State of US Economy and the US Dollar

This is a video done by Stansberryresearch, an independent investment research firm. They have a lot to say about the US Economy and an impending collapse of the USD. Well i understand not every investor buys the doomsday scenario, but it is an informative session nonetheless.

Personally, I got out of a USD denominated insurance linked savings policy about 6 months ago. I bought it a few years ago as one of my baby steps towards financial planning, but my belief right now is that the insurance linked element is already bad enough, what more with a devaluating USD. I am not going to continue paying in the hope of "non-guaranteed" and "projected" returns. Just my 2 cents worth. Anyway here's the link.

http://www.stansberryresearch.com/pro/1011PSIENDVD/PPSILC89/PR

Ezra


The stock has reentered uptrend channel. 1.64 has been tested 4 times and a solid support base has been established. The signs that i look for in an uptrend stock are present:

1) Above MA
2) Trading within uptrend channel/ imminent break of downtrend channel
3) Support tested and rebounded off
4) Sentiment/Correlation with index and commodity

Oil is trading at USD91 a barrel, and Ezra was one of the few stocks that turned up before STI the last few days. Conventional knowledge- index down, stock down, normal. Index down, stock up, strength. The technicals suggest more upside to come.

Bank Stocks


DBS is Trading below MA, in a descending wedge. Although the descending wedge usually indicate a reversal of trend (bullish in this case), my assessment favours the downside more. Confirmation is needed in the form of a red bar to show that a bounce off the resistance has occured rather than a breakout from it.

UOB is the weakest of the 3, returning to its previous triple bottom region via a breakdown from the triangle, and subsequently a downtrend channel- All weak signs.
Will the support hold? Again i favour the downside, as the chart clearly shows that the previous selldowns were sharp, and the rebound from the support came quick also. However, the last 3 months was a sluggish and slow drift to the support.

OCBC is the strongest of the three, showing a clear uptrend amidst the underperforming bank stocks. It is in fact this that gave me more conviction of the impending selldown. 2 clue i picked up- Symmetrical triangle breakdown; A fallback to the channel after an upthrust.
My shorter term indicator also pointed out a price rejection from 9.85 resistance. A close below 9.72 is the sell signal. The significance is higher as there was a breakout 3 trading sessions ago above 9.85, and it hit the day high slightly below 10.00, which coincidentally is the resistance line for the triangle. Classical TA setup of failed breakout on the short term, and breakout on the medium term.

STI update






Looks like STI is not 'giving face' to the US side this time round. The rally has been unconvincing
for the local market at least. Although it is very tempting to buy into the year end window dressing, the techincals suggest that a flushout could occur before the buying opportunity comes. STI has been forming a H&S with declining momentum over the last week, and has traded into the MA. This is not a good sign especially if the US is showing all the 'strong economic fundamentals' that indicate recovery.

SnP is approaching 1250- the level prior to the big selloff in 2008. Will investors be haunted by the ghosts of Lehman Brothers? The technical evidence point towards a downside. For the STI, a 50-80 point break seem to be in the cards. 3152 is the support. A break further will bring the STI to the 3120s region.

Drawing reference from the SIMSCI post i made earlier, there were several attempts to cross 377.3, but the market has not held on to the level as a support. The correction may turn out to be deeper.

MSCI


The rally on Wednesday burned out many bears. I mentioned a while ago while the market was on its way up, that the media was selectively focusing on news that were in line with sentiments. The Euro crisis was a backdrop that did not receive any attention, until coincidentally when the market peak formed.

Although it came quick and scary, i conclude that it is a correction rather than a trend reversal.
My strategy for the next two weeks is to get on the long side above 377.3 while staying out if it falls below (not short). If my position is triggered, stop@ 370.9 (below MA)

Ezra

For the risk taking fellows, 1.71 is the price one can consider to go long, but on half position. Ezra is trading below the 2 MA, meaning that it is still weak. Any positions taken here will be meant for a longer time frame.
I am not too impressed with Ezra's performance lately, given that the commodities have been rallying and Ezion has put up a better performance. The breakout point at 1.81 was barely breached before a reversal downward. The focus seems to be still on agricultural commodities, with Golden agri and Noble taking the lead. I will be making more posts next week once i have more time. For now the market sentiment seem to be poised towards a bullish stance, after all the 'washout' has occurred.

Stock Pick


Market sentiment-
Been scanning around some trading blogs and i realised that the sentiment is still cautiously bullish. We have more space to go. I have been looking out for commodity counters as they are obvious targets for a leg up in this climate of weakening USD. Crude oil in comparison has not rallied much. Ezra is under the radar now because of a recent rights issue. Most oil counters in fact have not been in the limelight recently, with the attention focused on agricultural commodity counters like wilmar and golden agri.

