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.

Monitoring our stocks

Being minority shareholders, we are at the mercy of the management of the companies we own when it comes to disclosure of information. So, there is always a strong preference to be vested in companies which are transparent in their business and timely in announcing any development which might affect the value of our investments.

Every day, we should scan the announcements on the Singapore Exchange for possible news from the companies we own or, simply, are interested in. Apart from extraordinary events, I am usually very interested in the quarterly financial reports. That's the best tool we have to see how a company is progressing through the year. I also like to look at the quaterly financial reports of other companies in the same sector to determine the comparative performance of the competition.

From a technical perspective, I look at the charts every night. Charts provide a window into the mass psychology of the market participants with the two emotions of fear and greed being much talked about in investment communities. So, it is not good enough that we identify investment opportunities, it is equally important to be able to read charts in order to approximate when to buy and when to sell.

Monitoring our stocks is a daily affair.
Thoughts on methodology

Determining the impact of news on specific companies

Investors have to determine the implications which news might have on the economy, specific sectors and companies within the sectors. In so doing, investors will be able to position themselves to take advantage of any developments.

So, for example, a year or so ago, when we read about how most cities in China do not have clean drinking water and how the Chinese government intends to spend more on infrastructure, the implication was that companies in the water sector with exposure in China should benefit.

For examples in Singapore, we could consider the near completion of the integrated resorts (IRs) and a growing population. The IRs are expected to attract many more tourists to Singapore in 2010. The hospitality and retail sectors are prime to benefit from this.

With a growing population in line with the government's aim to achieve a long term target population of 6.5m residents in Singapore, we expect real estate developers, healthcare services providers and transportation companies to benefit.

These connections are not difficult to make. Investors just have to keep themselves informed of the latest news. A nightly scan of the latest business news online has become a routine for me.
Identifying trends and value: FA and TA.

Bloggy Award

Being pretty new to the business of blogging, I decided to send my blog in for a professional opinion. I chanced upon "Bloggy Award" while visiting other websites, submitted my URL and, voila, a review was completed on 6 Jan 2010. My blog was given a very objective review and some very constructive comments. I am so impressed that I've decided to blog about them and recommend that fellow bloggers who would like to know the positive and negative aspects of their blog designs to send their URLs to "Bloggy Award" as well.

In case you have doubts as to their professionalism or objectivity, I have reproduced here the review which they did for my blog:

Posted Jan 6 2010 in Personal Finance by Noemi:

A Singaporean Stockmarket Investor is the blog of AK71, whose aim is to secure a financial future for himself. In his blog, he shares his experience in trying to grow his wealth and create a steady (passive) stream of income.

Visual Aesthetics – 8
The color scheme of A Singaporean Stockmarket Investor is quite pleasant – various hues of green. First impression: the blog looks stark. If you think about it though, the simplicity matches the central idea of the blog. I suggest a more striking header, though, as well as a few more images here and there. Another suggestion is to balance out the contents of the columns, as most columns have lots of content while the third column has too much “white space.”

User Friendliness – 10
A Singaporean Stockmarket Investor is very very easy to navigate. The four-column structure makes it easy to find relevant links – both within the blog and outside of it. Load times were not a problem either.

Reading Enjoyment – 10
I have to be honest and say I didn’t really find myself enjoying the posts, but I cannot take this against the blogger; after all, I have no inclination towards stocks whatsoever. Going through the content, however, I am pretty sure that like minded people will find the blog quite enjoyable to read.

Useful Info – 10
As ignorant as I am when it comes to investing, I was able to pick up tidbits of information from A Singaporean Stockmarket Investor. I can just imagine how useful this blog will be to those who actually need information on the Singaporean stockmarket. From the blogger’s favorite companies to his strategies, you will find a lot in this blog.

Overall Experience – 9
A Singaporean Stockmarket Investor has loads of content that many will find useful. If you are into investing and the stockmarket, then you ought to bookmark this blog. If, however, you are not, then I suggest passing up on this one.

Please visit:
Bloggy Award Review

Genting SP

This is another counter which I found visitors searching for in my blog. Personally, I'm not vested. Here is a TA for those who are interested.

On 31 Dec 09, price action formed a wickless white candle, closing at $1.30 for 2009, a record high at the time. On the first trading day of 2010, price action formed a long legged doji with price closing 1c lower. MACD had a sell signal that day and the price has been declining since then.

