Search Google

Custom Search

Saturday, January 26, 2008

StockWatch (Jan 28-Feb 01, 2008): PSEi, EEI, TEL

PSEi Weekly Chart
PSEi (Chart: Daily Resistance: 3330 Support: 2980)

The index has reached the downward TP of the channel from where it broke down. Currently an island reversal has been formed confirming the action for the past 3 trading days. The island reversal is an indication that the index is now on its way to retrace the previous action, however, this is not a guarantee that we will be out of the downward moving action. We still have a couple of resistances on the way up, one of which is the support-turned-resistance line at around 3330. Also, we have been successively gapping up for the past 3 days, forming a break away gap and a run away gap. We have yet to see an exhaustion gap, so we may see cautious trading towards the end of next week. . Looking at the MACD for the daily and weekly chart, we can see that we are still in bearish territory despite the 3 successive up days, so the appropriate strategy would be just to take short positions until probably all notable resistances are taken out.



EEI (Chart : Daily Resistance: 2.50 Support: 2.36)

EEI looks promising as volume for the past 2 days has been exceptionally large and has the potential of retracing its previous downward move. It has currently established support at around 2.36 and has been trading sideways. However, this stock hasn’t been responding positively with the recent 3 day upward move by the index. So buying at this time is too much of a risk. A good buy signal is probably when the stock gaps up with volume of around 3M.


TEL (Chart: Daily Resistance: 2900/3000 Support: 2740)

TEL has already reached its downward TP and has surpassed it. Currently, the trading last Friday has created an island reversal, a confirmation that the recent downward move has ended. Upcoming resistances are previous highs of 2900 and 3000.

In Retrospect: BPI, FPH

BPI

BPI has now broken out of a downward channel. Last Friday’s close was at 60.50 with around 2.9M shares traded. Based on the breakout of the channel, we may see the stock reach up to 67. However, there are a couple of resistances along its way up at 63 to 65 levels, which are previous highs. Also another word of caution, as for the past 3 days, the stock has been climbing with long bodied white candles; the stock may reach exhaustion levels if it continues to move up with just average volume. Do not forget the upcoming ex-div date at Jan 31, as there might be dumping of this stock once ex-div date is reached.


FPH

The bullish divergence is still intact for FPH as well as the ranging action which the stock has been doing for the past weeks. Watch out for upcoming resistance at 60 and 65 which are previous highs. If the stock is able to move above 60, start selling at 65.

Sunday, January 20, 2008

TA Blogsites: MoneyBullsEyes and A Bull in a Bear Market

Here are two new blogsites by members of the Absolute Traders community. Read their analysis and trades and share your thoughts. Let's all help each other make more money!

MoneyBullsEyes (http://moneybullseyes.blogspot.com/)

A Bull in a Bear Market (http://jensendkc.blogspot.com/)

StockWatch (Jan 21-25, 2008): PSEi, BPI, FPH


PSEi (Chart: Daily Resistance: 3370 Support: 2870)

The index had a distressing action last week. I was earlier expecting that the index would somehow follow its usual ranging pattern, however, things started to go haywire on the third trading day with the index successively gapping down. The week ended with another gap down accompanied by large volume. Last week’s action broke 2 important support lines. The first is the support line from Sept 2007, second is the support line since June 2006. This obviously suggests a very bearish market and for the risk averse it would be best to stay as an observer for the mean time. Friday’s trading seem to have formed a hammer, coupled with the index’s oversold state, it may be possible to see a rally next week. For those who are not risk averse, you can take advantage of the rally for some short gains. For those staying on the sidelines for the moment, be on the look out for stocks with bullish divergences and those that are moving positively against the bearish market sentiment.


BPI (Chart: Daily Resistance: 58.50/60/62/64 Support: 53)

BPI is showing signs of bullish divergence with the MACD and RSI creating higher lows and price creating lower lows. The stock bounced off from support at 53 with volume near the average volume of 1.9M shares traded. The bullish divergence and the bounce off from support may suggest that this might be the bottom or a reversal. Observe the volume for the coming week, if the volume exceeds 2M shares on an upward move, this is a good indication that there is strength in the upward movement and we may see this stock move higher. If there is no volume on the upward movement, then it would be best sell immediately. Expect resistance between 58.50 and 60; if it breaks resistance at 60 with volume of above 2M shares, price may reach 64.