Ezra Technical analysis-
This stock has been trending down in a multi month channel and has been underperforming the market. Traditionally, Ezra and Ezion has a high correlation due to its similar nature of business.
Putting the 2 stock side by side, it is clear that ezion has broke out once from the 1st downtrend channel and is attempting the 2nd resistance. Is this a hint that Ezra will breakout soon also?

Ezra's low in april is likely to be there for a while, since the 1.65 support has been tested 3 times and the stock is currently trading above right now. Some stability is forming with the new short term uptrend channel forming and notice how it converges into the downtrend resistance. The last time Ezra fell below the moving averages, the dip was swift and deep. Notice how the recent price deep has been formed; again signs of support.

The market has priced in the rights issue by now and Crude oil will probably be trading above 90s in time to come. The quantitative easing is supposed to bring in some inflationary pressures to the US to offset a deflationary economy. The trickle down effect point towards increased demand for crude oil, and the posture of a weak USD will reinforce a upward trend for commodities in general.

Strategy-
The 1.74-1.78 region is a good load up area. Look to add more above 1.81, this is the breakout point. Cutloss at 1.69, target 2.00.

STI Outlook


STI is still on a downtrend, though there are some signs of support. In a more bullish scenario, we could see a strong closing back to 3180 region. This will be the signal that the correction is over. Personally, i would rather the index dip a little lower down to 3144 and rebounding from there. This will be a stronger signal to get long after the support has been tested.

Fundamentally, the USD rebounded as mentioned and provided the excuse to take profit off the table. Next week is lined up with economic releases below.

Oct 25 – Existing Home Sales (Previous: 4.13M. Expected: 4.20M).

Oct 26 – Consumer Confidence (Previous: 48.0. Expected: 48.5).

Oct 27 – Durable Orders (Previous: -1.3%. Expected: 1.0%).

Oct 27 – New Home Sales (Previous: 288k. Expected: 270k).

Oct 28 – Initial Claims (Previous: 452,000. Expected: 450,000).

Oct 28 – Continuing Claims (Previous: 4,441,000. Expected: 4,450,000).

It does seem more plausible that the week starts mixed and drift downwards before rebounding towards the end of the week. I will suggest positions to be made towards the mid week, especially when the index is leaning towards 3144. A rebound from here is a strong signal for long, while a break below is a clear short.

Cosco weekend update


Cosco is still showing bullish strengths, achieving the highest close of the year so far at 1.93. The chart is suggesting strongly that the move towards 2.00 will come very soon, as there is no historical resistance that may cap the upside within this leg. Yangzijiang has also moved up strongly, which leads me to believe the maritime sector is having a positive outlook at this point in time. The commodities have rallied strongly due to the devaluation in USD and these commodities need to be shipped by bulk shippers like Cosco. That in my opinion, may be the link that explain recent strength.

Of course, the most direct manner to take advantage of this current market is to be long on commodities, but i noticed Cosco at a earlier stage so i will be following the shipping sector first. The commodities have all rallied substantially, if i have to pick my take would be on Ezra.

TA for Cosco this weekend- the 1.91 resistance in this leg has been tested 7 times, with varying degrees like black candles developing, as well as 2 hanging man from 24 sep to 15 oct. The closing on last friday on a strong white candle leads me to believe that 1.91 has been conquered and this will be the support in the next leg of correction. The round number figure of 2.00 is always a strong magnet whenever a stock trades close, based on my own observations. Let's see if Cosco can go there before correction sets in.

STI Outlook


Correction looming-

The short term trend now is suggesting a correction. This is the time to take profit on any positions taken prior and wait at the bottom for a fresh entry.

Using a combination of the main uptrend channel and a divergence in the momentum indicator, it is foretelling of a correction soon. Of course, if the index does get squeezed to the last drip, it could hit 3231 (uptrend channel resistance) or 3239 (historical resistance) depending on the strength left. The negation of this is a close above 3239 on a long white candle. If the index shows me such strength it would lead me to believe the correction could be postponed.

If not, next week could possibly be on a downside bias. The long term trend is still up, so there is no hurry to get long. Sitting it out may be a better option right now. The quantitative easing will support the stock market rally, but the oversold USD may be seeing a short rebound which i suspect will be the excuse for profit taking to set in.

Some Thoughts on Trading


I took a ride around the neighborhood on my road bike to destress after a hard week of essay submissions and a presentation in school. I went down this stretch of park connnector that i was familiar with only to find a dead end after the former link to the other end of the park connector was closed. I was tired, i wanted to take a shot and cross it but i could not because there was a canal next to the blocked path. I turned and took a new route through a private estate area to find a path back to the main road.

