, our wealth is still shrinking as the returns lag inflation.
Be a pragmatist and prosper in 2010.

I wrote about capital gains and high yields in various articles in this blog.  I have shared my thoughts on inflation and investments in gold and real estate too.  On a daily basis, barring the days I'm away from home, I've shared my analyses on price movements of certain counters.  These analyses would hopefully contribute to capital gains.  It seems that I'm neglecting high yields.  After all, the theme of my blog is: "Have a more secure financial future in an uncertain world by creating a stream of reliable passive income with high yields." 
High yield portfolio.
Real estate as hedge against inflation.
Gold as an insurance against inflation.

I guess why I'm not writing as much about high yields is because they don't really have to be actively managed as much.  I am receiving dividends from a portfolio of high yields at this time on a quarterly, half-yearly and yearly basis, depending on the stock.  This is something which people who are relatively risk averse, who want to grow their wealth, fearing the effects of inflation could consider.

My portfolio of high yields at this moment include:
SPH
ST Engineering
Cambridge Industrial Trust
CitySpring
First REIT
FSL Trust
K-REIT
LMIR
AIMS AMP Cap Ind REIT
MIIF
Suntec REIT
HWT
Frasers Commercial Trust
Saizen REIT

These high yields are not all created equal and some were bought at prices I would rather forget.  Many, however, I am happy to say, I have purchased at much lower prices in the last twelve months.  The constant passive income they have provided me with makes me happier.

The profits I made from trading in the stockmarket, I make it a point to apportion some of it towards accumulating high yields.  The high yields I have been accumulating in the last few months were SPH, AIMS AMP Cap Ind REIT and Saizen REIT.  I have written extensively about these high yields.  So, I shan't say more here.
Passive income with high yields - Saizen REIT.
AIMS AMP Cap Ind REIT.
 
We have a responsibility to ourselves and the people we care for to have a secure financial future.  This is something we have to consciously work towards.  It is the responsible thing to do.  The journey is likely to be filled with obstacles but treat each one as a learning experience and grow with each step.  A good dose of luck doesn't hurt as well.  Good luck to us all.

STI: How low can it go?

With the Dow down 216.9 (-2.09%) at 10,172.98 and the S&P down 24.72 (-2.21%) at 1,091,76, it is likely that the bloodbath will continue next week in the Asian markets. Crude oil is down to US$74.23, that is down US$1.85 or 2.43%. Crude palm oil (CPO) on 22 Jan closed at RM2,455, down RM33 or 1.33%.

The flood of negative price action is psychologically daunting for investors and longer term traders alike. Investors are likely to wait for prices to go even lower before committing more capital while longer term traders are likely to wait for clearer signs as to whether the trend is still up or reversing before taking fresh positions. The one group that might benefit are the short term traders who might short the market as the chances of further downside is definitely greater.

Having said this, generally, the longer term uptrend is intact and investors would do well to hold on to their positions and ride out this rough patch. Of course, not all stocks are created equal, certain counters such as Healthway Medical are expected to be more resilient while certain counters such as Yanlord might sink much more.

In the last session, the STI gapped down and traded lower for most of the day but did a dramatic u-turn and closed higher, forming a white candle which looks promising. Promising because a possible reversal pattern which chartists call a "morning star" might appear if the index opens and closes higher in the next session. Confirmation is still required.

However, with the return of heightened volatility as could be seen in the widening of the Bollinger bands, a lack of buying momentum as could be seen in the rapidly declining MFI and the continuing distribution as could be seen in the declining OBV, it would be no wonder if buyers hold back in the next session, which could send the STI lower.

Now, the question is how much lower will the STI go if it does continue sinking? To answer this question, I have decided to draw three sets of Fibo lines for the STI's chart. For the visually challenged, please don't click on the chart. My eyes watered after a few minutes of looking at it.

From the three sets of Fibo lines, we can see where some of the Fibo lines are so close to each other that they overlap or almost do so. From these lines, I see strong supports at 2730-2740 and 2680-2700. Another 5% downside, it seems, cannot be ruled out from the last session's close of 2,819. Time to bring out the warchests? Maybe. May Lady Luck smile on us.

Healthway Medical: Strength

Healthway Medical's price action exhibited relative strength as it closed higher on a white candle day at 17.5c. This level is actually the XR adjusted level of the previous eventual target of 19.5c. All the more impressive. The new eventual target for the counter is 21.5c if 17.5c is taken out. Notice that the volumes on down days are actually lower than the volumes on up days for this week. That is a positive. The MACD has a buy signal today too.

The only negative I can spot is in the weekly chart which shows the MFI in overbought territory for the third week running. Conventional wisdom is that a counter cannot stay overbought forever but it can last quite long in extremely bullish cases.

I repurchased a chunk of Healthway Medical's shares at 16.5c and I would be quite happy to see it fly higher. If it sinks lower, I would carry on repurchasing as my current investment is only 40% of what it was originally before the counter ran up.

Saizen REIT: Accumulation mode

Like the broader market, Saizen REIT retreated today. Opening at 17c, it reached a low of 16c before closing at 16.5c. This is also on the back of higher volume. MFI and OBV are in decline, suggesting a lack of buying momentum.

Taking a look at the weekly chart, we see that the 20wMA is flat, coinciding with the 38.2% Fibo line at 15c. Expect 15c to be a strong suppot. With today's heavy volume selldown and the negative divergence between price and volume seen on the weekly chart, further decline in price to possibly test 15c cannot be ruled out.

