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.

Greed and Fear

This morning, one of my warrant's underlying, SembCorp Marine, powered thru and went up to 5.1++. My warrant therefore moved up to 0.500, 25% more than my purchase price of 0.400. At that price, I would have had earned 300+, a 20+ % return in less than a week. However, greed got the better of me and I decided to wait for SembMarine to rise even more. Unfortunately, it went down all the way to yesterday's closing price of 5.08, leaving me with alot less profit. This has taught me a valuable lesson, to be disciplined not only in stop loss, but also profit taking target. once I have set a profit taking level, I should stick to it, and not hope for better price, since i am, after all, speculating.

Oh well, hopefully sembmar will rise to today's level and I will take my profits tomorrow. =)

the 7 and 2 tenets of value investing according to Adam Khoo

Adam Khoo, in his book "secrets of millionaire investors", teaches how to identify great companies (the 7 tenets) and when to buy them (the 2 tenets). He incorporates both Technical Analysis and Fundamental Analysis in his approach toward stocks.

Honestly this isn't strictly his approach as I've read another book that states basically the same thing

I'll put the 9 tenets up here for easy reference for future use
Criteria for Value Investing
1.) History of Consistently increasing sales, earnings and cash flow
2.) Good competitive advantage (good thing i studies Economics at A levels)
3.) Future growth drivers
4.) Long term debt < 3x per annum profits
5.) ROE above average
6.) Low capital expenditure reqd. to maintain current operations
7.) Senior management staff are holding, buying the stock

When to Buy:
1.) Undervalued
Px less than intrinsic value
2.) Stock price in consolidation phase/ uptrend

I used to think that A levels were a waste of time...that we studied things that were not useful in reality, like differentiation, organic chem, quantum physics (urgh) and economics...but since I started my investing journey, i've realised the importance of ALOT of what A level econs taught us... Perfect Competition, Oligopoly, monopolistic competition , demand and supply etc...

anyways, i will be posting on some companies i'm currently interested in soon, when i have the time. Currently interesting in Singapore Medical Group, NOL.

NOL MBL eCW110303, SembMar MBLeCW110303

Bought more warrants this time.

I've read that what I'm doing is speculating (momentum trading), not investing. And yep, I agree with it, I am speculating. :)

In the long run, value investing is my target investment style, however, I'm trying my hand out in momentum investing for now. Reason being, i don't have much money, hence warrants can get me large exposure to equities with just a fraction of the cost, being safer than CFD, yet being able to achieve high percentage gains (and losses.)

Anyway, I made a small mistake today. in buying NOL MBL eCW 110303, i accidentally saw the price wrongly and ordered at a higher price than market rate. hence POEMS transacted my order at the current market price, which was not very attractive. I bought 5 lots at $0.24 each, thus immediately losing about $100 since the buy price dropped to $0.230, inclusive of my brokerage fees.

Anyway, i didnt make the same mistake when buying SembMar a few hours later. I placed my order (and double checked!) at a low price, $0.400. SembMar dropped and i got it at that price.

With regards to Coscocorp warrant that i bought last friday, it went thru a tumultuous week, at one point i lost about 20% of the warrant value when cosco dropped below $2. but cosco seems to have rallied with their announcement of the 2 contracts they received, and I'm hoping that the fabled "SANTA CLAUS RALLY" will help me gain some profits for christmas.

Apparently, December to February has historically been the best months of the year, one reason being that retail investors sell off in dec to claim capital loss for tax reasons, and unit trust managers have to transact to meet requirements. not sure how true these reasons are, but since 1930+, most of the market rallies have been at the year end.

Reason for buying NOL:
Profit and revenue rose YOY consistently, Most of the fundamentals look good, it's PE ratio is around 11, however I'm concerned with its high debt level, at USD 1.3 billion, which is 20% of net equity. Bought the short term warrant instead of the share due to the reasons mentioned above.

Reason for buying SembMar:
Revenue has dropped, yet profit has increased, they are in the running for Petrobras' 27 rig building contracts, debt level is pretty good, yet i can't afford it's share price. sigh...

NOL MBL eCW 110303
Buy price: $0.240
Target profit taking level $0.30
Stop loss level: $0.180 (25% away- loss of $350 incl brokerage)

SembMar MBL eCW 110303
Buy price: $0.400
Target profit taking level : $0.460-$0.480
Stop loss level: $0.300(25% away- loss of $350 incl brokerage)

CoscoCorp BNP eCW110530
Buy price: $0.485
Current price: $0.500
Revised profit taking level: $0.580
Revised Stop loss level: $0.385(21% away- loss of $250 incl brokerage)

In a side note,

Why are brokerage charges so HIGH in Singapore? In the US, POEMS comparable internet trading like E*Trade, TD Ameritrade, Charles Schwab, Fidelity charge a FLAT rate of US 7.95-USD9.99 for non advisory! Why is Singapore so expensive? could be due to Economies of Scale i guess.