What is my point?

I bought my first stock in 2007 right before the effects of the sub prime crisis and i continued to trade through the bear market of 2008, the rebound in 2009 and the new bull in 2010. It has been almost 2.5 years into this journey. Looking back, i can confidently say there are no regrets, despite the losses, heartaches, stress and emotional roller coaster i went through. It is worth it. There is no other sense of satisfaction that comes close, especially when i reap the seeds of my well analysed and executed trade.

My trading style has evolved throughout and i have come to better terms with my own temperament as a trader, my tolerance and my edge. Being a trader is a inward discovery as much as it is a outward discovery. It is really an amazing feeling to reflect in retrospect some of the virgin trades that i took and wonder what the hell was going through my mind at that time. Although i have moved on, i would never want to think i have gotten better, but simply moved further down the journey. The spirit of humility would allow me to continue pursuing more knowledge and deeper insights because there will never be a day when i become better than the market. This market has no regard for egos. A lot of people say the market is a zero sum game, one loses, the other gain. I think it is a matter of perspective. It definitely can be fairer, IF you have a plan. The knowledge is floating out there, and the initiative of a trader to level himself up is the key to leveling the playing field. Of course, there will never be an absolute fairness because the individual trader would not have access to the institutional resources, but that's where a trader's edge comes in. Where's your edge?

My little riding trip reminded me of how important it is to be flexible and focused. If one road does not work out and the risk involved is not worth the reward, look for other opportunities and other ways. Cliche as it is, when there's a will, there will be a way.

Trading is my passion, not my hobby. I intend to take this further and every little step i take will build towards my goal. Not quite there yet, but hey, at least i am on my way.

STI Outlook

STI is in correction mode. Brief recap of last week's trading: STI gained ground on 3153 and touched the next resistance at 3195 briefly and did not close above. Profit taking came in and pressed the index down the same 40 point range back to 3153. The intraday selling shook out the traders who sold below support on 8th october when it dipped to 3142, and closing at 3153.

Overall trend- Still intact, with the index breaking above the long term parallel uptrend channel briefly, resisted on a rebound and closing down. The retracement amount is manageable for now, and the trend has not yet turned.

Short term trend- 3179 is the short term r/s line. It broke below, so right now we are in a selling mode. The downtrend parallel channel intersects coincidentally with 3153 again, and i believe the market is telling me just how important this numbers are in the week ahead. On Monday, Any trading done below 3153 is bearish, and a close below this level will reinforce the downside bias, with a target of 3107.

My views- The US market shrugged off the unemployement figures, as well as the ongoing Euro debt crisis. The USD is still very weak, although extremely oversold. The currency devaluation inclination, the quantitative easing and the weak US economy lends no support to a rebound in USD. The USD is likely to remain weak, although it could retrace a little from here. The equities market is still very keen on going higher.

Linking this to our local market, i think that 3153 should hold, with some sideways movement before the next upward thrust. The hot money is chasing equities right now, and there should be more room for upside. I think its vital to keep an eye on the currency and Euro situation, as the market is merely ignoring and choosing to enjoy the music. When the mood changes, these topics will probably hit the headlines. The overall picture is not all rosy as every country is buying themselves out of debt. I don't want to imagine that one day when it is simply impossible to pledge anymore collateral and when anymore quantitative easing threatens hyperinflation.


STI and 3 Banks



The STI is poised to take on the next level at 3144. Using a simple fibo projection, it appears that this correction is over as the strong closing on friday negated 4 days of correction.

The banks are still weak, but there are signs that support has come in. It is interesting that the 3 banks are displaying varying degrees of strength and ranging within different price patterns. The strongest among them is OCBC, which is undergoing sideways consolidation for a breakout at a position that is well above support. DBS had a false breakout from a symmetrical triangle, but last friday's close was above the triangle resistance and historical resistance at 14.21. My take is that the real breakout has a high probability of occurring. UOB had a breakdown during trading last week, which was a very classic signal to invite selling. Prior to Friday, the consecutive black candles are too obvious to be ignored. No long calls though, on UOB before it closes above 18.80. I would go with OCBC given a choice at this juncture, with 8.92-8.94 being good levels for entry and cutloss below 8.84.

Cosco weekend update


This is a possible trade plan if no trades have been initiated yet. Buy 75% position between 1.82-1.84 when the stock starts trading into that range, and add the last 25% around 1.84-1.85 if it closes above the prior resistance of 1.84. Cut all positions once there is a close below 1.75.

