Trading Vs. Investing, and KIV Counters/Positions for next week

I have 2 very distinct animals inside me, one of which is the short term trader, and the other, the long term investor. I'm sure many of us do dabble in these 2, and most of the blog community here tends towards the investing side. No doubt, earning and losing money in days, let alone hours, is very exciting and something that I've covered in previous posts. Nonetheless, it's extremely high risk.

For example, I expected a market correction either yesterday or today, and I bet a small short contract on the SiMSCI yesterday. Needless to say, the Singapore market went up strongly and I ended up losing about the price of a G2000 shirt. Today, I expected the market to correct and I did put a SiMSCI Short again, earning back 1 bowl of sliced fish beehoon, can add fish and beehoon.

I'll state outright that I've lost more than I've earned thru my short term trading of warrants and CFD's, but the amount, in the grand scheme of things, isn't that much, about the price of a pair of cheapo jeans you can buy in the mall. However, losing money obviously hurts.

Luckily for me, I've been disciplined (so far) that I never put a significant sum of money on the line.

Investing, on the other hand, takes much more deliberation. You have to decide whether this business is worthy of your money. I took a very very very very long time deliberating whether or not to invest in Dapai and First REIT (especially Dapai), and glad to say, it's paid off somewhat with Dapai showing about 20% gain from purchase price, and First REIT about 7%.

I still think Dapai is a good company, BUT, obviously this is contingent on the management's integrity. All my Fundamental Analysis can go to hell if the books are cooked. (My FA on Dapai is here)

So in conclusion to my rant, is that I try to make most of my money, and have most of my money, in long term investments, whilst I try to make some kopi money from speculation. (currently losing a few starbucks frappucinos)


From the 2nd part of the blog title, it's obvious what I'm gearing at, the short term speculation of counters next week. Just posting these up as an opinion and to test my TA. Probably will use IG markets demo account to go with my predictions.

I'm looking at a few counters to go long (duration: Few days) next week, namely,
1.) Keppel Corp
2.) Wilmar

Also looking for opportunity to go short on SiMSCI.

For Keppel Corp, I will wait for a pullback before entering. Indicators showing that Keppel is WAY overbought, with RSI at 87% level and MFI at 80% level. However, there is no divergence (higher high and higher low) between RSI/MFI and Stock price, which indicates the trend is still intact. Moreover, Stochastics indicate overbought too, but bullish. So is MACD. However Keppel Corp is approaching 52-week highs.

So I'm predicting for next week that Keppel Corp will rise, but face strong resistance. I likely will not enter unless there's a huge correction.

Wilmar:

From the chart, you can see the negative divergences of RSI and MFI, these 2 indicators forming higher high and higher low (slightly) whilst Wilmar was downtrending, possibly indicating a turnaround. Also both hovering around mildly oversold conditions.
Looking at momentum, Stochastics just showed a bullish crossover, and so did MACD, which possibly also indicates a turnaround.

However, there was higher selling pressure on the 2 days that Wilmar dropped off a cliff, as compared to the moderate buying pressure the last 3 days (when Wilmar rallied). Not sure about that.

Fibonacci retracements show that Wilmar's next resistance is $5.79.

In conclusion: Wilmar's indicators look good for a turnaround, but next (minor) resistance is fast approaching.

My prediction: Wilmar will go up next week, but have to watch whether it can clear the $5.79 level. As short term traders go, Buy at support and sell at resistance.

2 scenarios which i will buy wilmar:
1.) Drop back to Tuesday's low or roughly about $5.50-$5.60
2.) Clear $5.78 at reasonable volume.


SiMSCI:

SiMSCI corresponds 99% to STI (difference is that SiMSCI has CoscoCorp whilst STI doesn't) so I'll be talking in terms of STI.

STI's currently at it's minor resistance of 3272 with indicators showing bullish yet overbought conditions. Stochastic is about to perform a bearish crossover, however, MACD is still bullish. RSI and MFI show no divergence, but at extremely overbought levels.
2 scenarios I can see panning out:
1.) STI surges thru it's minor resistance at 3272 next week to meet it's major resistance at 3310.
What I'll do in this scenario: Long STI on Monday, then SHORT STI when it touches 3310!
2.) Capricorn effect dissolves and STI can't, or will have major difficulty, passing thru the 3727 resistance.
What I'll do in this scenario: Review the indicators when it happens. either short or go long or sit back and watch the show.

I think scenario 1 is likely to happen, which is good as there's clearer technical signs for me to make some Frappuccino money.

Lastly, a disclaimer to this post: Obviously, I am super new to the stock market, so do not take me seriously. Please follow someone else more senior with your money.
I'm not even sure whether I just spent 30 mins typing bulls**t.
More senior readers please correct me if I'm wrong before Monday morning. :)
I will be playing out the scenarios I've described on a demo account with IG markets and with very little real money on City Index.

Bought First REIT and Dapai

As per my post on Dapai, I mentioned I was not too keen on Dapai's business but was impressed at it's financials. Hence I took a small position on Dapai, with 6 lots @ $0.185. We'll see what happens when it releases it's 4Q 2010 results in Jan 2011.

I also vested myself into First REIT @0.700, giving myself a 9.00% dividend yield for 2011, using the 6.4c per unit guideline from the manager.

