Rebound or Jump?

Time to rebound or time to jump? Massive bloodbath as we continue our week. Yesterday USA continues to show its stock weakness, as investors/traders continue to sell into any rally. Nasdaq almost make it to green, but selling comes in late and takes it down more than 1%. This shows how negative the situation is and at the same time, making indexes and stocks (especially financial stocks) very 'oversold'. Previously, people can just buy any dips and will see a rebound working past previous highs, but unfortunately not this round. This time, the strategy is "take yr time to jump off the plank". But I believe we should see some relief rebound soon, because Thursday is USA's thanksgiving holiday.

Look for HK-warrants, as they are smashed down the most, and will have the most profitable rebound, 'if' the rebound occurs.

GO and Trading: Part 1

There's a board game that I extremely loved to play and has been playing for more than 3-4 years. The game is called 'GO' or in chinese known as Weiqi. This game consists of 19X19 board and two colors - black & white. The game rule is very simple (2 rules only), but the gameplay is very complex. The reason why GO game is very complex, is because there's no fixed or 'perfect' solution for every move, and thus even the current strongest AI computer cannot beat a newbie professional player even with a handicap of 9 ( i can easily beat AI with handicap of 4-6 ).

In GO, different players have different playing style. I will illustrate further with two top pro players below:-

(1) Lee Sedol (korea 9P, Age: 24) (Left Picture)

Playing Style: Aggressive ( focus on killing groups ), Play high-risk moves by sacificing own groups for bigger kills.

If he trades in KLSE, he likes: PN17 counters, HK warrants.

(2) Lee Changho (Korea 9P, Age: 32) (Right Picture)

Playing Style: Conversative, play steady moves that takes into account of overall picture/game balance, doesn't take much risk

If he trades in KLSE, he likes: High-dividends stocks, Blue Chips

Although these two players have different styles, they are the world top players. Lee Changho has the most number of champion titles (International & Champion) in the world, while Lee Sedol, now in the bullish 'form', is now considered as world No '1' due to dominating China & Japan's top players in recent international competition. The reason why they can perform well is because they are playing a style that suited their character and personality. And the most important objective is they are comfortable with their style and brings out the 'best' out of them. Despite each style has their own pros & cons, both styles had helped them to achieve world-class professional.

Likewise in trading, there are many methods to trade the market. You have breakout strategy, mechanical systems, swing trading, support/resistance strategy, intraday strategy, value-investing ,etc. So, to achieve success in the stock market:-

(1) You must find a style that fits your personality and most importantly, you are comfortable with it. All styles can make 'big' money, except individual styles do well in different parts of a trend. Breakout strategy works well in high-momentum stocks, Support/Resistance strategy works well during a stock's temporary correction, etc.

(2) Achieve 'mastery' in your style. Backtesting, continue to upgrade your style through reading books, and doing performance evaluation of your trading style.

(3) If you are investor, dun try to be a intraday-player. If you are investing for the long term, dun look at intraday charts every minute and got into emotion 'fright' when you see big blocks of selling during intraday. Likewise a short-term player shouldn't become an investor. If you see your stocks hit your stop loss, dun think that "oh, i dun feel like taking that loss, lets hold for a few weeks to see if it can rebound for breakeven sell."

KLSE: Strongest Index in Asia?

Seeing the market so 'boring', I decided to study how our asia neighbours are faring in this downtrend compared to KLSE. The rise % is based on the rebound from lowest pt during the subprime meltdown issue in August and the drop % is based on the current downtrend from its Yr High.

KLSE : Rise 24% Drop 3%
Korea : Rise 28% Drop 10%
Singapore: Rise 31% Drop 12%
Hong Kong: Rise 65% Drop 14%

From the stats, KLSE is doing the best of the four, since it only drops 3% compared to the rest of the region dropping at least 10%. Of course, KLSE is the 'least' risen stock exchange. But if you take a real study of this data, our KLSE drop% is definitely look 'distorted'. In fact, the reason why our index is holding up strongly is because of funds holding up index stocks and the bullish performance of some plantation stocks. Based on my calculations (which i rather not shown here, since its pretty complicated), KLSE should 'correctly' drop another 4-5% if it is to follow the rest of the region downfall.

Trades for 16 Nov 07

Our Market closes in the green (+5 pts) with winner-losers ratio of 2:5. We all have seen this quite common, sincely the market can practically support itself with those index-linked counters, while the rest of the 2nd-3rd liners all ride its way 'down'.

The market is definitely trending downwards. I can't find any attractive trade nowsdays. Thus with the spare time i have, i can only read books and search the internet for interesting stuff.

A very funny picture that I come across.

Trades for 15 Nov 07

No interesting trades to look. In fact, i believe our market is getting weaker and weaker. Many charts I look at does not have any high-probability setup, instead they are more looking towards the downside.