The reason for doing so is that the uptrend channel is the gauge for upward momentum. Cutting too deep into the channel (close below 1.75) suggests that the upward breakout may fail and go into another basing pattern. Right now, a flag channel can be drawn of which a breakout is a continuation of the trend. That is why 1.82-1.84 is a good area to load up. Above 1.84, adding of positions command higher premium due to the confirmation given by the price action. It is hence wiser to build heavy from bottom and add small on the way up.

My overall view is that Cosco should trade back up in time, so the concern for traders is to find an optimally timed entry to minimise the draw down on the trading account, so that even small accounts can survive the downswing while riding the trend up. My humble opinion.

Cosco

Cosco is down on profit taking, currently trading at 1.78/1.79. It probably will test 1.75 support now that the higher support has broken. My view is unchanged that Cosco is still on the way up. This is a retracement. My view will be negated if Cosco breaks 1.75 and trades all the way down below 1.60. If this scenario happens then reevaluation is needed.

Falcon Energy

Update on Ezion- 0.73 traded but closed lower. Once it closes above 0.73, expect it to test the 2nd target at 0.75.

Falcon Energy- Considered a laggard as it usually moves in the 2nd wave of an uptrend, this stock usually moves after a significant move in other oil counters.

I did not project a long term downtrend line as i found it to be more insignificant as the immediate trend is unclear. While the long term trend line has been broken, the expected upward movement is not occurring as yet. Instead, Falcon is going in to a triangular squeeze. The moving averages are converging around the center, representing the fair value to be right smack in the middle of the tight price range recently. This means a breakout above this triangular squeeze will be significant and telling a longer term, perhaps 2-3months. As of now, Falcon is not displaying any strength as it tested the upward resistance thrice but failed to close on top. It closed both below my short term horizontal channel and the 2 MAs, so the conclusion to be drawn is that it is leaning to a downward breakout. As of now, there is no reason for a trader to be caught long in Falcon energy. Things could change in a few days if the price action proves otherwise. KIV.

Cosco


This ship has been sailing slowly and disappeared off the radar of many investors and traders. My view however, is that this could be back in action in this bull run. Not all the way back to its hay days, but it would not be unrealistic to expect a rally back to 2+ region. A quick browsing of the yearly reports revealed that Cosco was making net profit of $419m in 2008, and $137m in 2009. These were achieved under the massive cancellation of shipbuilding orders and an economic slowdown in seaborne trade. Citi group recently upgraded Cosco and raised target price to $2.30. My emphasis however, is on the fact that during the bad times, Cosco was still putting up decent performance, despite underperforming expectations. If prices move on expectations of future earnings rather than actual earnings, does it mean an upward revision of expectation is the catalyst needed to kick start a rally?

Those were just some basic fundamental approach in looking at Cosco. The reason that i will put up a trade on this is because Cosco has been trading in an uptrending channel for close to a year very slowly. Despite all the volatile events in the international economic scene, the Stock managed to absorb the negativity and trade higher, evident of the available information being priced in. Unless an equally devastating collapse happen, the expectation on Cosco's future earnings is already higher than in 2009. The resistance formed at 1.87 is significant and the breakout will occur at 1.87, while an early entry can be made once Cosco closes above 1.84 firmly. The first target is $2.31, the second $3.20. The wide spread gives a substantial upside of 25% at the first target. Cut loss below $1.60. This trade may take a while to play out so holding power is requred. Caveat Emptor.

Ezion breakout


Following up on the last Ezion post, it broke out today, closing on top of the downtrend channel. The next target is 0.73. As the focus is now on the 2nd and 3rd liner stocks, the pennies will be in play. A lot of stocks are displaying either triangular patterns or breakout setups. I think that the pennies will breakout one after another in the next few days. Afterwhich, STI should be correcting downwards, in preparation for the next wave of buying.

Trade suggestion: Long@0.70. Target 0.730 (1st target), 0.750 (2nd target). Cut loss once close below 0.660.

Bank stocks


Despite the STI rallying close to 80 points since breakout at 3000, the 3 banks have not been performing. In fact, the 3 of them are testing support near their respective support lines. The main component stocks that have strapped the STI along the rocket ride are mainly Genting ,Jardine C&C as well as the commodity stocks. Should the banks break below 8.70 OCBC, 13.80 DBS, 18.43 UOB, i believe one should be wary going long for the time being. The correction in financials will take a toll on the index and especially if Genting's steriods run out.


On the other hand, this will be a good opportunity to load up on the bank stocks should the price action prove that the sector finds strength in the pullback to rally further. In that case, the process of playing catchup will mean the upside could be pretty violent. Keep a close watch on the financials.

GMG


Support has been seen in GMG global twice along the uptrend channel. The stock is attempting a ascending triangle breakout similiar to many stocks over the last week. In a week or two, this could be the next big gainer. A close at 0.235 signals a breakout.

