When to buy SPH's stock?

A reader who attended InvestX Congress wrote to say he enjoyed my presentation at the event and that he was especially enlightened as to why I thought SPH made a better investment for income compared to SPH REIT which led to me plonking down more money in SPH's stock. He then went on to ask if this is a good time to buy more of SPH's stock.

Yikes! I am very afraid of questions like this, regular readers of my blog would know.

So, I asked him what did he think the fair value of SPH's stock was? If he were a value investor, he would want to buy it undervalued. Of course, I reminded him that valuation is a subjective exercise and depending on what he focused on, he could come up with different fair values.

Personally, I feel that the fair value is about $4.20 a share, give or take a few bids. So, I do what I sometimes do and which I did not talk about during InvestX Congress. It wasn't something I was supposed to talk about at the event.

What did I do?

I looked at the charts.

Click to enlarge.

I see lower highs on the MACD, a momentum oscillator, as higher highs in the share price were reached at $4.17, $4.26 and $4.27. This is a negative divergence. This is an indicator that weakness is on the horizon.

Immediate support is currently provided by the flattening 200 days moving average (200dMA) at $4.14. Is this support going to be tested next week? Possibly.

Bearing in mind that the 200dMA is a long term moving average, if support at $4.14 should be breached, we could see SPH's share price moving much lower. How much lower? That is hard to say but we can use Fibo retracement lines to get a glimpse of where the supports are likely to be.

Click to enlarge.

Share price could retrace to $4.10 (the 50% golden ratio) or $4.055 (the 38.2% golden ratio). The support provided by the 23.6% Fibo line is a weak one at $4.00. So, if share price should go that low, we are likely to see $4.00 support breached.

So, given the technical analysis I did, if I didn't yet have a long position in SPH, I might wait to get some at immediate support which might be moved higher to $4.15 since the 61.8% golden ratio is at $4.145.

If I already had a long position in SPH (which I do), I will wait to accumulate on weakness which, given the negative divergence observed in recent weeks, looks likely to happen.

Related post:
SPH: Within expectation.

We can help to lessen the pain.

On 25 May, I put up my complimentary ticket to InvestX Congress 2014 for auction, promising that the proceeds would go to a charity of my choice. Within 2 days, I closed the auction after receiving the top bid of $99 which was equivalent to the regular price of the ticket.

Now, here is the proof that I have made a donation with the money received:

When a reader asked me on FB which charity would I be making a donation to and whether it would be to NKF, I told him I would be making a donation to KDF. It was the first time he heard of KDF despite the fact that it was set up in 1996.

KDF is a not-for-profit and independent charity to help needy kidney patients who lack funds for dialysis and also to find a cure for kidney diseases. They work together with NUS in their search for a cure for diabetes. I like the vision of a world where people no longer have to suffer from diabetes.

Learn more about KDF: www.kdf.org.sg

There are people who are forced to sell their cars and valuables due to financial hardship. There are people who suffer financial hardship but have nothing valuable to sell. For these people, if financial hardship is due to health reasons which prevent them from being gainfully employed, we should offer a helping hand, if possible.

Related posts:
1. InvestX Congress: AK's ticket is up for grabs.
2. Forced selling due to financial hardship.
3. Counting our blessings.
4. Towards better mental health.
5. Voluntary contributions to CPF.