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.

My Financial Situation...and stock notes today

I've been reading through many Singaporean investment bloggers. Many people, in their late 20s to early 30s, already have SGD 100k to SGD 300k investable liquid assets. I just turned 20 not long ago and I have...below 20k. Understandable, since I'm an NSF...

Unfortunately...this will dog me through to my early 30s, or even further. Why?

I'm going to England for University...after being rejected by a certain faculty in NUS.
It's going to cost me(read: parents) a bomb...In excess of SGD 300,000.
Obviously there has to be a ROI on that investment...
How long will I take to earn back 300k (with interest!)?

Looks like I'll be a low net worth individual (indeed, a negative net worth) for quite some time...
 

Back to stocks today:

-I was sorely tempted to pick up KeppelCorp warrants again this morning after they fell back to $0.325 (as KepCorp fell to $10.60). Decided not to, as TA tells me it isn't a good time, and also because I went out with my friends in the afternoon (just came back actually), and ANYTHING can happen...

-First REIT rose to $0.705, which kind of prices me out. I was (still am) looking to enter at $0.680.

-Dapai fell again to $0.190. Will probably buy some (5-7lots) before 4Q 2010 results come in early Jan.

-STI ETF fell to $3.20. Still too expensive for me. STI has formed a head and shoulders formation. Might see some downside. Will be in the sidelines for now.

Sale of KeppelCorp Warrants, cessation of my short term trading for now

Today I sold off my KepCorp warrant for a tidy 4.37% after accounting for all brokerage fees. As I bought heavily into it, my absolute amount gained is pretty high. :)

Having said that, I bought the warrant on Wednesday and sold it off today. On Wednesday, I was showing a paper loss of about 8%, and today I realised a 4.37% gain. That's a 12.37% swing in just 20 hours of trading. What a difference a day makes.

I will be ceasing my speculation for now, at least until I am more familiar with Technical Analysis. Why do I say so?

1.) Playing with financial derivatives is very risky. As Warren Buffett puts it, "risk is not knowing what you're doing." I understand how warrants and options work, but maybe it's time for me to take a step back and understand more about TA and charting before I plunge into speculating again. Then, playing with warrants would be, by definition, less risky for me.

2.) The way I'm using TA is obviously wrong now.
Example in point:

My top earner: SembCorp Marine, which I held from 3/12 to 10/12, was in my understanding, bearing many traits of a bearish stock. In that period, RSI had negative divergence, MACD was showing negative divergence, PSAR was above the stock price, which were all bearish signs (or so I thought). Only Stochastics was showing an upward trend. With all the bearish signs showing, you'd expect the stock price to drop, but instead it rose slightly, and with my huge leverage, I earned a tidy sum.

My top loser, Neptune Orient Lines, which i held from 3/12 to 15/12, was in my understanding, bearing many traits of a bullish stock. In that period, PSAR was constantly bullish, MACD line was above the signal line AND both of the lines were above 0, Stochastics was showing blue line above the red, AND, both on an uptrend toward 80%, which I believed were bullish signs, and yet, the stock price dropped quite a bit, and I quickly stopped my loss. (which is a good thing, considering that I would have lost another 25% had I sold off today-NOL dropped again)

This leads me to the conclusion that:
1.) My TA is too simplistic and hence largely incorrect, AND/OR
2.) I'm interpreting the signs wrongly,
3.) I'm too caught up in the excitement and anxiety that I make rash decisions.

Hence, I will be ceasing my warrant trading at least until CNY. This is also to help me take a step back and not make rash decisions like buying warrants on a whim, and to analyse them closely before making a purchase. As I have been on leave the whole of last week, I've been waking up and reading the finance news before logging on to POEMS/sgx.com at 9am. Which is not a good sign.

I will also be using the few weeks to CNY to brush up on my TA, of which I am only somewhat familiar with MACD, Stochastics, RSI, Volume, Moving Averages, PSAR and Bollinger Bands.
I will of course look out for good stocks to buy. 
My current KIV Stock list:
1.) Dapai
2.) CapMallAsia
3.) SATS
4.) STI ETF (Thought I'm reluctant to buy into STI now, many of the stocks are pretty overvalued, like Genting, City Development, Jardine, DBS, Olam, SGX, ST Engineering and our favourite way to fly, SIA, with PE of 84x)
5.) First REIT (div yield of 9.5%)  


I have also just applied for an OptionsXpress Cash Trading account, which allows me to trade in the United States market with a MUCH lower commission rate (USD 14.95) than POEMS, and with no custodian charge.

I will be researching on the Standard and Poor's "dividend aristocrats", which are companies that have given rising dividends every year for >25 years running).
I am most interested in McDonald's, ExxonMobil, the Standard and Poor's S&P 500 ETF (Otherwise known as SPDRs-Standard and Poor's Depository Receipts) and of course, Berkshire Hathaway B shares.

Merry Christmas and a happy new year to all. :)

Cutting Losses and unpredictability of stock market

This morning, I FINALLY cut my loss on NOL. Sold off my warrants at a 20%+ loss, wiping out all my SembMar + Coscocorp warrant sales on Monday, and still incurring $20 loss.