I put in a queue last night to buy at the 16c support level. That was filled. I will put in a buy queue tonight at the next support level.

Golden Agriculture: White hammer!

Golden Agriculture gapped down and sank rapidly, hitting a low of 52c on heavy volume. Impressively, it closed at 54.5c, forming a white hammer in the process! A white hammer appearing after a series of down days is usually promising. We might have a reversal next week. We will need confirmation in the next session.

MFI, a momentum oscillator, is declining and almost at the 50% mark. OBV is still in decline which suggests distribution is still very much alive. Despite a lack of buying momentum and accumulation, price action managed to form a white hammer. This suggests some strong underlying support for the counter: the selldown was well absorbed.

As is my style to buy at supports when prices are moving down in an uptrend, I put in a buy queue at 54c, which I identified as a gap support, last night. Of course, it was filled. My other queue at 51.5c was not filled. Missed by 0.5c. Sometimes, hedging by queueing at one bid above support could be rewarding.

STI: Rejoins the channel

The air is buzzing with excitement or it might be panic. It depends on whether we are asset light or asset heavy at this point in time.

On 13 Jan, I blogged:
"The previous uptrend channel resistance for the STI should now provide support at 2,860 through early next week. If the index breaks this support, it would rejoin the channel. Having said this, with the 20dMA, 50dMA and 100dMA all rising and each within 70 points of each other, more or less. The outlook for STI's uptrend is still good. The correction will be a good opportunity to accumulate shares of good companies as prices move closer to supports."

With the STI now just a tad above 2,800 this morning, the index has rejoined the channel. The uptrend is still intact. If the index breaks the uptrend channel support, then, I would worry. For a look at the chart, please refer to: Confirming the signs.

On 15 Jan, I blogged:
"To me, the recent ups and downs of the STI is a sign that a correction is probably going to happen. A 3000 points initial target which so many analysts have talked about is so near and yet so far. The market is grudging and unwilling to give bulls the satisfaction (yet). Analysts have also talked about a 3300 points eventual target for the STI by end 2010. That's a mere 10% from where we are now." Please see: STI: Up or down?

The correction which we have been anticipating has descended upon us. This is an opportunity to accumulate at supports and I am doing just that. Good luck to us all.

Healthway Medical: Share placement

The Board of Directors of Healthway Medical Corporation Limited (the “Company”) wishes to announce that the Company is in advanced discussions with a major international financial institution (“FI”) for an equity and debt funding package (the “Funding”) of up to US$25 million. The terms and conditions of the Funding have been substantially agreed between the Company and the FI. The Funding is, inter alia, subject to the FI’s board approval. The FI’s board is expected to meet and
decide on the Funding by end February 2010.....

.... The Company will convene an Extraordinary General Meeting (“EGM”) to seek the approval of the shareholders of the Company (the “Shareholders”) on the above transactions. This EGM is expected to be held in the first quarter of 2010.

As the Funding and the Placement are still subject to the FI’s board approval and/or Shareholders’ approval at the EGM, the Company wishes to state that there is no assurance that approval of the FI’s board and/or the Shareholders will be obtained and the Funding and the placement will be undertaken.

Healthway Medical is attracting the attention of international financial institutions now which is good. They are doing a share placement which is bad as it does not allow minority shareholders to participate.

Healthway Medical: Time-table

Shares traded ex-rights : 19 January 2010 from 9.00 a.m.

Books Closure Date : 21 January 2010 at 5.00 p.m.

Despatch of Offer Information Statements, the AREs or the : 26 January 2010
PALs (as the case may be) to Entitled Shareholders

Commencement of trading of “nil-paid” Rights : 26 January 2010 from 9.00 a.m.

Last date and time for splitting Rights : 29 January 2010 at 5.00 p.m.

Last date and time for trading of “nil-paid” Rights : 3 February 2010 at 5.00 p.m.

Last date and time for acceptance of and payment for Rights : 9 February 2010 at 5.00 p.m. (9.30
Shares and excess application p.m. for Electronic Applications)

Last date and time for renunciation of and payment for Rights : 9 February 2010 at 5.00 p.m.
Shares

Expected date for issuance of Rights Shares : 22 February 2010

Expected date for the listing and commencement of trading of : 23 February 2010
the Rights Shares

Healthway Medical and Saizen REIT

Healthway Medical: A low volume pull-back today with price closing at 16c. MACD seems certain to form a bearish crossover. MFI has formed a lower high today as it formed a higher low yesterday. There is no momentum either way, it would seem. If this continues, it actually favours the bears as price is more likely to drift lower than to float higher in such instances. Support at 15c is still valid.

Saizen REIT: MFI is moving higher but the index is still not overbought. OBV is moving higher too which indicates continuing accumulation although slight. Supports provided by the rising 20dMA at 16.5c and the rising 50dMA at 15.5c. I continue to like the REIT's fundamentals and I see limited downside while upside potential remains attractive.Saizen REIT: Accumulate at supports.