Today, the price closed unchanged but the relieve this grants to shareholders might be just an illusion as the candlestick formed today is what is commonly called a gravestone doji. With the MACD about to form a bearish crossover, the MFI declining after forming a lower high which spells reduced buying momentum and a declining OBV which tells the chart reader that distribution has been ongoing, more downside cannot be ruled out.

The 61.8% Fibo line is where the rising 20dMA will be next week at $1.21. That provides initial support followed by support found at the 50% Fibo line which is also a many times tested candlestick resistance at $1.18. Rising 50dMA and 100dMA at close proximity to each other should limit further downside by providing a cluster of supports between $1.10 to $1.15.



Taking a quick peek at the weekly chart reveals a bearish candlestick pattern, a smaller black candle within a larger white candle. The black candle week also happened on the back of higher trading volume. The probability of a decline in price is definitely higher next week. Having said this, even if the price should decline to $1.15 next week, the longer term uptrend remains unbroken for now.

Golden Agriculture and Goldman Sachs

Crude palm oil (CPO) closed down RM4 today at RM2,626 (US$777). Nothing to shout about but Goldman Sachs raised its forecast for CPO prices today to US$850 this year and that prices may increase to US$950 next year. This gave some much needed fuel to push Golden Agriculture higher, reaching a high of 61c before closing at 60.5c. This move came on the back of respectably high volume and there is a chance that the target price of 62c might be attained in the next session. If 62c is taken out, the next eventual target is 69c which was a support level that broke in late July 08. As is my usual style, I would hedge by divesting partially at resistance and take some profit off the table.

Healthway Medical: Black spinning top

19.5c remains a stubborn resistance level which refuses to be taken out. Price action started the day at 19c, reached a high of 19.5, only to close at 18.5c, forming a black spinning top in the process. This is often a sign of a probable bearish reversal. MFI shows the buying momentum continuing to level off and the OBV shows that accumulation has halted. The only consolation is that all these negative signs are accompanied by much reduced trading volume.

With this week's spectacular run up in price, new support and resistance levels should be drawn. Using Fibo lines, we identify initial support at 16.5c (61.8%), 16c (50%) and a stronger support at 15c (38.2%). Eventual target at 19.5c is still the resistance to watch. If 19.5c is taken out, the next eventual target is 24c.

It is hard to maximise gains but we can always optimise gains and to do so, we cannot go very wrong selling at resistance and buying at supports in an uptrend.

Saizen REIT: "Good" bearish signs

Saizen REIT had another black candle day. Sell signal seen on the MACD. The MFI has formed a lower high which indicates that over the longer term, buying momentum has not really picked up. OBV shows only a slight bump up in accumulation activities.

As opined in an earlier post, with the rising 20dMA, the new support level for Saizen REIT is at 15.5c which was a many times tested resistance level. If this breaks, the next support level is at 15c which is supported by a flat 100dMA and a rising 50dMA.

A respite is actually good news for people who believe that Saizen REIT is undervalued and would like to start or continue accumulating. Passive income with high yields: Saizen REIT

Oceanus

A counter which has been hotly discussed is Oceanus. Personally, I am not vested in this counter but the word "Oceanus" came up a few times when I went through the list of words put into the "search" function in my blog. So, this is a TA of Oceanus for anyone who might be interested.

On 30 Dec 2009, after forming a black spinning top with extremely long legs, usually a strong sign of a possible reversal, Oceanus' price has been sliding down in the last few sessions. The reversal sign was confirmed on 31 Dec 2009 by a sell signal on the MACD. Breaking the 61.8% Fibo line at 41c yesterday and closing below the line today suggest that more downside may follow. Next support level is provided by the 50% Fibo line at 39c which coincides with the rising 20dMA. Rising 50dMA and 100dMA limit further downside at 36c. The short term uptrend is drawn using the color army green and from this, we see that the uptrend is still intact.

However, with the MACD poised to do a bearish crossover, more downside is probable. The risk premium is not as high as it was in the last two trading days of 2009 but waiting for a pullback to stronger support levels might be prudent before accumulating.

Healthway Medical needs a break?