It was a good thing, as the market took a turn for the worse in the afternoon, had I not sold my stake, I would have incurred another 10% extra loss. big phew.

 I'll just take the $20 as a lesson learnt on not buying at the resistance and to watch the market makers' pricing on the warrants for at least a day or two, AND to buy In The Money(i.e. worth something) Warrants to be safe (since after all I'm still a novice)

Anyway today I bought a large stake in KeppelCorp's warrants issued by Deutsche Bank. I "amalgamated" my buys, which means I only pay 1 brokerage fee even thought I bought the warrants at 3 different times. I bought twice in the morning and once in the afternoon, averaging my cost price and achieving a decent price on it (considering I can't predict the market with much accuracy). My average cost price was $0.355/warrant, and last done price was $0.335, which means i lost $20 on each lot of warrant I bought, not including brokerage fees. Nevertheless, I've come to realise that I will ALWAYS lose on the first day of buying, simply because of the volatility of warrants, brokerage fees and the spread. Anyhow, I still believe KeppelCorp is on an uptrend, and my target period to sell the warrants are before CNY, when they still have 3/12 to expiry.

Petrobras is about to annouce the winners of it's rig tenders, and KeppelCorp, together with Jurong Shipyard(subsidiary of SembcorpMarine) are strong contenders. Hopefully, Keppel wins a contract which boosts it's stock price in the short run, and makes me some money in the process! Keppel today was a victim of the market, along with most of the other STI component stocks, in the huge sell off in the afternoon.

Looking at chart nexus, Keppel Corp's charts don't look too good; hence I will set a tighter stop loss for this warrant. KepCorp fell at a moderately HIGH volume of 7.83 Million today, and the MACD line diverged even more from the signal line today, plus, Blue line in Stochastic dropped even further from the red, and is inching it's way toward 50%, which is not a good sign.

KeppelCorp DB eCW110530
High: $0.375
Low: $0.325
Close: $0.335
Effective buy price: $0.355
Break even price: $0.361
Profit taking level: $0.40-$0.43
Stop Loss level: $0.310 (13.85% loss)

KeppelCorp Technical Analysis

After selling my sembcorp marine stake, I'm still bullish on the Offshore Marine Sector.
Since I can't buy Keppel Corp (too expensive), I am keen on buying some underlying warrants on KepCorp.

As you can see from the graph,

Stock price is WAY above all moving averages, a very bullish sign
Stock price has been on an uptrend since 25/08/2010
Volatility, as seen on the bollinger band range, is low, making the warrants cheaper
HOWEVER, prices are above the middle band for quite awhile already, indicating overbought territory/little upside.
PSAR indicates bullish trend
MACD is somewhat bullish...Both signal lines and MACD line is above 0, however signal line is above MACD Line
No trend in RSI, whether overbought/sold
Stochastic basically shows the same thing as MACD

KepCorp is currently consolidating and the TA indicators are only somewhat bullish (MACD/Stochastic/MA bullish trend, Bollinger, RSI neither bullish nor bearish, PSAR bullish). I will KIV this counter. If KepCorp can break out of it's $11.00 resistance at high volume, it would be a good time to get a warrant on it. However if it drops below $10.75 support then it'll be time to stay out.

But since the TA indicators are somewhat bullish, maybe I should take a punt on KepCorp...

Anyway, for Kep Corp some of the warrants I'm eyeing are:
1.) Something medium term (3-6 months long)
2.) Must be in the money

KEPCORP DB ECW110221 (LT3W) ASK: 0.630
Exercise Price 9.10

Expiry	21 Feb 2011	Break even price at Expiry	10.99
Last Trading Date	14 Feb 2011	Moneyness	16.21% ITM
Time to maturity	72 days	Intrinsic Value per Warrant	0.593

And
KEPCORP DB ECW110530 (MN6W) ASK: 0.395
Exercise Price 10.10

Expiry	30 May 2011	Break even price at Expiry	11.285
Last Trading Date	23 May 2011	Moneyness	7.00% ITM
Time to maturity	170 days	Intrinsic Value per Warrant	0.260

The former looks good as the ask price is close to the intrinsic value and Delta is 0.87, however, it's spread is 1 cent while the latter's spread is 0.5cents.

Shall track KepCorp and these 2 warrants.

SembMar warrant sold

So today, SembMar went up to almost as high as yesterday's high. Sold off my warrants at 0.490 each, a 22% profit after taking brokerage fees into account.
However, my other STI component stock didn't do too well today, NOL, and I'm hoping that it'll bounce back next week.

My mistake, after using chartnexus to plot NOL, was buying at the resistance.
However, The technical indicators for NOL seem to be bullish, yet, NOL keeps decreasing day by day! sigh.

Anyway, for NOL:

As you can see:
MACD is above 0, MACD line is slightly, just slightly, above the signal line. Both above 0, so this is a bullish sign.
RSI: No trend.
20day MA and 50day MA both below stock price
Stochastic essentially giving same signs as MACD
PSAR: Bullish.

Yet, stock price is falling!
Oh well, I've decided to cut my loss at 0.225-0.230 region next week.

Next target for momentum trading will be Keppel Corp, IndoAgri and Olam, all of which fell today.