Golden Agriculture: High volume sell down

Golden Agriculture broke support provided by the 50% Fibo line at 56.5c to close at 55.5c after touching an intra-day low of 55c. This is on the back of pretty high volume and it seems that the negatives from lower crude oil and crude palm oil prices yesterday were too much to bear. Price is now supported by the rising 20dMA. With this type of high volume movements, there is usually some momentum and expectation is for the price to move lower tomorrow to test supports at 54.5c (38.2% Fibo line) and 54c (gap support). If those break, the next supports are at 51.5c (gap support) and a band between 50c to 51c (many times tested resistance turned supports).

Longer term fundamentals are still good. After selling off 90% of my position by the time it hit 62c last week, today I bought a chunk of Golden Agriculture's shares at the 20dMA support. This was a buy queue I put in last night. I will continue accumulating on further weakness.

Golden Agriculture: A tale of two crudes

I was watching Bloomberg on TV while vacationing and some technical analyst said that US$80 for crude oil is in the bag and would happen before the week ends. There is also news out of Venezuela that Chavez might have to do something drastic to handle a crisis in the country and that might send crude oil up to US$100! That would make Darryl Guppy happy.

Crude oil moved to the lowest in 2010 on Tuesday, 19 Jan, while crude palm oil trades at the lowest level in 8 weeks today at RM2,444, down RM46 or 1.85%. Short term weakness providing a chance to accumulate? Maybe.

Technically, the 50% Fibo line at 56.5c seems to be providing near term support. If this counter is also doing a correction using time, it would be waiting for the 20dMA to catch up and the 20dMA would be at the 50% Fibo line sometime in the next couple of sessions. The 20dMA also coincides with an uptrend line and this reinforces the near term support.

If the 20dMA support gives way, Golden Agriculture should find support at 54.5c, the 38.2% Fibo line and at 54c which is a gap support.

Healthway Medical: XR

Healthway Medical's share price seems to be holding up pretty well even after XR. However, today's price action formed a doji after the previous two white candle days. That is always "iffy".

The MFI has formed a higher low which suggests that buying momentum exists but it is very close to crossing into the overbought region. We still do not see a buy signal on the MACD and I get a feeling that the counter is consolidating, doing a correction using time. If this is right, the price is unlikely to decline very much further and is waiting for the 20dMA to catch up before moving higher.

Adjustments have been made to the chart after the counter went XR on 19 Jan. So, I've redrawn the Fibo lines and we have a support level at 15c (61.8%) which is where the 20dMA is headed towards by end of this week. Downside should be limited to 15c if the counter is indeed doing a correction using time. New eventual target is also adjusted for XR and is now at 21.5c (down from 24c) as indicated by the 161.8% Fibo line.

I have repurchased some shares at 16.5c as a hedge. I will now wait to see if the counter is indeed doing a correction using time or if it would correct in price to hit 15c.

Rationale for partial divestment

Amongst the three counters I am actively monitoring, I remain heavily vested in only one counter: Saizen REIT. I have divested 90% of my position in Golden Agriculture and 80% of my position in Healthway Medical in the recent run up in prices.

From 4 Jan, the first trading day of 2010, Golden Agriculture raced from 51c to a high of 65.5c for a gain of 14.5c or 28%. Healthway Medical blasted through the roof as it started the year at 14c and hit 19.5c for a gain of 5.5c or 39%! In both instances, partial divestments took place at every resistance level as the prices rose.

Now, have I changed my mind about these two counters? No, of course not. The fundamentals and prospects are still good over the longer term. I just feel that the market became a little too enthusiastic and sent prices up too high and too quickly. I liken it to a sprinter who is able to run very quickly over short distances but the speed is unsustainable over longer distances.

Knowing which companies' shares to buy and when to buy them is important but knowing when to sell the shares is equally important. For sure, if we simply hold on to the shares till they reach the zenith before selling is one way. However, to grow our wealth more quickly, selling at resistance levels and repurchasing at supports for the next leg up could be more rewarding. It is with that mentality that I partially divested my shares of Golden Agriculture and Healthway Medical.

What about Saizen REIT? It started the year at 15c and reached a high of 18c for a gain of 3c or 20%. Not too mean either. I identified Saizen REIT as a yield counter for regular passive income. Conservatively, I expect a yield in excess of 10% per annum from middle of 2010. With that in mind, I am not too keen on divesting my investment in Saizen REIT unless the price is extremely compelling. Three portfolios and three counters: future gains and passive income.

The stock market climbs a wall of worries and goes down a river of hope or so the saying goes. Basically, it means that prices do not go up or down in straight lines. If the prices go up without a break, it means that the wall of worries is non-existent. I would worry in such an instance! It usually means that the market is euphoric and we have buyers rushing in en masse.

When we have almost full participation in the market, there is very little fuel left to push it higher. That is when the market reverts to the mean. Anytime, when too many people shift to one side of the boat, a shift back to the other side is necessary to maintain equilibrium.

In an article I read this morning by ETF Guide, it says,"Investors Intelligence tracks the recommendation of different market advisors. As of the most recent poll, 53.4% of all advisors are bullish. 30.7% of advisors are longer term bullish...... " It went on to say that even the market high of October 2007 did not get such a positive response. This is a wake up call and contrarians are taking note. Marc Faber is probably one of the first to sound the warning and I talked about this in a post yesterday: STI: Up or down?

Right, this is where I sign off. I will be going away for a short holiday from tomorrow and will not be adding new posts for a few days. Thanks for the overwhelming support so far and I hope my posts have been useful and in some cases, maybe, inspiring. I wish everyone the best of luck and, remember, always hedge and come back often.