A friend sms me this morning and asked me for a new eventual target price for Healthway Medical as it was last done at 19.5c. I was driving at that point in time and I was amazed at how quickly the counter moved to hit the target price I identified. In slightly more than half an hour from the opening bell, Healthway advanced 2c from 17.5c to 19.5c. However, the eventual target price of 19.5c is based on chart pattern and proved too strong to be taken out so quickly and price closed at 18.5c today.

Most of the time, chart patterns are accurate windows into probable future price movements, resistance and support levels. Our FA says that Healthway is worth a lot more than 19.5c but TA, as a measure of the mass psychology of market participants, tells us where the probable stops are in the meantime.

Healthway Medical has a white candle with a wick on top that is as long as the candle's body. In spite of increased volume today, price closed only 1c higher. OBV still shows accumulation. There is no sell signal on the MACD but this is usually lagging. MFI is levelling off which shows a slow down in buying momentum and remember, it is still in the overbought region. Is a correction due?

Taking a peek at the weekly chart, the MFI has moved sharply into the overbought region. The last time it did this was in April 2009. Technically, there is more downside risk now. I would accumulate after the counter has done either a correction in price or a correction using time. Incidentally, I have divested more of my position in Healthway Medical today.

Golden Agriculture still burning bright?

I have always disliked candles with long wicks on top. They suggest to me that the candles are burning up and that not much burning time is left. There is no gap up for Golden Agriculture today and price action formed a white candle with a wick on top which is almost as long as the body of the candle. There is increased trading volume today but that managed to push the price up to close only 1c higher. That the buying momentum is slowing down can be inferred from the levelling MFI, which is still firmly entrenched in the overbought region.

The price of crude palm oil (CPO) fell today to RM 2,630, down RM 72 or 2.66%. This likely dampened sentiments. A correction is expected after a strong run up but I feel that any correction should be short term in nature and presents opportunity for accumulation.

Eventual target price for Golden Agriculture remains at 62c but with weakened sentiments, flattening momentum and the many minor resistance levels along the way, it would be wise to reduce exposure as a hedge. Gap support is at 54c and this coincides with the 123.6% Fibo line.

SPH - A chance to accumulate?

On 2 Jan 2010, I mentioned in a post that I'm in no hurry to accumulate more SPH shares at current prices. On SPH's weekly chart, the declining 200wMA provides resistance at $3.80 and I would like to divest partially if its price moves to touch the 200wMA. Unfortunately, this did not happen. For a recap on what I said then, please see Rethinking SPH.

Today, SPH's price action on the daily chart formed a wickless black candle which crashed through both 20dMA and 50dMA before stopping at the rising 100dMA at $3.60 which happens to coincide with a 61.8% Fibo line. If the price breaks through the 100dMA, the 50% Fibo line provides support at $3.52. This happens to be a many times tested candlestick support and resistance level. A stronger support would be at $3.45. Rising 200dMA should limit further downside at $3.30.

MACD is poised to do a bearish crossover. MFI has formed a lower high indicating a lack of buying momentum. OBV has been declining steadily which shows distribution.

I like SPH for reasons stated in the earlier post. The current technical weakness might just present opportunities to accumulate SPH shares and I would do so at a price closer to $3.52. In the event that this support breaks, I would buy more at $3.45. For anyone who has yet to own any SPH shares and would like to do so, a hedge at $3.60 is not unthinkable as nothing is for sure. Remember that this would be a hedge. Don't break your piggy bank.

Saizen REIT: Another white candle day

Saizen REIT has another white candle day. The MFI shows buying momentum and is nowhere near overbought but with much lower volume, one would be right to wonder if the upmove would falter. Technically, the longer term downtrend in the MFI has not been broken. This means that the buying momentum over a longer term has yet to pick up substantially. Near term resistance remains at 17c, the previous high. Initial support is now moved up by 0.5c to 15.5c. This provides a fair entry price for anyone waiting to buy in.

Golden Agriculture impresses

For much of the day, it seemed as if Golden Agriculture would not be able to breach the 57c resistance level even though it gapped up, starting the day at 54.5c. Late day buying pushed the counter past 57c on high volume. Closing at 57.5c today with such strong white candlesticks and two gap ups in the two previous sessions is a bullish sign. MFI shows strong buying momentum but it has moved higher into overbought territory. OBV shows continuing accumulation. The eventual target is still at 62c and there are many minor resistance levels along the way. However, as is my usual style, I've hedged by selling 20% of my remaining position at 57c.

