Raffles Education: A new low.

What started out as a promising up day for the STI was not to be as the index sank almost 1% at closing.

STI drops 0.8% to 3,172.44 at closing
Friday, 03 December 2010

© 2010 - The Edge Singapore

In Singapore, share prices lost early gains to end weaker on Friday following concerns over interest rates. Traders said the market firmed with early gains in regional exchanges as strong US economic data boosted sentiment. But prices pulled back later after China said it would tighten monetary policy next year, suggesting further interest rate hikes to cap inflation.

Read article here.

My portfolio is largely unaffected except for a small long position I have in Raffles Education. This was something I purchased a couple of months ago in early October as I identified a positive divergence between the rising MACD and the falling price on the daily chart. A reader at the time suggested that I could be a bit slow in identifying that divergence and it turned out that he was right.

26c looked promising as a possible double bottom with volume on 3 Sep, when 26c was first touched, very high but volume had been very low when 26c was retested recently. A picture of low volume pull back was also rather clear. Well, today's expansion in volume took out 26c and threw a spanner in the works. 26c was just a floor.

Do I see price falling further? Price touched a low of 25c and this is where we find the 138.2% Fibo line before closing at 25.5c. This could be another floor and should provide interim support. The MFI and RSI have been forming lower highs, suggesting a reduction in demand and buying momentum. However, they are both in negative territory now which could give pause to the selling momentum.

Would I sell now and take a 10% loss? Let us look at the weekly chart.

Since early June 2009 when the counter hit a high of 70c, trading volume has been declining as price retreated. As each floor (support) was broken, the trading volume became lower. The MACD has also been gently rising since mid December 2009 as price continued in its downtrend.

To talk about a reversal is surely early days yet but the signs are that further downside could well be limited. When all the would be sellers have sold, we could see a reversal of fortunes. In the meantime, a long term downtrend is still in force and this is not for the faint hearted.

So, I would not sell my small (money losing) stake in the company. Also, I tend to overlook counters which I am not vested in. Stay invested and I would continue to monitor the company.

Related post:
Raffles Education: A trading opportunity.

USA is back on a growth path.

Warren Buffett sent an open letter to the U.S. government recently thanking it for a job well done:

"Uncle Sam, you delivered... overall your actions were remarkably effective."

Warren Buffett thinks that the stimulus money and bailouts worked. Well, there is finally hard evidence that the U.S.A. is back on a growth path. This is taken from Yahoo!Finance:

“In October we were able to rule out this double-dip nightmare scenario,” he says. “We are able to see very clearly, with a good deal of conviction, a revival in growth,” Achuthan tells Aaron and Dan in this clip. The improvements are widespread, Achuthan says.

-- Profit growth and productivity are on the rise. Achuthan says that leads to more hiring and capital investment in equipment.

-- Housing has stabilized. The outlook may not be rosy, but “it’s not falling off a new cliff,” which means it’s not a drag.

-- Cheap capital as a result of low interest rates. The private sector continues to create jobs.

-- Pent-up demand. Thanks to the jump in jobs, people are less afraid of losing their positions, Achuthan suggests. And after two years of saving and worrying, consumers have “frugality fatigue” which is beginning to show in the improvements in holiday shopping data.

Posted Dec 01, 2010 03:50pm EST by Peter Gorenstein

This bodes well for U.S.A.'s trading partners like Singapore.

Related posts:
Comments on the US economy.
The US consumers are back!