DJI vs STI















On the mid term perspective, there is no reason yet to believe in a double dip recession. As the trendlines formed over many months tend to be more stronger, i do believe the support on the index is present unless broken on strong volume. Looking at how DJI has been trading, my view is that the index has found strength at the 10k support. Followed by a shallower dip in August as compared to July. However, here comes the tricky part. Although i highlighted 3 bottoms that coincided with a potential reverse H&S, the reverse could be true also if the 10450 level turn out to be the peak of this cycle.(another H&S pointing to a downside) Therefore, within the next 1-2 months, we will be watching the DJI close above 10450 to validate the bottom of this cycle.

On the short term though, 10450 has been tested 3 times this month and has been rejected from the resistance. The range now is between 10370 to 10450. DJI is becoming short term overbought so there could be shallow dips to the support level at 10370.

Lastly, comparing the relative strength between the DJI and the STI, it leads me to believe the funds are flowing into Asia now. Despite many extensive studies on how Singapore is dependent on the US in terms of international trade, the flow of investment money evident on the charts show a different story. Notice how the STI trades in the higher tier of the channel for a longer period of time compared to the DJI, and that the correction period within these last three months have been extremely brief and shallow. While the DJI is still struggling at the lower tier of the channel, the STI only touched the lower tier resistance once and rebounded off from there, proceeding to use the middle line as a support. STI has effectively closed above the year high as of 7th september, while it is clear DJI still has space to run. This lends evidence to the view that Singapore is at a relatively stronger position now given its rosy GDP reports recently.Given the behaviour in the past, STI would have been trading at a lower tier given the strong dependence on the DJI. STI continued to perform strongly despite all the problems with PIIGS, unemployment, debt and trade deficit, leading me to believe that the inherent bullish sentiment is starting to form, and the long awaited bull could really make a come back.

In summary, my view is that the DJI is poised to move up further, and that could lend an extra push to our local index towards 3140.

HL Asia



Since my last post, HL Asia did not trigger a buy as it did not close above 3.75 on 13th August. It fell to the low in July and promptly rebounded from there. Currently, it is trading below the resistance of 3.56. HL Asia is a stock to watch because the upside beyond 3.73 is all the way to the 2 year high at 5. On the technical side, we are currently seeing consolidation for the last few months and a triple bottom is likely to form. There is no compelling reason to go long yet, but it is definitely worth a watch, especially when it starts trading back in the uptrend channel and subsequently break the 3.73 resistance.

STI Outlook



Friday's Close on STI was spectacular. The 2970s was tested again with the lower end reaching for the intermediate support and rebounding, closing all the way above 3000. The next level to test is 3014. To maintain on this uptrend, STI cannot close below 3000. No signs of fatigue yet, i believe STI should be able to test 3014 before the next correction. Someone mentioned that STI formed an inverted head and shoulders from May to July, with the neckline being around 2900. Notice how STI reacted when it challenged 3014, with it reversing around 360 points to the low in May. The second try in August resulted in another correction but it was only about 100 points. A new bull market could be coming, especially if we witness the first close above the 3014 level. I believe one should start building long positions and await the next run up.

Ezion


No Strong reasons for trade, but i am charting this just to get a feel on the market after missing out the action for quite a while. On the mid term, Ezion is trading within a downtrend channel and support at 0.555 has been tested and it rebounded from there. The recent channel from my indicator shows that resistance in the short term has been broken at 0.635. Look for Ezion to test 0.66. A close above that may bring it to test 0.68. 0.68 will be the key resistance to watch. If STI can hold above the 3000 level and Crude oil continues to trade higher, Ezion may experience a change of trend once 0.68 is broken.

Stock Pick



HL Asia is still going strong. Since 29th of August, the stock has edged higher to 3.84 before making a pullback . There is strong support at 3.66, and it is still attractive based on the last closing price of 3.71. The first target to clear is 4.32. Based on a swing setup, entry can be made above the downtrend channel at 3.74. For a longer term positional trade, a break above 3.84 should happen before an entry is made.

The recently released financial reports point towards strong growth contributions from the units in China. The 2nd quarter results reflected a stellar 98% increase from 2nd quarter 2009. The strong momentum will allow the company to continue to deliver results.

Stock Pick

Yanlord-

Time to get into a position trade with yanlord. This is ideal because it has just completed a cup and handles reversal pattern, followed by a pullback to the downward sloping trendline support (previously resistance). Notice that it coincides with the MA. At the neckline, notice how it challenges the 200d MA, and again there is a trendline from the 2009 peak that is a resistance point. On a higher risk swing trade, the position can already be entered. On a position trade, a close above 1.95 will be a good point to enter. Cut loss 1.84.