The price of crude palm oil (CPO) is probably supported by the bullish attitude the market has towards crude oil as oil futures have climbed for nine straight sessions, rallying about 12% so far. CPO is up RM20 to close at RM2,702 today. I continue to believe that a test of the previous high of RM2,790 will happen in the near future. Golden Agriculture will be a major beneficiary of higher CPO price.

Healthway Medical: Climbing upwards

Healthway Medical astounds market watchers today by climbing higher, closing at 17.5c, forming a white candle with a wickless top in the process. This candle is reminiscent of the candle formed two sessions ago. Volume is very high as investors seemingly could not get enough of the stock. MFI shows strong buying momentum and moved higher up into overbought territory. OBV shows sharp and continuing accumulation. In extremely bullish scenarios, a stock could stay overbought for a long time. Closing above 17c resistance today is a bullish signal. We need to wait for confirmation the next session to see if the price will move higher to test the next resistance level which I've identified as 19.5c previously. However, I prefer to err on the side of caution and I've divested another 15% of my position at 16.5c and 17c today.

Crude Oil: US$100 by mid 2010

More affirmation for Darryl Guppy's expectation of US$100 for crude oil through his TA - “As far as current demand trend shows, we will not be wrong to expect the price to rise as high $100 by mid 2010. We are not only seeing a better crude demand but also a better demand for the refined products,” said a Dubai-based trader. Dubai based traders reiterated that they expect the bull run to continue this year.

The comment comes in tandem with the views of Barclays Capital which said that crude demand will rise to a high of $100 a barrel this year, but will average at about $85 a barrel.Oil prices expected to hit $100 in 2010 say Dubai traders

What do we do? Well, this is good news for crude palm oil (CPO). Consider this: Crude oil: Update

Healthway Medical - Rising too quickly?

Healthway Medical opened nicely enough as it gapped up at 16.5. The buy up at 17c which we identified as an intermediate target was fierce but 17c proved ultimately too strong to be taken out today even as trading volume increased. Closing at 16c is a sign of near term weakness. Any decline in price will find support at 14.5c, the top of the previous cup formation which was resistance and now turned support. Any further decline in price will find support at 13c where three rising MAs are converging. This might just have been a case of rising too quickly as we see the MFI crossing into the overbought territory.

Fundamentally, Healthway Medical provides much better value compared to its peers. This picture has not changed. Any short term weakness in price will provide an opportunity for investors who have been waiting on the sides to jump on the bandwagon. Eventual target remains unchanged at 19.5c.

Golden Agriculture - Confirmation

Opening with a gap up today confirmed the bullish signal seen on the weekly chart yesterday which was the price closing above resistance provided by the descending 100wMA at 51c. That cleared the way for the counter to move higher. It just needed some buying momentum which was amply provided today as volume quadrupled! This is a strong confirmation even though it is now met with resistance at 54c. This is a short term resistance provided by the 123.6% Fibo line and has a high chance of being overcome in the next session as we have a wickless white candle today. Initial target is at 57c as provided by the 150% Fibo line. Eventual target remains at 62c as posited on 29 Dec 09. 29 Dec 09: Golden Agriculture

Fundamentally, the higher prices of soyoil and crude oil are limiting the downside of crude palm oil (CPO). With the Chinese New Year upcoming next month, demand is not expected to decline anytime soon. For more reasons why CPO is expected to do better in time, please refer to an earlier article in this blog: Crude Palm Oil: Update

Saizen REIT - Breakout

Saizen REIT had a nice breakout today as it started the day at 15.5c, above the resistance trendline which I've drawn in orange color, and proceeded to form a white candle. Volume expanded respectably with the upward movement in price. MFI has turned up sharply but being only slightly higher than the halfway mark, this counter is nowhere near overbought. MACD shows a strong buy signal. A quick look at the weekly chart shows the descending 100wMA at 21.5c. There is more upside to this counter yet although it should encounter initial resistance at 17c, the previous high.