I will be setting aside a small amount, probably $1k to try CFD's out. IG Markets has a promotion whereby people new to CFD's will be able to pay only $3 in commission their first 2 weeks playing CFD, then $7.50 the next 2 weeks, then $15  the next 2 weeks. After that will be normal $25. (City Index charges $10 only ....)

With my remaining money, I'm not whether to invest in commodities/oil firms here in Singapore, like GoldenAgri, Indofood Agri, Olam or Mewah, or pump it into the American market with Archer Daniels Midland (a dividend aristocrat), ExxonMobil (another dividend aristocrat) or PetroChina ADR. PetroChina's dividend yield is lower than XOM, However there is a 30% withholding tax levied on all American stock dividends. I'm not sure whether PetroChina is liable for ths 30% Tax. Some other blogger posted about him having a Telefonica ADR and paying only Spain's withholding tax. Hmm...wonder what's China's withholding tax rate for dividends? Shall go find out.


I recently found out that PetroChina is the world's largest company by market capacity and ICBC is the world's largest bank by market cap, without having a significant overseas presence...wow! Huge testament to China's might.

In other news, the Pound Sterling has depreciated again vs. SGD. Great!

Comparison of CFD and Warrants (Part 3 of 3)

In this section I shall compare CFD issuing firms, CityIndex, IG Markets, CMC Markets, Philip CFD and SaxoBank.


Since I'm going to be trading the Singapore Market only, I will only put up comparisons for the Singapore Market, share CFD's.

I will be setting up a CFD Account with IG and CityIndex next week.

(Note: Sorry, I'm not sure why CMC column overflow to the links side...)

	Philip CFD	Saxo	IG Markets	City Index	Kim Eng CFD	CMC Markets
1 Way Commission (Min/%)	$25, 0.2%(STI Component), 0.3% Others	$17, 0.2%	$25, 0.15%	$10 Flat	$30, 0.3%	$15, 0.15%
Finance Charge (±SIBOR)	5% (promo: 3.5%)	Not shown	2.50%	2.50%	5.00%	3.00%
Margin Rates (Blue Chip-STI Component)	10-20%	10-20%	10-20%	10-20%	10-20%	10-20%
Margin Rates (Penny)	Up to 100%, Most penny stocks are 50% or 75%
Minimum Deposit	$3,000.00	$10,000.00	None	$500.00	$3,000.00	$2,000.00
Interest Paid on deposit?	None	None	None	None	None	None
Remarks	From now till 31/12/10, Free 5 calendar days financing (about $5-6 for a $10000 position)		Most Informative Website	Website is the most crappy	Min. Age 21	Min. Age 21

Comparison of CFD and Warrants (Part 2 of 3)

In this second part, I shall discussthe pros and cons of using either structured warrants or CFD's.
If you notice, I said Warrants are close to, but not a zero sum game. This is because DMM's also earn from the bid/offer spread.
Pros	Cons
Unlimited Gains, Limited Losses	At the mercy of Mr. Market and his wife, Mrs. Designated Market Maker (DMM)
No Finance Charges	Market Makers can, and frequently do, manipulate warrant pricing
Traded just like any security	Has an expiry date, and time value decays as expiry looms
No Margin Calls	Lose immediately due to bid/offer spread (which can be high in times of high Volatility)
	Close, but not exactly a zero sum game- i.e. DMM wins, you lose, DMM lose, you win
CFD
Pros	Cons
Generally lower commissions than normal brokerage firms	Unlimited Losses#
Your incentives and Firm's incentives are the same i.e. Not a zero sum game- you win, they win too	Margin Calls if you are underfunded
At the mercy of Mr. Market only	Immediate closing out of open positions if funds are insufficient
	Finance Charges can add up
	Unlikely to have manipulation(or less effective) of the underlying
#Unlimited Losses occur when your stock price drops to a point where you lose more than your capital (e.g. I buy $10000 worth of SIA, my margin deposit is 10%, or $1000, and SIA drops to, say, $6000. I lose $4000 on this position, and since I originally borrowed $9000, I lose my initial $1000 and another $3000 I borrowed from firm.) Easily overcome with a STOP LOSS
Next up will be a comparison between CFD providing firms.

Comparison of CFD and Warrants (Part 1 of 3)

CFD's as compared to warrants are both financial derivatives which are leveraged. For Warrants the leverage (or effective gearing) is usually in the 4-8x range, i.e. you get exposure to $4-$8 worth of the underlying stock for $1 of your money.
For CFD's, depending on the underlying's "credit-worthiness", your leverage is from 0(very illiquid dubious penny stocks-like Jade) to 10x (If you are a credit worthy customer and betting on Blue Chips like SIA)
Essentially, both give leveraged access to shares, without ownership, dilution, rights, dividends of shares (a price you have to pay for the leverage-or using OPM-other people's money)
I find them very similar, but after doing some research on both, I've found that CFD's in theory do have a leg up against warrants.

I shall do a comparison of CFD vs. Warrant Trading below:

Structured Warrants			CFD
Issued by an investment bank (e.g. DB)			Directly tracks underlying share price
Prices moves up and down in accordance with the share and whether it is call or put
Bid/Offer Price is set by Market Maker			Price is in accordance with Market Pricing
Traded in SGX just like any other security			Traded Over The Counter