Golden Agriculture: As per expectations

Golden Agriculture is behaving according to expectations. Closing at 57c on lower volume suggests that if the price retreats to the gap support at 54c, we should expect some strong support. Although if 54c gives way, the steeper orange color trendline would be violated and the gentler green color trendline would come into play. The latter, incidentally, coincides with the 38.2% Fibo line at 50.5c and should be a very strong support. I am going to accumulate on the way down at supports as the longer term fundamentals of crude palm oil remain intact.

Healthway Medical: Decline continues

On 13 Jan, I said, "Even though the continuing sideways movement in price is taking place on the back of reducing volume, without any significant buying up activity, price is likely to lower in time." Healthway Medical: A grave situation?

Today, Healthway Medical closed at 17.5c on relatively low volume. For people who are waiting to accumulate Healthway Medical shares and would like to hedge, one bid above the support provided by the 61.8% Fibo line seems like a fair proposition. I like accumulating shares at support levels on the way down. 61.8% Fibo support at 16.5c looks attainable as the declining OBV tells me that distribution is underway.

Saizen REIT: Accumulate at supports

Saizen REIT retreated from 18c to close at the resistance turned support level of 17c today. An overnight buy queue at 17c which I put in as a hedge was done. I like accumulating shares when they are consolidating or coming off their highs to hit supports. With a high of 18c achieved in the last session, I have drawn the new support levels using Fibo lines. If the support at 17c gives way, next supports are to be found at 16c (61.8%) and 15.5c (50%). Of course, I will be accumulating at those levels as well.

Upside targets remain at 19c and 21c. Eventual target is at 24c.

STI: Up or down?

Looking into crystal balls can be hazardous to health because they give you signs of what might be and not what will be. Usually cryptic and sometimes perverse, it's best to avoid these magical objects. However, being human, I have the failings of our kind, the type of failings which got us kicked out of Paradise in the first instance.

In a post dated 12 Jan, I wondered if a correction was at hand and on 13 Jan, it looked as if a correction was underway. For a recap, please seeConfirming the signs. However, on 14 Jan, things did a u-turn and that got people wondering if there would be more upside to come.

To me, the recent ups and downs of the STI is a sign that a correction is probably going to happen. A 3000 points initial target which so many analysts have talked about is so near and yet so far. The market is grudging and unwilling to give bulls the satisfaction (yet). Analysts have also talked about a 3300 points eventual target for the STI by end 2010. That's a mere 10% from where we are now.

Marc Faber, in an interview with Yahoo! Finance on 13 Jan said that he is no longer bullish on stocks because everyone is now bullish on stocks. Marc is a shrewd contrarian who has been proven right time and time again. He made the observation that many stocks' prices are flattening out and that once the momentum fizzles out, momentum players who are in the market for the upward momentum and not to hold long term positions, will pull out and they will pull out fast! We will then have a correction in earnest. It would be prudent for us to take Marc's views seriously.

What are we to do? I suggest keeping an eye on the newsflow and on the STI at the same time for signs.

During the recent multi-months recovery from the market bottom, we saw how streams of bad news were brushed aside as the market powered upwards. That was a powerful sign that a cyclical bull was charging back. It was a sign which many ignored much to their regret later on. At best, disbelievers missed out on a money making opportunity of a lifetime. At worst, shortists were caught with their pants down and lost their pants in the process (and some even got spanked on their backsides).

If we get a constant stream of positive newsflow and the STI hardly budges but a slight whiff of negative news sends it down, the signs are clear: a correction is not far away.

A saying from Warren Buffet now rings clear in my mind: Be fearful when others are greedy! That is a generalisation like many of his sayings. It serves to inform and not to instruct. That's where many would be Buffets got it wrong. They think his sayings are instructions.

Personally, I believe in being a pragmatist and not being overly bullish or bearish. I believe in hedging. I have taken some profit off the table, leaving some long positions in the market in case it decides to go higher. After all, crystal balls reveal only part of the picture, leaving us to form our own conclusions and, usually, we see what we want to see.

Video added on 11 Feb 2010:

SPH, Healthway Medical and Golden Agriculture

SPH
After the positive newsflow yesterday, SPH powered upwards to $3.82 forming a wickless white candle today. This effectively broke the resistance provided by the declining 200wMA at $3.80. As the white candle day took place on the back of very much higher volume, the target of $4.00 which I identified in earlier posts looks attainable. This is especially so with the MFI rising rapidly today but has yet to reach the overbought region. To those who hedged and bought some when SPH was at support ($3.60 to $3.62) recently, congratulations.

Healthway Medical
A black candle day and Healthway Medical closed lower at 18c on higher volume. The gravestone doji was a harbinger of bad news, after all. MFI continues to decline and is emerging out of the overbought region. Expectation is for the weakness to continue. Support levels identified in an earlier post are still valid.Healthway Medical: Black spinning top.

Golden Agriculture
A white candle day on reduced volume does not impress me. Unable to gap close on a white canlde day is a bearish sign and the gap resistance at 61.5c remains. I am still of the view that the price will weaken and, therefore, I shall wait to accumulate at supports on the way down. If the price should rise instead and the gap resistance is taken out, initial resistance would be the recent high of 65.5c and the eventual target is 69c.

