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.