Trades for 14 Nov 07

Expect high open today, as US Markets had huge rally yesterday. For short-term gains, focus on HK stock-warrants. I will prefer Petroch-C1, Shenhua-C1, Sinopec-C1 & Cnooc-C1.
For long-term gains, continue to focus on plantation stocks.

In addition, Google-C1 is listed today.
Ratio : 3000 to 1
IPO Price : RM 0.11
Exercise Price : USD 680
Expiry Date: 6-6-08
Mother Share (as closed on 13-Nov) : USD 660.55
Current Premium : 17.9 %
Current Gearing : 6.69
My Remarks: Depends on how you value it based on market behaviour. Most likely it will trade higher than IPO Price this morning, but in the long run, Google mother share needs to be
USD 778 to reach in-the-money, assuming warrant price is RM 0.11 . So depends on how you see Google in the long run, if you believed Google will reach above USD 778, you can rush in and buy. For me...hehe.....no comments.

For addition info, I received news from my friend that more HK-warrants coming up (Sinopec, Petrochina, China Coal, ICBC ) all issuing IPO of less than RM 0.10, and *WAIT*, Toyota from Japan is also listing on Bursa as warrants soon. Our KLSE is now becoming very 'globalization'. Expect shares from London, Australia to Brazil to South Africa listing as warrants in the near future too ...*snicker*

Trades for 13 Nov 07

Plantation stocks will be the main focus today. They will continue their bullish momentum despite the drop in yesterday US Markets. Continue to look out for:-

Tanamas, THgroup, Unico, Kretam and IJMplant.
These 5 have the strongest bullish chart.

Recommended Book: Reminiscences Of A Stock Operator

I highly recommended this book to novice or experienced trader. It's like the 'bible' of trading.

First published in 1923, its a written life account of a market speculator called Jesse Livermore. Imagine if you trade in the 1920s, where there's no internet and prices are in the form of telegram (you get your quotes-tick by tick in minutes instead). This guy is able to make millions (and also lose millions) in that decade.

In this book, Jesse Livermore shares his experience and lessons learnt during his trading. His wisdom words are like Bible's ten commandments. You should get this book, and costs around RM70 in bookstores. I will share some of his wisdoms here:-

1) " It never was my thinking that made big money for me. It always was my sitting. Men who can both be right and sit tight are uncommon. I found it one of the hardest thing to learn. But it is only after a stock operator has firmly grasped this that he can make big money."

2) " Remember that stocks are never too high for you to being buying or too low to begin selling."

3) " Never argue with the tape. To be angry at the market because it unexpectedly or even illogically goes against you is like getting mad at your lungs because you have pneumonia."

4) " The professional concerns himself doing the right thing rather than with making money, knowing that profit takes care of itself if the other things are attended to."

5) " The successful trader has to fight two deep-seated instincts. He has to reverse what you call his natural impulses. Instead of hoping he must fear, instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a bigger profits."

Trades for Nov 12 07

No interesting/attractive trades from my weekend analysis. US Markets are badly hit again last friday, and Yen is trading at 1 yr's high (this will affect the carry-trade situation). Japan & Korea is down 2% at point of writing, so let us embrace for a long day of wading in the 'red sea'.
But here's some prediction for this week.

1) Hong Kong index likely to hit 27,200 level (Support 1) or 25,700 level (Support 2) within this week or next week, before staging a rebound. The level is calculated based on Fibonacci Analysis of 38.2% & 50% level.
2) HK/China-listed CA on KLSE will fall another 20%-30%. I went through some of their mother-listed shares such as Sinopec, Petrochina, and they all have serious breakdown. If Hong Kong Index are to hit my calculated level, of course, CAs falling 20%-30% is normal.
3) US market will stage a strong rally this week. The financial index is oversold badly, so there will be a strong rebound coming up this week.

Strategy of the Week:-
Stay in cash, and look for cheap buys on HK/China-listed CA. They will also stage a rebound too, and we are talking about 20-50% return if they 'do' rebound. Just watch for signs of weak selling and you can enter or buy on any good support level you see on the charts.

Good luck trading.

Trades for 9 Nov 07

No picks for today, cause US Markets got hit pretty bad on Wed & Thur, and we are lucky to escape yesterday's Asia stock markets plunge. Asia stock markets are rebounding this morning, so we might be lucky and not open down so badly, but today likely to be choppy.

After going through my charts, chinese/HK warrants look pretty bad. Some looks like its going to break their support, and may send their price going down some more. But if they can hold at their major support level, also looks like a good buy for rebound with little risk. I will list some to see if anyone is interested.

Angang-C1 ( expire 23-Apr-08 ) Support = 0.15 , Reward = 0.225
Chalco-C1 ( expire 25-Feb-08 ) Support = 0.18 , Reward = 0.315
HSBC-C1 ( expire 25-Dec-07 ) Support = 0.17 , Reward = 0.30
Sinopec-C1 ( expire 20-Jan-08 ) Support = 0.30 , Reward = 0.40

How to use the above for trade:-
For example, you can buy Sinopec-C1 at price around 0.30, and risk your cut loss at 0.28. Based on the last 5 trading days, its highest point is 0.40, so your reward can be calculated as 0.40.
Your reward-to-risk ratio is (0.40-0.30) / (0.30-0.28) = 5 , which is a very good ratio, as you are risking 0.02 loss for a 0.10 reward.