Saizen REIT impresses

Saizen REIT broke the 17c resistance level, forming a wickless white candle and closing at 18c in the process. This is on the back of very much higher volume and, if the move is confirmed in the next session, effectively turns the 17c resistance into support in the near term. The rising MFI is on the way to forming a higher high. As the index is not overbought yet, a follow through in the next session might see the initial target of 19c tested.

Please refer to my post on 11 Jan for a recap. In that post, I said "if 17c is taken out convincingly, the initial target is 19c. The rapidly declining 100wMA at 21c should put a cap on gains should 19c be taken out this week."Saizen REIT: Sell signal negated. If 21c is taken out, I see an eventual target of 24c which was a candlestick support level that gave way decisively in October 2008 and is now a gap resistance.

Saizen REIT is one of the three counters I've identified in the last few months that would help to build my wealth in 2010. Its fundamentals have strengthened and the market will recognise this in the usual way. Three portfolios and three counters: future gains and passive income

AusGroup closed unchanged

AusGroup closed unchanged at 68.5c, forming an inverted black hammer in the process. This was after forming a doji yesterday. Both candlesticks are signs of a possible reversal. Volume on both days were relatively low which suggests that the selling pressure is probably easing and AusGroup has found support. The flattening 100dMA happens to be at 68.5c. Over a longer term, the MFI is still uptrending and the counter's current weakness might just be temporary. The fast rising 200dMA is a positive. A hedge at 68.5c for someone who does not yet have a position in this counter is not a bad idea. To accumulate, I always like to buy on the way down at every support level. 68.5c looks like one to me. If 68.5c breaks, the next support is at 66c.

Resistance is provided by the rising 200wMA at 74.5c which also happens to be the most recent high achieved on 5 Jan 10. Overcoming this resistance level would give an intial target of 78.5c and an eventual target of 83c, a candlestick support level which broke decisively in June 2008.

Golden Agriculture: A choppy journey

My blog is pretty new but if you have been following my writings for at least the last week or so, you would know that I'm big on Golden Agriculture. In a post on Christmas Day, I wrote about three portfolios and three counters. One of the counters is Golden Agriculture which I called a cyclical counter as it is most sensitive of the three (the other two being Healthway Medical, a growth counter, and Saizen REIT, a yield counter) to economic cycles.

In that post, I said, "Currently at 49c. This is the second largest crude palm oil (CPO) producer in the region. It is heavily levered to the price of CPO compared to Wilmar which has a greater percentage of income from downstream activities. Whether we look at PE, ROA, ROE or Gross Margin, Golden Agriculture looks better than Wilmar. With the improving global economy, the demand for CPO has increased. With the rising price of crude oil, there will be a further increase in demand for CPO as an important source of biofuel. The journey up will be choppy which makes this a perfect counter for trading."Three portfolios and three counters: future gains and passive income

If anyone who were not vested before had taken a position in Golden Agriculture then and sold in the last few sessions at resistance levels on the way up, say at 54c and 62c, he would have made a handsome profit. I know it reached a high of 65.5c but few would have been able to time it that well.

From my earlier chart reading, I said we might soon have a golden opportunity to load up on Golden Agriculture again with a correction in price as true to expectations, the ride is choppy.Golden Agriculture: A golden opportunity.

Crude oil has been trading lower and is down at US$79.13 as of now. Crude palm oil (CPO) has been down for a few sessions now, closing at RM2,510 in the last session, down 1.8%. There is concern that rising production and lower exports may drive stock levels to a new record high. Apparently, America is having a good harvest of soybeans as well which will help put a lid on the price of CPO as a greater availability of soyoil will dampen the demand for CPO.

With such negative newsflow and as Golden Agriculture is the most levered to the price of CPO amongst all the CPO companies listed in Singapore, it will bear the brunt of lowered expectations. With a bearish chart to boot, I would be surprised if Golden Agriculture does not test those support levels identified in my earlier posts.

SPH: Net income in Q1 doubles

SPH delivered a set of impressive results, as expected, as first-quarter net income rose to $144.7 million from $73 million a year earlier. This is likely to give its share price a bit of a push upwards tomorrow despite the bland technicals.

Rising 100dMA provides support at $3.62 and with the positive news flow, it should limit any downside. If price closes above $3.69, a many times tested resistance level tomorrow, it would likely move up to test the resistance provided by the declining 200wMA at $3.80. Breaking $3.80 would give a target of $4.00.

Healthway Medical: A grave situation?

Towards the last half hour of the trading day, it was quite apparent that the bears have won the day. There were too many sellers with almost no buyers and price closed at 18.5c to form a gravestone doji. Selling down activity accounted for 24.6m shares while buying up activity accounted for a paltry 1.2m shares.

The steep uptrend seems ultimately unsustainable. Sell signal on the MACD is confirmed while the MFI moved lower, remaining overbought. Even though the continuing sideways movement in price is taking place on the back of reducing volume, without any significant buying up activity, price is likely to lower in time.

Strategy: I have divested more of my position in Healthway Medical in the last half hour of the trading day. What remains is 20% of my original investment. I now look forward to accumulating at supports as the expectation is for the counter to do a correction in price.

Golden Agriculture: A golden opportunity

Golden Agriculture confirmed the bearish signals seen yesterday with a gap down today. Opening at the psychologically important 60c level, it quickly turned that into a resistance level, resulting in a black candle day on rather high volume. Sell signal is confirmed on the MACD. The MFI continues to decline, moving out of the overbought territory in the process. The counter is no longer overbought but such black candle days usually have some momentum and the expectation is for a further decline in price. A major support level is at 54c.