As stated in my earlier articles about Saizen REIT in this blog, fundamentally, it is undervalued and should be worth a lot more. Factors in favour of Saizen REIT include (but might not be restricted to) stable income streams due to relatively inelastic demand for Japanese rental apartments, a lowering debt level, persistent insider buying, a strong Yen which means NAV should be adjusted upwards and could give rise to potentially higher yield as well. Over the next few months, Saizen REIT should see greater appreciation in price as more investors realise its true value. Congratulations to fellow unitholders!
Buy Japanese real estate
Passive income with high yields: Saizen REIT

Golden Agriculture: slow and steady?

Golden agriculture closed above the declining 100wMA today on low volume. This being the weekly chart, we have to see if it stays above the 100wMA at the end of the week.

Even though there is a negative divergence between price and volume, I see limited downside with all the MAs rising and within close proximity of each other on the daily chart. However, without a surge in buying momentum or some positive catalyst, this counter might end up moving sideways for a while.

The FA for crude palm oil (CPO) and for Golden Agriculture remains positive. Patience will be rewarded.

Healthway Medical - A spectacular breakout

Healthway Medical had a spectacular breakout today on very high volume. Closing firmly at 16c, this is beyond the top of the previous cup formation at 14.5c. The relentless buying momentum towards end of the day looks set to continue in the next trading session. The intermediate target of 17c looks attainable. Eventual target remains at 19.5c. This is derived from measuring the trough to the top of the cup formation and projected forward. This is further confirmed by the Fibo lines.

From a FA perspective, a price of 19.5c would mean a PE of about 17x which I believe is more than fair compared to Q&M Dental Group's PE of 37x at 60c!
Q&M Dental Group

I have divested 20% of my position at 14.5c and 15c as a hedge. The rest, I am leaving to ride the wave up. To all fellow shareholders, congratulations!



Here, I would like to share my recent response (with some editing) to a fellow shareholder's question on what might be Healthway Medical's future price movement:

From a FA point of view, Healthway Medical is cheap relative to its peers in Singapore. Compared to Q&M Dental Group, it's very cheap.

However, I also do a bit of TA which says that price action is all about sentiments. So, charts are supposed to be windows to the mass psychology of investors.

People keep saying that Healthway Medical will move to the mainboard one day and, guess what, I agree. However, that is over the longer term. Believing in that longer term prospect of the company will not stop me from taking some profit today based on TA.

Using TA, I hedge by selling some of my position at each resistance level. Usually, it's 10% or 20% of my position per level. It depends on how big a position I have. So, 14.5c is the top of the previous cup formation while 15c was the last high. I sold 10% at each of these two prices. The next resistance is 17c based on Fibo lines and candlesticks. I might sell 10% again. 19.5c, sell again.

As for what is the price going to be after the rights issue. Your guess is as good as mine. I will cross that bridge when I come to it.

Wilmar International

A friend mentioned that he would want to buy some shares of Wilmar International because he is confident that a listing of its China-related operations in Hong Kong will take place and it is just a matter of time.

Wilmar's valuation looks rich to me compared to other palm oil companies like Golden Agriculture. Of course, Wilmar is not a pure palm oil play but most people associate it with crude palm oil. The stock market is not the best place to find rational behaviour, we know.

Let's do a TA. Similar to Noble's chart, the 20wMA pulled away rapidly from the 100wMA. The 20wMA flattened two weeks ago. Compared to Golden Agriculture, which is testing resistance, Wilmar is hugging the flattening 20wMA for dear life as volumes dwindled. If I were to do some crystal ball gazing, this chart shows what Noble's chart might look like in future. For anyone who is thinking of entering, I see $5.54 or so as a fair entry point. It is about a 15% correction from the closing price of $6.43 and it is also a natural candlestick resistance and support level. This is another counter not for the faint hearted.

Noble Group

A friend told me recently that Noble Group was 9c a share in 1999. It closed the 2009 at $3.25. That's a 36x returns over 10 years!!! I've not done any research on any financial engineering the company might have done in the last 10 years. So, this observation might be too simplistic.

Looking at the numbers, I find valuation for Noble rather mind boggling. To buy at the current valuation, one must be extremely optimistic about the future earnings of the company. Well, Jim Rogers thinks that prices of commodities will continue to rise in the years ahead. If we believe him, then, it might be better to buy directly into commodities or companies producing these commodities rather than commodities trading companies. I remember Musicwhiz did some FA on Noble and Olam. So, I shan't go into details here. The link to his blog is in my blogroll. As is my style, if the FA fails, I do not bother to go on to the next step which is to do a TA.