Genting PLC

Genting-

Long setup based on ascending triangle, higher highs and lower lows. The volume transacted is tapering off, and i view it positively because this shows that the stock holders are not selling. The volume for Genting has a tendency to decrease before a powerful upward movement. You guys can try verifying it on the charts. This setup is ideal. Target 1.30, stop loss 1.17. Long above 1.23.

July Market

I have not been updating for quite a while due to work commitments. It has been a rough 2 months for the market, with the Euro crisis unfolding and uncertainty shrouding the investment arena. I believe the crisis has barely concluded the first chapter, as markets continue to break key supports within the last 2 weeks. In the next 3 mths, market is likely to be volatile. Tracking the SIMSCI, currently it is supported at the 50% retracement level. As long as 336.65 holds, there could be a bear rally up to the region of 343. I expect this to be short lived as the general climate is extremely cautious. Should the Euro sell off, another round of selling will be triggered.


On the short term though, Noble is showing signs of short term support. A close above 1.72 is a long signal, cut loss below 1.66.


I have updated the Asia Stock Charts page with crude oil futures and the USD/SGD. I am also using www.futurespro.com to track live DJI. These sources are free of charge and possibly as close to the live data one can get without opening a futures account.

SMRT


There is one counter that caught my eye this month, and it is SMRT. This is something you would want to invest in rather than trade. I see a lot of potential in this. SMRT broke out of the 1.96 resistance and has never looked back since. It last traded at 2.28. Of course, seek to accumulate on a pull back, but these are the reasons why SMRT is an attractive prospect:





Financials
(S$million)
FY2009
FY2008
FY2007
FY2006
FY2005
FY2004
FY2003
FY20021
Revenue
879.0
802.1
743.1
711.7
673.5
667.3
685.6
496.8
Total operating expenses
716.9
645.0
625.6
597.7
607.1
596.8
609.5
418.5
Profits
EBITDA2
299.0
284.1
255.0
247.2
230.0
225.5
243.7
196.6
Operating Profit
188.7
178.0
145.3
138.8
92.8
99.3
96.0
92.3
Before Tax
185.8
176.2
142.3
124.1
83.9
86.2
72.7
82.3
After Tax
162.7
149.9
135.8
103.6
126.6
90.2
72.2
56.8
PATMI3
162.7
149.9
135.4
103.4
126.7
89.5
72.1
56.8


The SMRT profit after tax and the cash raised from operations are consistently rising for the last 7 years. The net dividends has risen from 2.2 c/share to 7.8c/share over the 7 years. As of 2009, the dividend yield stands at 3.7%.

Purely as a dividend play, i would say that the yield is not high compared to reits like Suntec and Cambridge. However, the gearing is very low. As of 2010, SMRT has maintained a net cash position. What does this mean? The risk of a default or financing issue is low, and looking purely at just 3.7% dividend yield, it is good value. In terms of looking at a sustainable and well managed business, i believe there is ample recognition for SMRT.

Market position

SMRT derives its revenue from the fleet of SMRT buses, taxis, advertising, and increasingly from its property rental. Rental income has increased from $19.7 million in 2005 to $42 million in 2008, and is set to increase further once the Retail hubs are fully completed, and the Circle line is completed. Comfort Delgro is the only other company operating the NEL line. With a near monopoly on rail operations, a duopoly in bus operations and increasing rental space, the market dominance is uncontested.

Government policies

There are more than 60 ERP gantries scattered across the island aimed at controlling the congestion problem in the major roads leading to the CBD area. Combined with the high cost of parking in the CBD, the government is pointing human traffic towards public transport rather than private transport. The recently imposed COE quota system has caused an uproar, with COE prices reaching $30000 for cars below 1600cc. Car prices are likely to remain high with the supply of COE being tightly regulated. While car ownership is more than ever attractive to Singaporeans in this piece of congested land, it is increasingly becoming out of reach for many.
The combined effect point towards the encouragement of public transport over private transport. Not only is car ownership increasingly expensive, but car usage too. Coupled with the frequent jams during rush hour leading to fustrating waits, the tradeoff is increasing, especially for the middle income earners.

Next, ridership grew by another 5% from mar09 to mar10. The population figures stand at 4.9m as of 2009, out of which 1.7m are PR and foreign talents. The liberal immigration policies are not going to hit the brakes anytime soon, so more people can be packed into the containers. This represents a continuing upward trend on ridership and therefore revenue from fares.