Despite the fall in price, the uptrend for Golden Agriculture is still intact. I have drawn three trendline supports in blue, orange and purple colors. Comparing the high achieved just three sessions ago with the trendline supports, we get an idea of how the rapid rise in price was not sustainable. It would be nice to see the blue trendline tested sometime in the next few sessions and holding, failing which the orange trendline comes into play. With improving fundamentals, I do not expect Golden Agriculture to fall to test the purple trendline but, of course, nothing is for sure.

Strategy: This correction presents a golden opportunity to accumulate. Having divested 90% of my position at every resistance level on the way up, I will now accumulate at every support level on the way down.

Mid-afternoon take: AusGroup

On 9 Jan, I wrote in a post that "AusGroup had a sell signal on the MACD on Thursday (7 Jan). In the near term, price seems set to go lower. Initial support is at 69c, a many times tested candlestick support level. The cluster of rising 20dMA, 50dMA and 100dMA, all within close proximity of each other, should limit downside to 66c which coincides with the 50% Fibo line."AusGroup

AusGroup closed at 68.5c in yesterday's session and is now hugging the 100dMA and the 20dMA supports which are at 68.5c and 68c respectively. MFI has formed a lower high indicating weakened buying momentum and the OBV has gone flat. Despite the ugly black candle formed in the last session, the uptrend is still intact. If the support at 68c gives way, next support is provided by the 50dMA at 66c.

The current uptrend is negated if price closes below 65c this week. From a technical perspective, the probability of this happening is rather low. Having said this, we want to see AusGroup forming a higher low to confirm the uptrend in the next few sessions. The previous low was at 63c on 23 Dec 09.

Confirming the signs

A host of negatives with Alcoa reporting a US$277 million loss, the U.S. Commerce Department reporting a deficit in international trade of goods and services which expanded 9.7% to US$36.40 billion and with China raising its banks’ reserve ratio to cool economic growth, sent markets lower.

After wondering aloud if we were seeing the beginnings of a correction last evening, the STI confirmed my suspicion this morning in a most sporting manner. If we look at the daily chart, sell signal on the MACD was spotted on 7 Jan. Candlesticks are detaching from the upper limits of the Bollinger bands as the MFI formed a lower high. Movement has a definite downward bias on a decline in buying momentum. With the MACD poised to do a bearish crossover, more downside cannot be ruled out.

The previous uptrend channel resistance for the STI should now provide support at 2,860 through early next week. If the index breaks this support, it would rejoin the channel. Having said this, with the 20dMA, 50dMA and 100dMA all rising and each within 70 points of each other, more or less. The outlook for STI's uptrend is still good. The correction will be a good opportunity to accumulate shares of good companies as prices move closer to supports.

Reading the signs

Are we seeing the beginnings of a correction? The European markets are now in negative territory. U.S. futures are also down as of now. I personally feel that we are missing a much needed correction. A correction will be good as it shakes out the weaker holders. It also allows unwinding of overbought conditions and lets serious investors accumulate more at lower prices. This gives a more solid platform for further advances in future.

For the counters I'm actively watching, there is nothing remarkable. So, I'm just going to list my observations here:

Saizen REIT:
There is no follow through on the MFI today. The uptick in buying momentum seen yesterday fizzled out today. 17c remains the resistance to watch while downside support is seen at 15.5c. All the MAs on the daily chart are rising with the exception of the 100dMA which is flat. With all the MAs clustering closer together, there is limited downside in this counter but I am still waiting for a pullback closer to support before accumulating more.

Healthway Medical
We have a sell signal on the MACD today on the daily chart. The MFI has turned down, indicating a reduction in buying momentum but the index is still in the overbought territory and should have some way to fall. The price action has finally detached from the upper limits of the Bollinger bands as it closed at 18.5c today. Initial support is at 16.5c. I will accumulate at every support level on the way down just like how I sold at every resistance level on the way up.

Golden Agriculture
The chart is similar to Healthway's. We have a sell signal on the MACD and the MFI has turned down although it's still in the overbought territory. Price action formed an ugly black candle on rather high volume. Closing under 62c, the previous target price and resistance, is ominous. Initial support is at a round number, 60c. If that breaks, a strong support band is to be found at 52c to 54c.

SPH
Although SPH averted a sell signal on the MACD, price action formed a devilish inverted cross, a bearish candlestick pattern. MFI is still rangebound even though it has moved to the upper end of the range identified in my earlier TA while OBV has turned down again. I like SPH but I will wait a bit more to accumulate at a lower price.

Healthway Medical: A beautiful symmetry

Healthway Medical closed 0.5c higher at 19c today on much reduced volume. MFI has flattened in the overbought region and OBV inched up ever so slightly. I am a believer in chart patterns. See how the cup formation troughed at 9.5c and topped out at 14.5c? The target price in case of a breakout of the top of the formation is just a projection of the trough to the top and beyond which gives us 19.5c. This target price was reached in just one week from the midpoint of the cup pattern at 12c. Fast and furious indeed. Will it find fuel to extend the run or will it soon turn lower? It is quite obvious that there is more risk of a downside than a probability of an upside at this stage. I sold more shares in Healthway Medical today and I am left holding only 25% of my original investment. Why not sell all? It pays to remember that the market can be perverse. Always hedge.

