Plan and hedge.

Having a plan is important in almost everything we do.  We want to do well in school, we plan. We want to do well at work, we plan.  We want to start a business, we plan.  We want to have a happy marriage, we plan.  We want to do well in the stock market, we plan.  It goes on.

 Embarking on any journey without planning is foolhardy, in my opinion.  We might end up drifting and, maybe, even destitute as we use up all our resources. Some might enjoy this kind of gypsy like existence but I surely don't. However, does it mean that if we plan well, we will always do well? I think we know the answer.

I believe in hedging in a world of uncertainty. There is never anything that is for sure. See how the stock markets rallied almost non-stop for more than 12 months since March 2009? Along the way, at every dip, bears said a correction was going to happen but the markets powered on upwards.

Mr. Market does not care what bulls and bears think. Mr. Market will act how he acts and that's that.

In a world of uncertainty, hedging has to be part of our plans. For example, I believe in accumulating high yields for passive income but if I see the high yields developing a downtrend, what do I do? Sell some as they form lower highs. I could perhaps buy them lower. What if they don't go lower? Well, that's why I would only sell some.

Always remember that FA is about value and TA is about price. Value and price are not the same thing. FA tells us something but TA might tell us something else. We might be holding the stocks of very good businesses but if the prices are in a downtrend, selling some is what I would do. It is the pragmatic thing to do. You have heard this before but I will say it again: Don't be overly bullish or bearish, be pragmatic.

After the bloodletting on Friday in the European and US stock markets, what will happen tomorrow in Asia? Most would guess that the stock markets in Asia would follow suit. I am inclined to think that way too but the truth is I don't know. Maybe, the SSE would throw a positive surprise and send stocks upwards. Who knows? This is the state of the markets now: one of heightened volatility.

In a Tech Ticker interview, Felix Salmon of Reuters had this advice to give: "Rather than suffer through the tough times, Salmon’s simple message for the average investor: Sell your stocks. Now!"


Personally, I think this is somewhat extreme but it might be good advice for people with weak hearts. Just don't bang your head against the wall if things go the other way instead.

Charts in brief: 4 Jun 10.

FSL Trust: Bought some units at 45.5c today.  Volume shrank as price closed at 46c.  46c is still the resistance to watch. A semblance of stability has returned to this counter but its price is probably not going to rise in a hurry. MACD continues to rise above the signal line and MFI is testing 50% once more.

LMIR: Price closed at 47c above the 20dMA on low volume. We need confirmation that the 20dMA is resistance turned support. 47c is a many times tested support and should provide resistance.  I have sold some units at 47c to reduce my exposure. Next resistance level is at 48c which approximates the positions of the 50dMA and the 200dMA. The downtrend is still intact.

AIMS AMP Capital Industrial REIT: 22.5c. Very low volume. MACD has crossed into positive territory and MFI continues to rise above 50%. OBV has flattened at a high. I continue to queue to sell some at 23c, the top of the range.

Golden Agriculture: A doji formed today on very low volume. The downtrend is intact even as the MACD forms a bullish crossover with the signal line in negative territory. A lower high in the MFI tells of weak positive buying momentum. I have sold into strength and will wait for clearer signs of bottoming before going long again.

SPH: Volume continues to fall as price formed a white spinning top today, resisted by the 20dMA at $3.79. OBV is flat. MFI is moving to test 50%. The negative divergence between rising price and falling volume is quite clear to see (as with many other counters). I would like to to sell some SPH shares at $3.83 but without volume, it seems difficult.

Related post:
Charts in brief: 3 Jun 10.

Charts in brief: 3 Jun 10.

Singapore dollar to outperform on ‘safe-haven’ status, RBS says
Thursday, 03 June 2010

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STI climbs 2.4% to 2,793.34 at closing
Thursday, 03 June 2010

© 2010 - The Edge Singapore

AIMS AMP Capital Industrial REIT: There is no doubt now that this counter has cleared a major resistance provided by a cluster of MAs. Closing at 22.5c today increased the probability of a retest of 23c, a long term resistance.  Would it stay range bound with 23c as the upper end of the range? The MACD is rising strongly and looks set to cross into positive territory which would signal the return of positive momentum. MFI is rising and OBV is rising.  The momentum seems strong.

FSL Trust:  Volume expanded nicely today on a white candle day.  The declining 20dMA is growing gentler in its gradient.  MACD continues to pull away upwards from the signal line in negative territory. MFI formed a higher low as it moves to test 50% again.  OBV is rising. The Bollinger bands are narrowing which suggests a reduction in volatility. 46c remains the resistance to watch for now. The declining 20dMA is at 47c.  Clearing these resistance levels could possibly see a target of 51.5c.

Golden Agriculture: Price touched a high of 52c after overcoming resistance at 50.5c. 52c, incidentally, is also where we find the declining 20dMA.  I have sold my remaining shares in this company at 51c. The negative divergence between rising price and falling volume is quite clear.  The downtrend is still intact and this rebound has provided me with an opportunity to divest.

SPH: Very nice white candle day but the volume has declined. Negative divergence.  Not so nice. MACD is poised for a bullish crossover in negative territory.  MFI has formed a higher low but OBV is flattish.  Closing at $3.79 is where we find the 20dMA.  Breaking this resistance, I believe, will find resistance at $3.83 next as this is where we find the 150% Fibo line as well as the 100dMA. Breaking this level would find resistance higher up at $3.88 and $3.90. Without an expansion in volume as price moves higher, I am doubtful that the higher resistance levels could be taken out and would therefore sell into strength.

Related posts:
FSL Trust: Time to buy?
AIMS AMP Capital Industrial REIT: A strong up day.
SPH: Flirting with the 200dMA.
Golden Agriculture: Downtrend is intact.

Charts in brief: 2 Jun 10.

Healthway Medical: Closing at 16c today is probably a relieve for shareholders of this company. 16c is where we find the flat 100dMA.  16c is also a many times tested support and likely to be a strong resistance. So, it remains to be seen if this could be taken out.

Volume has been thin and any upward movement in price is not convincing, therefore. Personally, I would sell into strength, especially if price continues to appreciate. Sell some at 16c and sell more at 17c? Maybe.

LMIR: A low volume day as the MACD crossed above the signal line and price closed at 46.5c, approximating the declining 20dMA. Volume has been declining as the price staged a rebound from a recent low of 42c. I would continue to queue to sell some at resistance as a hedge. I see a band of resistance from 47c to 48c.

STI gains 0.5% to 2,727.57 at closing
Wednesday, 02 June 2010

© 2010 - The Edge Singapore

Related post:
LMIR: Up against a wall?