State ownership

Being a GLC, state ownership through 'private' entity Temasek Holdings stands at 54.37% in 2009. Judging from the continual profit over the last 7 years, tight regulation over the private transport market and the blatant increase in population, i infer that the state stands to gain from the strong financials of SMRT, and the various policies directed point strongly towards an upward movement in the stock over the long term.

Technical Analysis

The stock has reached an all time high of 2.32 on 30th of April, and has not seen any significant pullback since March. The oscilators have be trending strongly without any signs of divergence yet. The short term uptrend is still intact, but there is no harm waiting to collect on a pull back between 2.15-2.20.

Conclusion

These are some fair value estimates from various brokerages houses made in April 2010. CIMB-$2.41, Philip-$2.42, OCBC- $2.22, Amfraser- $2.19

I think any Singaporean who travels on the MRT frequently and especially during the rush hours will know how it feels like. Well, if the fares cannot be controlled and the squeeze unavoidable, the minimum is to invest in SMRT to ensure that you get your slice of the pie (although it might not be big) to negate some of the fustrations encountered in daily commute. Cheers.



STI retracement


STI-

Judging by price action, notice that the bar on 6th april is narrowing, indicating a slowdown in momentum. STI volume is also declining, a classing bearish divergence. A retracement is likely, with the first support at 2925 and the next support at 2885. The 2885 region is a very strong support and should there be a near 90 pt correction from here to touch 2885, this will be a good point to load up. It is however vital to loadup after a bar closes above 2885 upon touching.

Falconenergy is facing resistance at 0.685, if it breaks, i will take profit and wait for the next round of rally. -Sold with profit

-Update 14April

STI continued to show strength despite the earlier weakness. Now that the 3000 mark is broken, it is hard to say for sure. However, the irrational exuburance is forming in the markets. While some say that it is risky in terms of risk to reward ratio because of the market being highly overbought, this is on the other hand the portion where the market spikes up the most.

The breaching of the 3000 support is crucial as many traders were looking to short the market on every weakness for the past week. I posted the STI chart drawing the conclusion that a retracement was imminent, but the reverse happened. The shortists were panicking to cover their positions when every trade turned red. After squaring their position, will they change their stand upon seeing the market trend upward further?

The market breaking a higher high is a trigger for long. The 2 stocks on my watchlist are Novo and GMG. Coincidentally, both are a buy above the resistance of 0.25. With this being said, i am leaping into the fray, with my stoplosses in place. Novo-0.23, GMG-0.225

Novo Dual listing



Novo is proposing a dual listing similiar to Z-Obee, which showed a spectacular run over a period of 6 months. Novo has completed the first phase of share placement in preparation of achieving 25% public float for submission to HKSE. The next milestone is to look for the approval by SGX.

The timeline comparison shows that a dilution is expected immediately after the issue of new shares, but a high made that is above the pre-issue of new shares will represent the stock is ready to move higher.

The target of 0.28 was not met. On technical basis, there is no entry yet. A break above 0.28 (all time high) will mean that the placement shares have been fully absorbed and ready for the next move upwards.

Stock Pick

Watch Novo tomorrow. It may break 0.28 this time round.

Stock Pick

No closing above resistance of 0.8, but instead hit the support at 0.775. This guy could take a while longer. The STI is preparing for a big move right now, with it possible to move either way. While it may defy logic and move higher once again, i rather not enter new positions right now. I want to take a back seat for now.

I am eyeing Cambridge Industrial trust as my longer term portfolio (not for trading). At 0.46 the annualised yield is 13%. I will spend some time to research the fundamentals of the company to see how good it is. Meanwhile, a correction will make this stock even more attractive as there is some downside pressure.

Forex Indicator


This is the chart result from one of the indicators i purchased online. The green is a buy signal, the red is a sell signal. The profit take level i choose is to take short term 10 pip profits with a 5 pip stop. This is because the indicator is applied to the 1 min chart. It can be used on other timeframes, and the parameters for profit and stoploss vary. I am using this indicator to confirm the signals from the system i bought earlier.

Feel free to comment/drop me a mail if you have questions. Cheers

Tom Strigano-Forex Confidante




I purchased the Forex Confidante system by Tom Strigano, and have been using it for about a week. It has been working well for me on the demo. Below is a chart of the signal it generated during my trade. Notice that the price retraced before slamming down, and this is taken care of in the system. The stop loss was not hit in the trade.

My reviews on the system by far is that it is realistic, so dont expect a wonder black box system. Tom Strigano, an ex bank trader, shares his experiences through the system and provides an insight as to how the institutional trading environment is like. I definitely found it useful.

However, be warned that this is an ebook so it doesn't come with any indicators. It is a price action-based system, which means you will need to do your homework to determine your trading levels.