FPH (Chart: Daily Resistance: 60/65 Support: 52)

FPH is also showing signs of bullish divergence. Last Friday’s trading was accompanied with above average volume at 1.1M shares traded. It is possible that the stock will move upwards this coming week. Watch out for resistance at 60 and 65.

Sunday, January 13, 2008

StockWatch (Jan 14-18, 2008): PSEi, GLO, FLI

PSEi (Chart: Daily Resistance: 3540/3640/3690 Support: 3380)

It was a good week for the index last week as it was able to rally after breaking just below the support line. It was also able to cover the gap down the previous week. What is very clear now is that the support line is holding very well. However, the index is still trading in a downward range and there is still no clear indication of a reversal from the downward ranging movement. The rally may very well continue for the coming week. Expect resistance at 3540 (130 day MA), 3640 (65 day MA) and 3680 (resistance line). The index is ranging, so what ever gains you have had the past week, be ready to lock-in the gains when the index starts to move down.


GLO (Chart: Daily Resistance: 1560/ 1605 Support: 1440)

The stock had a very good rally last week from the low of 1440 to the high of 1560. One very noticeable action for this stock is the formation of a bullish divergence. The stock formed a lower low, while the MACD and RSI formed higher high. The symmetrical triangle formed previously is still intact and breakout probably is around 1620. However, there seems to be another smaller symmetrical triangle that formed with resistance at 1560. A good breakout volume for the smaller triangle is at 200T. We can immediately know by Monday if this would breakout from the smaller triangle. Otherwise, if it continues to move higher without the volume, then we can expect the resistance at 1600 to hold


FLI (Chart: Daily Resistance: 1.44 Support: 1.16)

FLI seems to be forming a falling wedge. It is still too early for a break out, however we can try to take advantage of the ranging action of the market and of this stock. Buy at 1.26 and sell at 1.36, cut loss at 1.24. Risk for this trade is high, but I’m banking that the price will move higher as indicated by the Stochastics. Observe also the volume on the way up, if it is higher than 70TM shares traded, then momentum may be picking up and price may go higher than 1.36.

In Retrospect: PEP

PEP

PEP’s amazing 1 day move 2 weeks ago did not have much of a momentum as the price just consolidated sideways last week and even closing the gap last Friday. It would be safer to liquidate positions on this stock since it has already touched the cutloss level of 1.24 and price may still continue to trend lower

Sunday, January 06, 2008

StockWatch (Jan 07-11, 2008): PSEi, GLO, PEP

PSEi (Chart : Daily Support: 3400/3200 Resistance: 3660)

We’re in a not so good start for the year with the index plunging 140 points lower. Currently the index is trading in a downward range with support at 3400. I’d rather like to see the index trade in a downward range than see it violently breakdown, but of course were not in control of the market. Couple of things worth observing, first, MACD is below centerline and below signal line, both confirming the current bearish sentiment. Second, a bullish divergence seems to have formed, price formed a lower low, while RSI and MACD formed a higher low, but I’m skeptical with this observation because the divergence is not very well defined or noticeable. Third, volume in the index seems to be diminishing. If selling continues with diminishing volume, this might be good, because this means selling pressure is diminishing and the index may have a chance of recovering. However, this ‘chance’ of recovery is not 100% sure, because once selling momentum is started, the index can continue to go lower even with low volume, it can only be stopped with increased buying sentiment. What we can expect for next week is for the index to continue its downward movement considering that DJIA went 200 points lower last Friday, this will definitely have an effect in the local market. Let’s just hope that support at 3400 will endure the selling pressure and hold off any further downward movement.


GLO (Chart: Daily Resistance: 1605/1640 Support: 1475/1445/1405)

GLO is interestingly consolidating in a symmetrical triangle. Still too early for a breakout and anything can still happen. This coming week, this stock will still probably trade lower, so watchout for support at 1475/1445/1405, the previous lows. Watchout also for buying sentiment accompanied by volume of above 100T shares traded. This could indicate a bullish move in the making.