Trading Picks for 7 Nov 2007

Short-term Play ( 1-3 days)
1. MUH
2. Bjland
3. HSBC - C1

My picks are based on my stock trading system which calculates the probability of a stock to register strong gains within the indicated time frame. Of course, the selection is based on the highest calculated probability value that meets my target. It is not meant for straight buys, but instead a recommendation for you to examine the highlighted stocks. How you going to trade it are up to individual's style, but the utmost importance is knowing yr risk before you put in the trade.

Scrolls of Wisdom # 1 : Define your stop loss (risk) before putting on any trade and obey your stop loss

On Monday 5-11-07, my streamyx is down and I had to go to a nearby A.A.Anthony Securities Branch to trade. At that time, there's is an old uncle ( 50-55+ ) sitting next to me. We had a nice conversation and he told me he's out of job and had to try his luck at the stock market to earn some meal money....

Uncle: Why is the market so bad? ( Asian stock markets all badly hurt on 5th Nov 07 )
Me: Market bad, you take any loss, uncle?
Uncle: Yap, I had 5,000 shares of Dataprep and its due tomorrow. (at that morning, Dataprep is still trading at 0.72)
Me: What price did you bought?
Uncle: 0.76
Me: Dataprep is pretty weak based on the charts, its best for you to have a stop loss on it.
Uncle: I know, I plan to lose RM 200 on it.
Me: You are already losing RM 200 at this 0.72 price.
Uncle: I also know, I am hoping for a rebound to sell. This Dataprep is supposedly to be strong.
Dataprep suddenly falls below the 0.70 price level ...0.69...0.68....0.67.......
Me : Uncle, you better cut loss now, market looking really bad.
Uncle: I know, but I can't sell now, because I am now losing more than RM 400 now. Let's hope for a rebound.

Does this "Uncle" sounds just like you?

If you want to trade successfully in the stock market, the most important rule is define your risk before you put in a trade and obey your stop loss. Playing the stock market is just like playing poker. In poker, you are to put in a wager bet before you get to see your cards. If the cards that you receive are crappy, will you still continue bet on? No, you don't. You forfeit the wager bet and start a new game with a new bet. Likewise, in a stock market, there are always many opportunities for you to make money. If the current trade that you are holding are showing are showing a loss, sell it and move on to other better trade. Never hope for a rebound, but instead fear that it will develop into a bigger loss. Remember, if your stock falls 50% from your buy entry, it will now need to rise 100% to touch yr original buy entry. So:-

Step 1: Define your risk. You can based on % percentage loss, dollar loss, or price support. If you buy a stock at RM 1.00, you may wish to risk only 5% pullback. Thus the stop loss price will be RM 0.95.
Step 2: If the trade hits your stop loss, just sell it. Don't let your emotions control you.

If you trade 10 times this month. 6 of your trades are 5% losses, while the remaining 4 are 20% gain. You will earn a very good return, because:-
20% X 4 winning trades - 5% X 6 losing trades = 50% Return.

Today Trades - Bought JAKS

I know that my Blog is still very new. But to those who had read my morning picks today will most likely be smiling to the bank, IF you HAD bought MPcorp. One of my friends had managed to follow my pick, and bought some MPcorp <----good for him. But unfortunately, I didn't buy any as I am 'fooling' around today and not putting much focus on my trading...hahaha.

Instead, I managed to buy another "boom-boom" stock today - JAKS. I didn't put Jaks into my morning picks as it was meant for long-term buy (in my personal trading journal). Bought 40 lots at 1.36. Again my lots are little, as mention earlier, I am 'fooling' around (with computer games)....*blush*. But even so, my little 40 lots represents RM420 in 45 mins (bought at 4:17pm) if I had sold at 1.48 intraday. Not bad for a guy playing computer games and earning this type of money..haha.

I put up my trade screen as proven evidence on my trades, so that you people will not think I am just bullshiting around.

So stay tune for more of my morning picks, I will try to post before 9am - Market opens.

Trading Picks for 6 Nov 2007

Short-term Play ( 1-3 days)
1. MUH
2. Bjland
3. MPcorp

The Beginning of a New Era

I have started to go back to my favourite passion - trading stocks (Malaysia KLSE Stocks) on a fulltime basis. I will post my stock picks, trading details and trading wisdom as I move along towards my goal. Unfortunately, the current stock trend is not very bullish. Hopefully you and I can still make some money.

My current trading method:-
* Selecting strong momentum-stocks for gains within 1 to 3 days using pattern-recognition entry.