However, what worries me is that even some usually very cautious investors I know are euphoric about Noble. From a TA standpoint, if the trend is not broken, continue riding it. Having said this, Noble's rapid climb in price does not look sustainable. So, I'm doing a TA out of curiosity. The negative divergence between price and volume on the weekly chart is quite plain to see. After breaking multiple wMAs in May, it tested the 100wMA support in July and off it went hugging the upper limits of the Bollinger bands since. The shorter term 20wMA has pulled away from the longer term 100wMA and 200wMA. The spread is now quite susbtantial. Using two sets of Fibo lines, it looks as if the current price of $3.25 is at resistane. A pullback is on the cards but with such positive sentiments bouying the counter, the 20wMA, at $2.70 this week, might just be able to support the price. That would be a 15% pullback. To my friends who are vested, stay vigilant. If the 20wMA breaks, there is quite a fair bit to fall.

Bungee jumping, anyone?

Under normal circumstances, if we were given a choice to stay safely on land or to jump off a bridge, I think we would choose to stay on land. If we were guaranteed safety if we were to jump off a bridge and collect an experience of a lifetime, would we do it? Many still wouldn't or else bungee jumping would become a very common pastime.

Last night, I had dinner with a few friends and as usual, we talked about investments as well. We all have friends who are very risk averse and would rather leave their money in the banks and collect 0.125% interest p.a. Some are "smarter" and leave their money in one year fixed deposits and collect 0.7% interest p.a. Now, we are talking about people with excess cash, beyond what they need in the event of unemployment over a period of 6 months. They are safely on land or so they think.

The threat of wealth erosion by inflation is very real and leaving our hard earned money in bank accounts to collect <1% p.a. isn't the wisest thing to do. The Monetary Authority of Singapore lifted its 2010 inflation forecast to between 2.5 and 3.5% on 19 Nov 2009. Land we were standing on which seemed firm just now might quickly become quicksand. Jim Rogers says that the worst thing to be in now is cash. It's perhaps an exaggeration but I think we get the idea.

There are many financial instruments which would "guarantee" higher returns but few would provide the liquidity which the stock market has. All financial instruments carry an element of risk to varying degrees. Make no mistake, the stock market has plenty of risks but it also has ample rewards for those who are equipped properly to traverse the difficult terrain. Having the right skills and, dare I say, right companions would make the journey a smoother one. Ultimately, do our due diligence and make our own decisions. We have no one to blame for our failures but ourselves.

There are many reasons why people would not venture into the stock market. Fear of losing money is probably the main reason. Not everyone has the mental strength to overcome this fear to move their money out of their "risk free" savings accounts into the stock market. We have friends who say they "cannot lose a single cent" and that they "would lose sleep at night if they have money in the stock market". It would be better to leave them be. Till this day, I have not had the good fortune of knowing anyone who had only made money in the stock market and did not lose a single cent. People who ask for 100% safety for their money (in nominal value) would have to settle for <1% annual yield.
Things Singaporean: SRS, CPF-OA and CPF-SA.

Rethinking SPH

This is one of my favourite blue chips. Strong balance sheets, generous dividends and it will be a major beneficiary of the improving economy as well as the opening of the two integrated resorts (IRs) this year. However, I'm in no hurry to load up at the current price.

Its price is being supported by the 20wMA at $3.60 and the declining 200wMA provides resistance at $3.80. I would divest partially if its price moves to touch the 200wMA. I would do this as a hedge as I'm not so sure that its price would not revisit $3.40, the 61.8% fibo retracement which coincides with the declining 100wMA. $3.40 also looks like an important candlestick resistance/support level.

Revisiting Keppel Corporation

Keppel Corp is one counter which I bought at under $4 in early 2009 but offloaded too early. I like this counter. The world cannot do without crude oil. Other counters in the same theme which I offloaded too early as well were Ezra and Swiber. With crude oil strengthening in price, it might be time for me to revisit Keppel Corp.

In terms of fundamentals, if one were to seek exposure to offshore counters, Keppel Corp is a better choice as it has a stronger balance sheet. The economy might be recovering but I'm not sure that taking on too much debt is a good idea as is the case with Ezra and Swiber. Keppel Corp also pays out generous dividends which is very attractive to me.

