Wednesday, 19 August 2015

KL: PRIVA rebound catching

Catching a rebound requires more than bravery. It requires the correct timing, the confidence to buy, the calmness to hold and the resolution to cut loss should the stock keep falling down.

I queued PRIVA @ 0.195 early in the morning, when the queue was 0.200 best buy and 0.205 best sell. Soon after the market opened, I saw KLCI "waterfall-ed" again and immediately wanted to cancel my order. But before I clicked on the "cancel order" button, the transaction was matched.

PRIVA rebound

Soon after that, the best sell became 0.195 in no time.

Soon after that, the last done price was 0.190.

Soon after that, the best sell become 0.190 and the best buy was 0.185.

This implies an immediately loss and is not a good feeling at all. It was tough to hold the counter in that situation, especially when KLCI has been plunging continuously. My confidence is certainly shaken right after buying. I decided to observe first and closed my trading platform. Until now, so far so good.

While PRIVA is not a 5-star stock (my basic requirement to catch a rebound), being a technology stock and a price of < 0.200 makes me irresistible. I target a return of at least 50% in short time.

Sunday, 16 August 2015

Currency talk 3.0

In Currency talk (1.0) I made a bold statement that the day of AUD:MYR = 1:3 is over, with a "however":

If you really want 1:3 back in the days of 2012, you will have to hope for a quicker depreciation of MYR than AUD. But even if that happens, how worthless is MYR at that time? And how much you could do with it?

Back then, the currency was trading at about 2.80. According to BNM rate as at 14-8-2015 17:00, AUD:MYR is buying at 3.0112. Unbelievably, something that I wrote without much contemplation has become true in less than 6 months.

And NO, this is not due to the appreciation of AUD but a quick depreciation of MYR since July.

And NO, even the ratio of 1:3 is back does not mean that the MYR you converted back has the same value. The 1:3 today is completely different from the 1:3 back in 2012.

And NO, I do not want to see this coming as this means that MYR is getting worse. It looks like there is no signal that could stop the depreciation of MYR.

Human's brain is hardwired to survive. At the critical moment, protecting own interest is always the top priority. This is really no different from politics where it is all about self interest. Therefore, believing that the government could somehow help the currency is unrealistic. Because of this, I have to be responsible to my wealth. I thought that it is now a bit late to change currency, but whatever it takes, I have to come up with a Plan B.

Sunday, 9 August 2015

Currency talk 2.0

In currency talk, I mentioned that MYR has no cure but insidious depreciation. Unfortunately, the prophecy has become a reality. The chart below shows the trend of USD:MYR in the last 2 months:

(Figure obtained from Yahoo finance)

Point A:  30th - 1st July. The credit rating of Malaysia remains unchanged and the outlook was upgraded to become stable. MYR has rebounded strongly in the following day. Shockingly, this rebound only last for 1 day! And because of this conspiracy theory arises...

Point B: 7th July. USD:MYR broke 3.80 for the first time since 1998. I thought that 3.80 will be a strong psychological support since it was the rate pegged 17 years ago. But it did not look as "strong" as it should be. The slope of that day is relatively steep, showing that it breaks the support "just like that":

Point C: 22nd July. After breaking 3.80, I was looking for a rebound -- to at least 3.70. The rebound did happen, but to a much lesser extent and a much shorter period than I expected. This scares me a lot.

Point D: 7th Aug. USD:MYR was trading at 3.92. Why does it depreciate so fast? Perhaps political issues has lower the confidence of foreign investors?

Seeing the rate of MYR depreciation, Many Malaysians stocking up on Singapore dollars, US dollars as ringgit weakens. This basically tells me that now is not a good time to change money.

In 1997, the damage on Malaysia was relatively "mild" as compared to its neighbouring countries (except Singapore). Looking back, it was definitely a right decision to peg USD. But the current situation in Malaysia seems to be developing another financial crisis. Keeping in mind that US has still yet to increase the interest rate and MYR already like that scares me a lot. What if US really increases the interest rate this September? It is also possible that BNM may raise the interest rate in September meeting in trying to stabilize MYR. Interesting things might happen in a few months time.

Sunday, 2 August 2015

KL: KLCI technical analysis

KLCI is really weak recently. Trying to earn money from KLCI lately has been challenging. Regardless of what shares you are trading, the index is still the most important benchmark in KLSE as it determines the general trend of the market. How is it doing? Let's examine this from the monthly, weekly and daily charts.

1. Monthly chart:

KLCI monthly chart

Monthly chart does not look good. MACD and stochastic are heading negative. The last candle, July 2015, was primarily due to the last trading day where KLCI was pulled up by 23 points. Was this a sign just to draw a "nice" chart or is it that KLCI is ready to go? It has 3 black candles followed by one white candle where similar trends have been observed in 2008 and 2011. While 2008 was a real bear, 2011 was an adjustment. Which way will it go this time?  Only time can tell. 

2. Weekly chart:

KLCI weekly chart

Weekly chart looks a bit nicer. The chart looks like forming a double bottom. All MACD, RSI and stochastic seems to recover from the bottom. However, no sign of strength was observed.

3. Daily chart:

Daily chart cannot tell much. Chart shows KLCI seems to have "triple bottom" recently. MACD, RSI and stochastic are heading positive, but the trend in daily chart can change very abruptly.

A lot of rumours say that if the PM were to step down, it will lead to political instability and chaos (as in the stock market) would ensue. I couldn't be bother about this factor. Partly because I don't think he will step down; and partly also because who knows which way will the stock market go if he really steps down?