PEP (Chart: Daily Resistance: 1.52 Support:1.26)

PEP seems to have moved considerably last Friday with price gapping up 0.02 pts and volume at 14M. The only pattern I could see with the stock is a descending triangle and if you would consider the pole formed, the descending triangle might also be a flag formation. A descending triangle is still similar to a symmetrical triangle and can also unusually break out instead of breaking down, which indicates bullishness for the stock. If you would consider the triangle, target price is at 1.60, if you would consider the flag formation, the target price is at 1.80. If you buy in at 1.34, cutloss would be 1.24.

Wednesday, January 02, 2008

Lessons I Learned from 2007

I started this blogsite with the intention of looking back at my analysis and trades and somehow extract lessons from the year that was. And now, I just would like to share some of my realizations that might also help new traders in their analysis and trades.

Technical Analysis Lessons Learned

1. Don’t forget to look at the broader picture!

During basic technical analysis, we were taught that there are 2 kinds of approach in analysis, its either you go from macro to micro view or you go the other way around, whether it be fundamental analysis or technical analysis. Either way, the approach intends for the person doing the analysis to take also into consideration the broader picture of the market. That lesson did not stick much in my mind because I was subscribed to the idea that focusing on the micro view was all that I need since the micro constitutes the macro view. Any movements in the stocks will definitely affect the index. While it is true that movements in the micro view will have an effect in the macro view, the problem with subscribing to that idea was that sometimes the general movement of the market does not become immediately obvious in the micro view.

I learned from this the hard way when the first big market drop happened last Feb 2007. I was very much subscribed to the idea that the micro view is all that I need to aid me in my trades. What happened was that the stocks I was trading were doing well in the market and since it was doing well, I was not paying attention to the broader picture given by the index, which at that time, was already displaying a bearish divergence, with the price going higher and MACD and RSI going lower. Ofcourse I was stuck when the drop happened.

2. RSI = 30 is not the bottom

In basic technical analysis, we were taught that RSI of 30 means oversold and usually once a stock breaches this level, bulls come in and pick up the stock at a bargain price and consequently pull up the price. The year 2007 opened my eyes to first hand experience of a very bearish action in the market, where the RSI for the index went as low as 18 and some stocks going as low as 7 in their RSI.

I previously had a strategy of picking out stocks based on RSI that is near oversold level of 30. I learned a lesson the hard way when I started picking up stocks last July, those with RSI breaching the 30 level. Since the market was very bearish, the pull up that I was hoping did not materialize and I got burned. The mistake I had was relying too much with the oversold indicator of the RSI without considering the general movement of the market. I had luck in applying this strategy in the previous years because the market was ranging in 2005, and in 2006, an RSI near 30 immediately pulls up because of the bullish sentiment in the market. The RSI is only reliable during ranging market and is unreliable during trending markets. During bullish trends, it gives you an unreliable overbought signal and while during bearish trends, it gives you an unreliable oversold signal. I fell for the latter and got burned.

3. Time frame of the divergence.

In my previous analysis, I was calling bullish and bearish divergence on some stocks but was not seeing it materialize. That’s when I got very much confused with the concept of divergences. Thankfully, thru the advanced technical analysis sessions given by the Absolute Traders, I learned that I also have to consider the time frame when the divergence occurred. A shorter time frame makes a divergence much more reliable. The mistake I had was that I was calling divergence on a wider time frame, making the divergence less reliable.



Trading Lessons Learned

1. You have to be agile in changing your trading strategy to conform to the market trend.

This was pointed out by Fitz Aclan in one of the Absolute Traders’ Chart Analysis Forum sessions. In order to minimize losses, a trader has to be agile enough in changing their strategies to conform to the market trend. This was one of the big realizations that I had this year. I started trading stocks on 2005 and during that time the market was moving sideways. I was used to the trading strategy of having quick, short term positions because of the ranging movement of the market. When 2006 came, the market started to move in an upward trend. Because I was used to having quick, short term positions, I was not benefiting much from the bullishness of the market in that year. It took me some time before I was able to adopt a new trading strategy of going long and riding the bullish momentum. And again when 2007 came, since I was not paying attention to the broader view of the market and also since I adopted a strategy of going long on the stocks, I found myself loosing some of the gains that I had when the market started to drop. I was going long, when I should have been locking in the gains.