Breaking 19.5c resistance will give an eventual target of 24c. Any correction in price will find initial support at 16.5c with a stronger support at 15c.

Saizen REIT: Sell signal negated

Saizen REIT's sell signal on the MACD was negated today with the MFI turning up and forming a higher low in the process. Are things picking up? The price closed at 17c today which is a resistance level provided by the previous high on 26 Aug 09. However, the volume which accompanied the upmove today was much lower and in fact, the negative divergence between price and volume from early October till now is quite clear.

If 17c is taken out convincingly, the initial target is 19c. The rapidly declining 100wMA at 21c should put a cap on gains should 19c be taken out this week. I continue to see support at 15.5c and will wait to accumulate at that level.

SPH: Moving up for real?

SPH has a nice white candle day with the rising 100dMA seemingly giving it a bit of a push. This prevented the MACD from completing a bearish crossover. However, putting on 7c to close at $3.69, a many times tested candlestick resistance and support level, on relatively low volume is not very convincing. As the MFI shows, the buying momentum has been rangebound between 13% and 50% for more than two months now and has been steadily forming lower highs since August 2009. OBV still shows a downward trend that is levelling off with no significant increase in accumulation activity per se. Unless there is a meaningful increase in volume together with a move up in price, SPH is unlikely to break out of resistance.

The rising 20wMA provides immediate support at S$3.62. While breaking the resistance provided by the declining 200wMA at $3.80 gives SPH an eventual target of $4.00 which was a strong support level that gave way decisively in July 2008, a break below $3.62 would see more downside.SPH: A chance to accumulate?

Golden Agriculture: defying gravity

Golden Agriculture gapped up today to start the day at 62c which was the eventual target price and resistance level which I identified in earlier TA. A friend SMS me halfway through the morning to say, "Golden Agriculture is on drugs. It's 65c now!" Indeed, if Golden Agriculture took part in the Olympics, it might have tested positive for steroids as it reached a high of 65.5c and closed at 64.5c on increased volume! Most impressive.

In my previous TA on Golden Agriculture, I said that if 62c is taken out, the next target is 69c. If the price action stays as energetic as it did in the last few sessions, 69c might be reached sooner rather than later. However, it is likely to be a stronger resistance than 62c as it is not only a candlestick resistance/support level, it is also a 123.6% (in red) and a 161.8% Fibo line (in green). Drawing two sets of Fibo lines instead of one is what I do sometimes to find very strong resistance or support levels. MFI has pushed higher into the overbought territory and OBV shows continuing accumulation. With the MFI so overbought at 98%, I wonder how much longer can the gravity defying upmove continue. In keeping with my style which incorporates hedging, I am now 90% divested.

Healthway Medical: A seven months journey

One of the best performers in my portfolio in recent times has to be Healthway Medical. I started accumulating shares in the company in June 2009 at 10c and I was actively contributing in various forums on why Healthway was a value buy and how its intrinsic value should have been higher. I walked the talk and was actively buying up more shares in Healthway Medical over time and my last purchase was in December 2009.

I had to constantly explain to people why I was so convinced that Healthway Medical was a value buy. Most were more attracted to Parkway or RMG. To be fair, there were believers and there were skeptics. Here were some of my replies (edited for brevity in some cases):

7 Nov 09:
I started accumulating shares in Healthway earlier this year at 10c.
Fundamentally, a strong company....... Successfully breaking the top of the cup formation seen earlier at 14.5c would give an immediate target of 17c and an eventual target of 19.5c. Patience will be rewarded.

9 Nov 09
I am not too concerned about Healthway paying little or no dividend. This is a growth stock, not a dividend stock. I opted for scrip dividend instead of cash the last time.

There will always be growing pains and uncertainty. That's why Healthway is trading at 11x PE while RMG is trading at 19x PE. There is a discount for risk but I feel that it's too heavily discounted. A 17c target which translates into a PE of 14x for Healthway is realistic.

23 Nov 09
Healthway's chart is interesting. Its price is going through a protracted consolidation period after the cup formation was completed in August. 9.5c is the lowest point of the cup while the brim is at 14.5c. The halfway point is 12c.

The lowest price in the consolidation period since August is 12c in late October. This cup with a very long handle is seeing volume dwindle over time. As the MFI and Stochastics show, there is simply no momentum in this counter since mid August. However, OBV shows consistent accumulation and this picture has not changed.

This is a counter for long term investors but if I'm going to do a bit of crystal ball gazing, I am willing to hazard a guess that price might see a significant upmove end of this year or early next year. Rising 20wMA and 100dMA at 12.5c should limit any downside.

2 Dec 09
Some say that Q&M is overpriced. I am of the opinion that Healthway is too cheap and should trade closer to Q&M's PE. A PE of 14 for Healthway translates into a price of only 17c. At 19.5c, the PE would be about 16.5 which, I feel, is about right. The current weakness in Healthway's price presents an opportunity to accumulate and I've done so.

4 Dec 09
Insiders can sell shares in the company for many reasons. Maybe, they are buying a new property or meeting some other expenses.

I am not usually concerned when one or two insiders sell some of their shares. I will, however, take notice if insiders are selling en masse and in larger percentages which is not the case here. In the last dividend payouts, insiders opted for scrip dividends rather than cash. Updates on 20 Nov 09. I did the same.....

