Before we move on to 2014 stock picks, let’s look at the performance of those stocks which were selected by a local research/trading house for the year of 2013. Of the 12 recommended counters, 6 were negative and the rest were positive. Of the negative counters, Biosensors, CDL and CapitaMall Trust were the hardest hit. They ranges -10.56 to -31.84. Of the positive counters, the star performers of the year include Ezion Holding (+58.57%) and M1 (+21.11%).
For me, I would deem the stock picks by local research houses as fundamentally good stocks as at the beginning of the year and it is important to apply technical analysis to these counters to avoid pitfalls and maximise profit. People always ask about recommended stocks to buy for STI, but they forget about timing. The local houses have spent so much resources and research on these counters and have put across their choices, with their reputation at stake. I am sure there must be strong basis on their selection. Fundamentals considerations comprise of expected earning, intrinsic value, potential upside etc. But these criteria are dynamic and no one can guarantee that the expected earning would not change. For example, no one would expect earnings of CDL or other property related stocks would be so badly affected until the implementation of TDSR by MAS in the middle of 2013. Property counters, including REITs were hit. Apply technical analysis will allow one to get away early before the counters took a deep dive. It also reinforces the idea of applying both fundamental (taken care of by the analysts) and technical analysis when one trades, be it long or short term.
The stock picks for 2014 was published by the Sunday Times on 29 Dec 2013. I want to document it for review on 31 Dec 2014. This will also be useful for readers who want to have some reference at any point of the year. Again, I need to caution on investing in these counters blindly or simply ‘buy and hold’. I have illustrated earlier that, if based solely on fundamentals, the probability of getting the counters correct is only 50-50.
Last but not least, I wish everyone good health and a prosperous 2014.
To make the story complete, I need to revisit my comments on 12 Dec 13. Below is a summary of what happened to STI :
The analysis was accurate that STI rebounded from 12 Dec 13 onwards. I have illustrated what is true support and indicators are lagging. Though the window dressing finally came after 12 Dec 13 with much excitement, the immediate resistance of 3,200 was not broken by 31 Dec 13.
The STI has been moving sideways and non-trending since 3rd Oct till 11 Dec 13. This is clearly reflected in the ADX(14), where the indicator remained below 20 for a nearly 2 and a half months. Although December is a month for window dressing, it has yet to show signs of excitement. I would think that the green candle on 12 Dec 13 is an indication of it being temporary supported at 3025, given that there is a true support at this level. It is likely that the index will rebound from there. Although -DI is currently above +DI, but don’t forget indicators are lagging.
The summary of STI’s performance for the whole year has been captured in the above chart. Nothing spectacular with most of the time being trapped between 3,277 and 2,990. The immediate resistance is at 3,200 and as at 12 Dec 13, STI is at 3,059. We shall see if there is any window dressing coming along that will boost the index to back to 3,200. However, for STI to climb 140 points within the remaining 2 weeks before the year ends, it seems to be rather challenging.
Sometimes it is rather difficult to have the patience to wait for a price pull back. Often, it is within the traders’ psychology not to chase the price upon breakout.
When a trader longs a position at a higher price, it is definitely further away from its support, below which the trader can define the stop-loss. There are 2 options that traders can set the stop-loss, either above or below the true support. The former will expose the trader to higher risk (as it was further away due to the breakout) while the latter will be more likely to be triggered, thereby resulting in losses.
The skill of finding the true / resistance (to take profit) becomes very crucial. An experience trader can actually ignore the indicators by just observing how the price behaves when it is near to the support / resistance. Many times, the indicators give mixed or conflicting signals when used together. True support is the strongest support nearest to the current price.
Having said that, most traders would be so psychologically affected and they would not have the right mindset to participate in subsequent breakouts when the prior attempts failed.
For swing trades that last for a few days to a few weeks, the focus should always be entering near support (for long) or resistance (for short). The detection of the strength of the imminent move should always be intraday. Otherwise, it is always safer to wait for pull backs to initiate trades.
Trading is just like mathematics. Only when the defined risks are small with the probability of winning high, can the overall profit be sustained.
Consolidation continues for STI and it will be testing resistance of 3,065 – 3,080. From the CCI, it seems that there are up side potential and from the pattern of consolidation, the breaking up of the trading range is likely, unless war breaks out.
STI did not close below 3,000 on 28 Aug 13. The support was respected. Currently, the index will be consolidating within the range of 3,000 and its resistance of 3,065 – 3,080. The direction will be clearer once the index breaks either the upside or downside.
The STI continues to drop and broken the support of 3065 – 3080 after a few attempts. The next support is the 3,000 psychological support. From the weekly chart, it seems that STI has broken the long term uptrend line and is on its way down. From the momentum of the weekly chart, breaking of the 3,000 mark soon is definitely possible.
Update on 28 Aug 13
The day’s low was at 2,990. The down momentum is unstoppable. STI will be down for a long time to come. Look at the next supports.
DJ respects the lower channel support line and bounce off. It seems like the MACD is crossing its signal line soon.
Update on 28 Aug 13
The lower channel support line has been broken. DJ will continue its way down.
After FOMC announcement on 21 Aug 13, DJ has dropped about 100+ pts on that trading day.
Currently, DJ is approaching its trendline support. If this support is broken, we are looking at support 2 and 3 at 14,640 and 14,360 respectively. MACD is still negative and there is no sign of crossing its signal line yet. Investors are urged not to long DJ but wait to see how the index behave when it reaches support.
If you are to observe, the previous resistance of 15,600 mentioned 24 May 13 posting was not broken in Aug 13 when the index attempted to make new high.
Update on 22 Aug 13
STI gap down and is trapped within the support 2 zone of 3,065 – 3,080. This shows how accurate is the support.
Looking at the rate, the support 2 will likely be broken soon.