I was lacking on 2 things in my trading strategy, first is looking at the broader picture of the market and the second is at being agile in adapting to the current market trends. I was not looking at the broader picture of the market, so I did not have an idea of where the market was at that time and where it’s poised to move. And since I did not have any idea of my environment, I was not able to quickly adapt to the change in the market movement. I was going short, when I should have been taking advantage of the momentum and I went long when I should have started going short and locking in profits.

2. When you increase your fund size you have to be ready with a plan.

The year 2006 was fruitful year for me in my trades. In that year I had accounted for a considerable profit from my fund and I saw the potential of earning more with my trades. And so I was lured into increasing my fund size for 2007.

Having a small fund before, I was used to trading small amounts, having small profits and incurring small losses. I could still bear the loss even if the stock’s price went below the cutloss level. When I increased my fund, I was not psychologically prepared. My mindset was still in trading small amounts, so when I made some trades, I found myself having some funds left. Being a gung-ho, trigger happy trader, I either increased my current position in a stock or bought other stocks. This was going well for me when I was winning the trades, however when I started to incurr losses, I also found out that I was also not emotionally prepared for it. Having more positions, I of course incurred more losses and I was very much disappointed and depressed with most of my trades. And being emotionally unstable when trading, led me from one trading mistake to another.

Being an inexperienced trader, much more a fund manager, the only equation that I had in my mind was Increased Fund Size = Increased Earnings. Now, having incurred those losses, I painfully discovered the other half of the equation was Increased Fund Size = Increased Risk. I was not psychologically and emotionally prepared with handling more funds. I did not have a game plan. David Hanson had an article in his blog about this, and as he puts it, increasing your funds means your “starting a new career because your capital has changed”.

Now how do you become psychologically and emotionally prepared for it? You map out a game plan for your fund, even if it is just a small fund. These are just some items to consider for your plan: Know how much earnings you desire to achieve for your fund and when you’ve reached that, lock in your profits. The other side of it is knowing how much losses you can take if incase the market is not in your favor. Study and plan out your trades, know when to get in and out. Know how many stocks you can hold at the same time while also ensuring that you can properly follow and promptly react to their movements. This was a mistake that I had, having a larger fund, I took in 5 stocks at the same time and ofcourse this was going well when I was winning, but it had me panicking when I started to loss on all fronts. My attention was divided and so I was not equipped with the proper study and plan for each stock and also I was not able to react promptly to each movement.


3. Earn to give.

I read this article in Inquirer by Conrado Banal III about the GMA7 IPO.


"But there is more to IPOs than just raising the interest-free cash. They are the only definitive equitable way to spread the wealth.

Look, when GMA Network (Channel 7) for instance recently did its IPO, it also did not need the money, as the foreign fund managers pointed out to the GMA 7 people, particularly Felipe Gozon, president and CEO, during the company’s roadshow for the IPO.

Well, the network was looking at a cash flow of about P3 billion this year.

What Gozon told the fund managers might have floored them. He said the network just wanted to share its good fortune with the public."

Wow! That statement definitely floored me. They were doing the IPO to spread their earnings! Which lead me to ask myself, why was I trading? What was my purpose for trading? Bo Sanchez’s book “8 Secrets of the Truly Rich” also asks a similar question,
"Why am I earning money and why am I in business anyway?"
And his answers were simple, first, because he loves his family, and second, because he wants to love beyond his family. And again…Wow! Sometimes when I trade, I only think of earning for myself and my family. The blessings that I receive never went beyond my space. Having thought about it, it makes perfect sense to apply these in my trades: I trade because I want to earn and I want to earn so that I could give more to my family and to others. Applying this frame of mind means being responsible with my trades. I need to do my best, do my homework, observe my stops and lock in the gains, because it is not only me who will benefit, but also others can benefit from my earnings. Sometimes, when I trade I only consider myself, thinking that I alone, am assuming the risk and the losses. But when I apply this mind set, I am also involving my family and others in the risk, so I need to be responsible with my trades. When I do not follow my trading plan because of “greed” in winning trades or follow and nurture “false hopes” in loosing trades, I am willfully risking the opportunity of giving more to my family and to others.


The above are just some of my realizations. I hope that others may also benefit and learn thru my mistakes and realizations.