13 Dec 09
...How do I usually decide on whether a company is a worthwhile investment these days? Firstly, I look at the sector versus the economy. Secondly, I look at the company's numbers to ensure that it is not over-valued, that it is profitable, that it is not too highly geared and that it has good cashflow. Thirdly, I compare the company's numbers to its peers. There are other things which I might look at in time but these 3 points form the core of my fundamental analyses. Then, I use technical analysis (charting) to decide on fair entry points.....

13 Dec 09
I only took notice of Healthway as its price was recovering from its bottom this year. I was attracted to it because of its dominant position in the domestic primary healthcare sector. This, I viewed as a strength in times of recession as it did not depend so much on medical tourism like RMG and Parkway do. It is a business that, even if managed by a conservative management, would continue to benefit from strong cashflow and would in time amass a cash hoard. My first purchase was at 10c. This was below its NAV at the time.

Since then, the more I learned about the company and the business, the more convinced I am about the future of the company. My concerns regarding the fundamentals of the business have been mostly addressed.

In terms of the price, it is seeing some weakness. I believe that 12c should hold. It is exactly the halfway point of the cup pattern which I identified earlier. Price action might be going through what Darryl Guppy calls "correction using time".

You have asked me questions on the history of the company but I'm afraid I do not have the answers as I'm quite a new shareholder (and do not have the emotional baggage and knowledge of older shareholders).

Taking a leaf from Dr. Tony Tan's book, I do know that I have taken care of the downside in my fundamental analysis of the company. I will leave the upside to take care of itself. I can wait.

On Christmas Eve of 2009, I wrote an article in my blog titled Healthway Medical: Growing a defensive business. My blog was still very new at the time but I've been a firm believer for 6 months by then.

I have, by now, divested 50% of my position in Healthway Medical, selling at every resistance level which is my style. The technical target of 19.5c has been achieved in just one week. I am still rubbing my eyes in disbelieve, to tell the truth. A correction at this point in time would be healthy. Of course, Mr. Market is always right and my opinion should not matter. To one and all, have a good week ahead! :)

AusGroup

I counted 9 attempts at searching for information on AusGroup in my blog. So, here is a TA for those who are interested:

AusGroup had a sell signal on the MACD on Thursday. In the near term, price seems set to go lower. Initial support is at 69c, a many times tested candlestick support level. The cluster of rising 20dMA, 50dMA and 100dMA, all within close proximity of each other, should limit downside to 66c which coincides with the 50% Fibo line.

MFI, a momentum oscillator, shows an uptrend in buying momentum as it formed higher lows and higher highs. The OBV shows gradual and continuing accumulation. Seemingly, this counter has support and a probability of a severe downward movement in price is low.

With buying momentum intact over the longer term, breaking 74.5c, the recent high, is a matter of time. That would give an initial target price of 78.5c as provided by the 123.6% Fibo line. Accumulating at supports would give a potential gain of 12% (buy in at 69c) to 19% (buy in at 66c).

Risks and rewards: TA and FA.

In an article in Investor's Business Daily on 7 Jan 09, Alan R. Elliot wrote:

"One of the most common mistakes among investors young and old: never bothering to learn to read charts. Yet the price and volume action shown on charts is a critical tool."




The long and short of TA is to determine resistance and supports as the basic idea is that we should sell at resistance and buy at supports. This is in conjunction with trend analysis. For example, if the trend is up, everytime the price falls to support, generally, it's good to accumulate.

Then, we want to look out for chart patterns which might hint of trend continuation or a trend reversal. In TA, it is always important to seek confirmation in the following session after a signal, either bearish or bullish, manifests itself.

I know of people who have paid thousands of dollars to take up courses in TA and I can't possibly do justice to the subject here with a short post. Investopedia is a very good free online resource and I've provided a link in a box labelled "RESOURCES" here in my blog.




In the same article, Alan went on further to say that "other investors suffer from the opposite weakness: not knowing how to analyze fundamentals. That is, they don't know what to make of sales, earnings, margins and other financial data. So, if there are areas of financial reporting you haven't gotten your arms around, make 2010 the year you master them."

If a person bought some stock without any knowledge of fundamental analysis (FA), he could make some money depending on TA as he trades the psychology of the market.

If a person has no knowledge of TA, he could also make some money gunning for undervalued stocks.

If a person has no knowledge of either, he is going in with 100% risk. If a person has knowledge of both TA and FA, his risk is not 0% but it is much reduced.




What about depending on professional analysts, you may ask? My answer is to do your own research. This gives you confidence in your decision and allows you to hold with conviction.

If an analyst says "BUY", use that as a starting point and go look through past financial reports and announcements made by the company. Compare with peers in the same sector. Look at the macroeconomic and geopolitical conditions. Consider financial or any other trends which might have an impact.

Then, decide if the company is fundamentally sound and if the prospects are good. If you have a green light, use TA to determine a fair entry point. I must have mentioned this a few times before and it sounds really quite simple. Of course, it's not. It entails some hard work.




So, if you have yet to learn FA and/or TA, it's time to hit the books. You will find it all worthwhile.

Related posts:
1. Rich Dad, Poor Dad: 2 are better than 1.
2. Recommended books for FA and TA.
3. 5 rules for successful stock investing.
4. Secrets of Millionaire Investors.
5. Little Book of Value Investing.