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Sunday, April 13, 2014

It's easy to plan a trade, but it's hard to trade the plan. Here's why.

Consider this scenario:

You buy 1000 lots (1 lot = 100 units) of a stock at  Rm1 per share. You place a stop-loss at 95 sen. You say to yourself, " I am only prepared to lose only 5% in this trade if it turns sour. So my loss is limited to RM500. "  

Immediately after you have bought, the price starts to drop. The screen shows: Buy 95sen 100 lots; Sell: 96 sen 500 lots; Last done 96 sen.

Now, are you going to trigger your stop-loss and sell 100 lots to the buyer? Bear in mind that you have 1000 lots to sell at 95 sen.

While you are undecided, the buyer suddenly pulls out. The screen shows: Buy 94 sen 200 lots; Sell 500 lots 94.5 sen. In such a circumstance, what are you going to do? Sell everything at below 95 sen or wait until there's a pullback to 95 sen, then sell. What if there is no pullback, and the price keeps dropping? 

So, you see, you can plan your trade, but you may not be able to trade your plan. 

Here's another possible scenario: Stock AQ has been in an uptrend for sometime and in the last few days, the stock has been hitting new highs everyday. Your remiser whispers to you, " Buy this stock, I have insider news that it will hit RM10 in the next few days. The stock is now selling at RM6." 

Wow! You said to yourself, " Here's my chance to make a lot of money. I shall take the tip and place a stop-loss at RM5.50. My risk is only 50 sen. So there is not much danger." Now what may happen is this:

After you have bought at RM6, the stock really moves up. Higher and higher it goes,
RM6.30,  6.40,  6.50 and still going strong. You become greedy and buy more. The stocks hits limit-up sending you to cloud 7. 

Suddenly, Bursa makes an announcement, AQ is suspended pending an enquiry. After a few days of investigation, Bursa classifies  the stock as a designated security. This means that if you want to buy the stock, you have to put money upfront.

This has a big impact on the stock immediately. When suspension of the stock is lifted the following day, it gaps down at the opening bell. Fear sets in. There is a rush for the exit but only a few can get out before it goes limit-down. 

Before long it was trading at a much lower price than your initial purchases. You are trapped. 

From the above two scenarios, you can see that it's actually not easy to trade according to what you have planned.

Tips from remisers are actually the most unreliable. When a big boy wants to unload,  whom do you think they will entrust the job to. Remisers of course.

Want to trade? Think again. Do you have the capability to cope with ablest money getters in the world? 

Tuesday, April 08, 2014

Why I like ECS

The reasons are as follows:

It is a small-cap stock; its paid-up capital is only RM90 million.

It has a strong balance sheet with over RM80 million in cash as at 31.12.13

It has no borrowings 

Its current ratio is over 2 as at 31.12.13

Its par value is 50 sen

It has a dividend policy of giving out 30% of its earnings as dividends

It distributes a comprehensive range of ICT products comprising of notebooks, personal computers, printers, software, network and communication infrastructure, servers, and enterprise software from more than 30 leading principals such as HP, IBM, Cisco, Asus, Microsoft, Apple, Dell, Oracle, Epson, Samsung, Buffalo, Adobe, Juniper, Blue Coat, VMware and Lenovo.

It has more than 3000 outlets to sell its more than 3000 products.
In our modem world of ICT, computers, PC tablets and smart phones are no longer luxury items, they are necessities of life. Mobile devices, especially smart phones and PC tablets are increasingly in demands. This trend is sure to continue as new technology comes into play.

High Speed Broad Band 2 (HSBB2) and Budget 2014 will boost the demand for ICT products. 

The company is also involved in cloud computing and enterprise systems which every business needs. Cloud computing is popular in Japan and Hong Kong. Malaysia will be next.

The founders of ECS are still managing the company.

The company is expected is do well this year. Growth will come from its business in smart phones and other mobile devices. 

Keep a close watch on this counter. Presently at around RM1.28, it is a laggard, cheap and lowly priced. 

When it finally moves, drive into the market and load up your truck.

Buy at our own risk. 

Wednesday, April 02, 2014

ECS On Verge of Moving Higher

This daily chart of ECS shows that the stock has strong underlining support since early this year. Today a strong bullish candle is sure to be formed by the end of the day. This is a good sign that the stock is on its way to a higher level.

ECS has a strong balance sheet with RM83.7 million in cash as at 31.12.2013. Its paid-up capital is only RM90 million. The company is predicted to do much better this year than last year. Its new business in mobile devices such as PC tablets and smart phones is bearing fruits. This I think will be reflected in the 1Q2014 earnings which may be reported in the first or second week of next month.

The stock was last traded at RM1.23, but it won't be there for long. I think it will move up pretty fast going forward.

Investing/trading in the stock market is risky, and there is no such thing as a certainty. So please remember this: You always buy at your own risk.