Looking at its weekly charts, the negative divergence between price and volume from May 09 to Dec 09 is quite clear. Buying momentum has been weak as MFI continues its decline, forming lower highs. However, OBV has a gradual slope upwards which indicates longer term accumulation. Price has been hugging support provided by the 20wMA so far. Without any buying momentum, this counter is doing a rather precarious correction using time. Resistance is being provided by the very gradually rising 200wMA at $8.85. The falling 100wMA is unlikely to provide much support in the event the 20wMA breaks. A stronger support would be one provided by the rising 50wMA.

I would wait for a correction before accumulating. I would buy some at the 50% fibo retracement(S$7.55) as a hedge and would buy more if it goes to the 38.2% fibo retracement (S$7.28). If one is already vested, selling some if the price hits the 200wMA would be a nice hedge. Having said this, I am sure that the longer term trend of Keppel Corp is up as the rising 50wMA is on course to form a golden cross with the declining 100wMA in the coming months.

Crude Palm Oil: Update

On New Year's Eve, crude palm oil (CPO) closed up RM68 or 2.62% at RM2,663, a 7 month high. A retest of the high achieved this year at RM2,790 in May is on the cards.

CPO price is more likely to rise than fall in 2010 because of:

1. Demand from the world's top two consumers of vegetable oils: China and India. This demand is expected to increase as economies improve.

2. Bad weather in the Americas leading to lower soybean yields. This leads to lower soyoil production and higher prices. CPO is a substitute which is also less expensive.

3. Crude oil's price movement which is expected to continue rising as a cold winter increases demand for heating fuel in the short term and economies improve through 2010. CPO is an important source of biofuel and would most likely ride the wave up.
Why Golden Agriculture?

A new year and a new decade. Strategy for 2010.

Firstly, Happy New Year! It's the beginning of a new year and a new decade. Many countries in the world still have huge debts to deal with but let's hope things will be better the next 10 years.

This is extracted from the latest issue of NEWSWEEK magazine:

The American goverment may owe China US$799 billion but when it comes to foreign debt per capita, the US is relatively prudent. Which nationality has the highest foreign debt per capita?

Greeks US$ 27,746
Belgians US$ 27,023
Austrians US$ 26,502
Irish US$ 24,247
Norwegians US$ 21,402
Italians US$ 21,089
Dutch US$ 20,412
French US$ 18,946
Germans US$ 15,574
Finns US$ 13,617
Americans US$ 11,094
Danes US$ 9,410
Spaniards US$ 8,715
Swedes US$ 7,058
Brits US$ 6,526

Now, this puts things in perspective. Many countries are still not out of the woods. This gives the idea that we will see the global economy going into a tailspin again in the next 2 or 3 years greater credence. We are experiencing a cyclical bull in a secular bear market and not the beginnings of a secular bull market.

My strategy for 2010?

1. Gold
I am keeping an eye on the price of gold. If it goes closer to the psychologically important support level of US$1,000 an ounce, I will buy more physical gold as a long term hedge against inflation. Gold also acts as an insurance for my other investments. I buy physical gold from UOB.

2. Crude oil
I believe that demand for crude oil will continue to strengthen through 2010. However, it will not go up in a straight line. It will climb a wall of worries and we will have plenty of worries in 2010, no doubt. I would trade counters which are leveraged to the price of crude palm oil (CPO) as a proxy to the price movement of crude oil. I like Golden Agriculture.

3. Japan
As a contrarian play, Japan might outperform after almost two decades being in the doldrums. I like the Japanese Yen. I like Japanese real estate. I like Saizen REIT.

4. Indonesia
A strong emerging market, Indonesia did not suffer negative growth in 2009. I like LMIR and First REIT for the low gearings and the high yields.

5. Healthcare
There is greater demand for quality healthcare with increasing affluence and an ageing population in Singapore. I choose Healthway Medical.

6. Tourism
2010 will be a year where tourist arrivals balloon in Singapore with the completion of the two integrated resorts (IRs). Looking for value and high yield, I like Suntec REIT and SPH.

There are many other counters which will do well in 2010 but I will concentrate on these I've highlighted. The choices here are based on FA. Remember to use TA to identify entry and exit prices. Good luck in 2010.