For those that are interested,this is a link to get it. The good thing to this is that there is no risk on your part. You are able to refund the product and get back your money should you find that the system is not to your liking. Its priced at USD$97, a full fledged system with a 3 day training course that easily would cost you 2k. Its definitely a bargain.

Do drop me a mail if you have any doubts on it! Cheers.

Thoughts about Trading

Hi guys,

I have been exploring the Forex world recently as the forex market is a better environment for full time trading. That is what i am working towards, and the commissions involved is lower compared to stocks. That means i get to keep more. I attended a talk organised by SGX academy a month ago and they were promoting their advanced futures technical analysis course. While i did not sign up in the end due to cost, but i was inspired by the trainer who was an ex-SGX pit trader. His course is something i would definitely aim towards. In his preview he mentioned 3 types of traders.

Traders that are constantly losing- These traders lack self discipline, or they need to get a system that can work better according to their trading style.

Traders that are constantly winning- Nothing needs to be said, they are the 5% who have found the thing that works

Traders that are breaking even- This group of people are the interesting bunch. Breaking even dispite 1+ year of trading...that means they profit and they make losses. While improving their system or trading is a direct method, the other method is easier- lowering the cost of commission. Well this seems logical, but it did not strike me before.

Since singapore stocks incur the same amount of costs unless one opens a CFD account, i came upon the other option-FOREX.

Brokerages like Oanda Singapore gives 0.9pips for the Eur/USD pair. I have an account with them, i find the rates very reasonable compared to the rest.

No harm giving it a try. I opened an account with $100. The positions are mini, just for experience sake. There is no minimum as long as you have enough margin to trade your pair. One step in for me. Lets see how this goes.

Stock Pick


Biosensors-

Rebound imminient. Support at 0.775, cutloss once it breaks. A break above 0.80 is a long signal, target 0.855. "Buy on dip" scenario. Notice the rebounds once the price touches the trendlines. Following a fierce selloff for 6 days. this rebound could be a good one when shortists cover their position when they see a rally. Notice today and yesterday's unusually huge volume.

Falconene-

Declaration of $0.01 dividend per share, or $100/10lots. Today it broke above 0.70. Following my own trading, i cut initially when it went below 0.675, but reentered today at 0.685, when 0.68 was broken. Lets see how it goes.

Feel free to comment on my posts and exchange opinions.

Stock Pick

Falcon Energy-

No time to post chart, but this is a long once it breaks 0.71. Strong support at 0.685 and 0.68. With the 0.68 support tested 5 times. cut loss at 0.675.

For Z-Obee, i have taken profit on the stock. Parabolic spike ups tend to selldown fast n furious. Today's trading in HK did not live up to the hype. Wait for the next setup to go long.

Z-Obee



Z-Obee-

This stock has broken the downtrend resistance with high volume. A close above 0.335 resistance is a signal to long. Z-obee has been trading positive despite the selldown in the STI within the last 3 days. The general sentiment is bearish still due to the Euro crisis. For Z-obee however, the fundamental news driving trading interest is the dual listing on the Hong kong stock exchange on 1st march. The listing price is $0.33 after conversion fo Sing dollars. Indicators are showing bottoming out signals. Stop loss at 0.3, once 0.305 support broken.

GMG Global

UOB Kay Hian-

Summarised in points:

  • Demand for commodities set to quadruple over coming decade to feed growing economies like China and India
  • Regional palm oil plays like Indofood Agri, Wilmar and Golden Agri have been running up due to bullish reports
  • GMG Global is the only pure natural rubber play listed in Singapore
  • Supplier of processed rubber and latex to world's big tyre makers like Goodyear and Bridgestone
  • Owns 40000ha of landbank in Africa
  • Total rubber output of 70000 metric tonnes
  • 51% owned by Sinochem International Corp, a Chinese state-owned enterprise, largest rubber player in China
  • Rubber consumption in China projected to grow around 10% over coming decade
  • GMG sitting on a cash pile of $170 million following a share placement last year
  • Little gearing, $41 million profit in FY2008 and $22 million profit in FY2007
  • NTA 11 cents

This stock has been heavily traded in the past week, showing that there is market interest. I will monitor and wait for buy signals.

Dow Jones



DJI-
The closing on Jan 13 is at the day high of the cycle high of the uptrend channel. A closing above that, which is 10682 is the signal for further upside. I rather miss this wave of run up and wait for the correction as the current prices are high. The index has been trending for the past week, and there is probably a lot of BB waiting to unload and initiate short positions. Patience for now. 10582 is the immediate support.

Dow correction imminient

A warm new year to my readers. I am a bit short on time to put up the chart, but a correction is imminient on dow jones and the STI index. I am staying out of long positions for the time being.