Sunday, March 23, 2014

A Trader is not a Gambler

View's Instablogs on:

  • Five Reasons Why A Real Trader Is Not A Gambler How often have you heard someone say that they just bought a stock because they have a feeling that it is going to move higher? Personally, I hear someone tell me that every single trading day. When I ask them how they know the stock is going to move higher they answer by saying it's a hunch or they heard someone talk about it. Well, in the trading world it is not prudent to take tips or trade on a hunch. There needs to be a sound methodology for taking a trade, otherwise it is just gambling. It is important to note, a good trader has the odds in his favor while a gambler does not. Just think about it, how can a Las Vegas casino stay in business if they do not have the odds in their favor? The answer is they can't. A casino knows that the odds are always in their favor and the longer a gambler plays in the casino the more likely the casino will take their money. As a trader you want to be Steve Wynn, not the guy at the roulette wheel placing bets.
    Here are five reasons why a good trader is not a gambler, but more like a Las Vegas casino owner:
    1. A good trader takes a position when the odds are in his favor, not when the odds are against him. An educated trader will accomplish this task by using charts and understanding the human emotion that is being displayed on a chart. That is why certain breakout and breakdown patterns continue to reoccur throughout history. The chart pattern is simply recording the human emotion that is taking place in that particular equity.
    2. A good trader will know when to cut his loss when he is wrong. The legendary trader Jesse Livermore used to say that a trader should never take more than a 10 percent loss on any position. Even a Las Vegas casino will cut off a hot gambler if they win too much money. When a trader can admit they are wrong on a trade and limit the loss it is much easier to come back from that error. Traders must always use a stop loss.
    3. A good trader does not need constant action in the market. A trader only enters a trade when the chart setup favors that he will make money. If the chart setup does not overwhelmingly support a pattern then the trader does not want to be in the position. A gambler constantly needs action; they continuously need to have some type of bet in place at all times. This gambler mentality is one of the reasons why so many people over-trade and lose money. A good trader patiently stalks out a stock or equity waiting for the right chart setup to appear. One thing I have learned over the years is that the worst thing you can do as a trader or investor is to force your will on the market. Chart patterns make money and you must patiently seek the good charts out.
    4. A good trader does not trade will with capital they cannot afford to lose. It is so important to be calm and keep all of your senses when trading. I have seen traders enter a position hoping that it is going to work out and their heart rate jumps up like they are running a marathon, this is usually a sign that they are trading too much money. A trader should not use capital that makes them feel uncomfortable. A gambler will usually bet the farm on a single bet, a good trader will not. Gamblers are always doubling down after they lose; this is a recipe for disaster, especially if you are a trader. I have seen traders blow up their entire accounts by doubling down and averaging in.
    5. A good trader does not take tips from others, but looks at the chart and decides whether the pattern is bullish or bearish. Have you ever been to a horse track? Half of the bets in a horse race are because someone has given someone else a tip. Good traders do their own due diligence and never listen to the public. Remember, when everyone is looking at the same thing it will rarely happen. Never take tips. Even the legendary Jesse Livermore admitted this to be one of his biggest mistakes as it was usually one of the main reasons for his trading losses.

  • Nicholas Santiago

Thursday, March 20, 2014

Latitude Back On Track

Latitude went up to an intraday high of RM2.82 on Feb 20, 14. A mild correction because of profit-taking brought the stock down to RM2.35 where it found strong support. 

The stock is now back to its uptrend track. Strong resistance is seen at around the RM2.80 area. If RM2.82 is decisively breached, the stock is likely to trend up higher. At the time of writing this post, the stock was lasted traded at RM2.69.

Buy at your own risk. 

Monday, March 17, 2014

CBIP wins RM46 million contract

This daily chart of CBIP is a beauty to behold. The stock has been having a gradual uptrend. Of late, this uptrend is becoming steeper. The company has just announced that it has been awarded a contract to build a palm oil mill for RM46 million in Papua New Guinea. Click here for the article.
The stock is likely to trend higher.

Tuesday, March 04, 2014

Latitude Trees (LT) Too Good To Ignore

LT is in the business of wooden furnitures. Its main raw material is rubber wood which is plentiful in Malaysia and Vietnam. It has 6 factories covering 7.8 million sq feet. That is  about 179 acres. Three of its factories are in Malaysia, two in Vietnam and one in Thailand. Below is a brief history of the company, sourced from its website:

"Latitude Tree Holdings Berhad was incorporated in Malaysia as an investment holding company. Through its subsidiary companies, the Group specialises in the manufacturing and sale of wooden furniture and components particularly rubber-wood furniture for both the domestic and export markets.
The Group has carved out a strong niche in the household furniture segment, specifically dining and bedroom sets. From its humble beginnings as a manufacturer of chairs for dining sets in 1988, the Group has grown into a complete high- and-medium-end dining and bedroom sets manufacturer. About 60% of its raw materials are rubber-wood-based with the remaining being oak, pine wood and other wood-based materials.
The Group has made great advances to position itself as one of the largest rubber-wood furniture manufacturers and exporters in Malaysia and Vietnam. Approximately 99% of the Group's products are exported overseas to the United States of America, Canada, Europe, South Africa, Australia and the Middle East countries. 
Manufacturing / Operating Activities
The Group's manufacturing activities are operated from its three factories in Malaysia, two factories in Vietnam and one factory in Thailand. The total floor area of the six manufacturing plants is approximately 7.8 million square feet. The total current workforce is about 7,500 workers."
The EPS of the company in the last 6 months ending 30.12.13 are just too good to ignore. The latest quarter is 19.52 sen per share, and the preceding quarter is 15.02 sen per share. Assuming that these kind of earnings are sustainable in the next 6 months, the full-year result will be 69 sen per share. 
 In view of its strong showings, especially in the latest 2 quarters, a PE ratio of 7 accorded to the stock is not illogical. This means the stock is worth RM 4.83 per share.
The company has a strong balance sheet with a current ratio of 1.598 and cash in the banks at RM154 million. Its paid-up capital is only RM97.208 million. Borrowings stand at below RM100 million.
At the present price of below RM2.60 per share, there is lots of value for money in the stock. 
As usual, you buy at your own risk.