While a number of investors do not look good on the current market, I still yet to spot a "madness" in the stock market. After all, standing at 1723 is less than a 10% drop from the peak of 1890+. Is that really bad? But perhaps the drop occurs successively due to the involatility of the KLCI, it felt as if the drop has been long and significant. My view is that while bear has not yet formed, the chance of "final bull" remains unclear. The way to deal with this is as always: prudent investment involving good fundamental stock.

Tuesday, 21 July 2015

KL: Call warrant analysis

Recently, MYEG touched a low of RM 2.40 on 16-6-2015 and a high of RM 3.03 on 2-7-2015 in 2 weeks time, equivalent to a ~26% return. If you leverage your capital by trading call warrants instead of the mother share, what would be your return then?

MYEG trend

Call warrant^ Low High Return
MYEG-CD* 0.340 0.480 41.2%
MYEG-CG* 0.190 0.325 71.1%
MYEG-CH 0.185 0.320 73.0%
MYEG-CI* 0.030 0.105 250%
MYEG-CJ 0.080 0.200 150%
MYEG-CK 0.060 0.145 142%
MYEG-CL 0.075 0.160 113%

* MYEG-CD,CG and CI expire on July, September and August 2015 respectively.
^ MYEG-CM was issued after 16-6-2015 and hence it was not included here.

The above table summarizes the return for MYEG call warrants. Based on How to choose a call warrant, the first priority is that the mother share must possess strong fundamental. For this criterion, MYEG is a no-brainer.

Next, look for the maturity date. This means that CD, CG and CI will be out of my sight. While CI secured the highest return in 2 weeks time, this is not a risk that I would take.

Then, look for the premium, gearing and volume. CH was good back then, but its gearing is comparatively low now, meaning a lower risk and lower return/loss. For a higher gearing, both CJ and CK are satisfying all criteria. As CJ has a lower exercise price and a lower conversion ratio, if I were to trade, CJ will be my pick. It turned out that CJ is indeed the best choice. It wouldn't be too hard to choose a call warrant in this way.

Another handy information is that we can actually know how much these call warrants were held by the issuer at the end of each month. If you go to Bursa Malaysia website > Listed companies > structured warrants. In the announcement category choose "Issuers' announcement", you will see this type of announcement:



You will see that for MYEG-CJ, 64.68% of warrants are not held by the bank, i.e., a huge portion of warrants are held by other people. It may be big fish or retail investors. Either way, when the bank is no longer the market maker, the buy/sell queue volume will be low (e.g., from 5000 lots per bid to 1000 per bid) and this provides another criteria to choosing a call warrant.

While call warrant could bring you high returns in short time, it is a double-edged sword product. It can accelerate your capital growth or completely ruin your financial dream. My principle is to only trade call warrants with strong fundamentals mother share. INARI is an example, MYEG is another. Call warrant for shares like KNM, no matter how attractive they are, will be completely blind to me.

Saturday, 11 July 2015

2015 Q2 Review

The total transaction in this quarter was very high, probably the highest in my history.

My portfolio reached a pinnacle on 23rd Apr, which have declined since then as KLCI has been dropping continuously. Indulging myself in insatiable greed, I saw many counters that I hold turned from green to red, from earning to losing. AWC and PRIVA are only a fraction of examples. I experience the highs and lows of the rise and fall in my portfolio, feeling completely numb about the change in numbers.

The transaction involving call warrant in this quarter has far exceeded the total call warrant transaction for the past 4.5 years. After all these years, I have finally felt comfortable to trade call warrant. The experience is: taking profit on call warrant is way too important. You can't hang on to call warrant like the way I used to do with a mother share. When you see a reverse trend, it is time to sell regardless of the return.

Going to the end of June, the Greece drama and the possibility of a downgrade in Malaysia credit rating have proven that my own insight into the market was right. This marks a great advance in my investment life: to be able to insist on my own view and not being swayed by the others. Yet I know that I still have a long way to go, for having zero experience in a real bearish market.

The investment return will remain undisclosed since now.

Thursday, 9 July 2015

News by media, view by myself (end)

Writing this, I couldn't help but to recall about past experience of "big drop", i.e. Oct 2014. Last October, there was no sign prior to dropping, and the US stock market touched a bottom on 15-16 Oct 2014.

DJI Oct 2014

Then, in the mid of dropping, came the news:

16 Oct 2014:
Dow suffers largest mid-day drop in THREE YEARS as Ebola fears

16 Oct 2014:
Anxiety about Ebola

When the stock market started to plummet, there was no sign and no news. Then, the news came out. The "timing" of the news couldn't have been more "accurate". I still remember vividly how every media was reporting the fear of widespread of Ebola, including a future projection of Ebola cases of how it will become an epidemic. Interestingly, do you still see coverage of Ebola now? It is miraculously disappear from the media. I was scared at that time and learnt a big lesson, I am not buying any story since then.

The current Greece drama is amusing. In my own view, there will be no "Grexit" (how interesting can English evolve!), not now. Time will unfold this soon.

The crux of this series of blog is no more than this: the media has been highly manipulated, and trading by news will bring you nowhere but losses (Holland). While it is not easy to do the opposite when everybody is selling fearfully, it certainly pays off, sooner or later, if you can think and act independently at those critical moments.

PS: A question to ponder -- now almost everyone is talking about the potential of US to raise the interest rate. While raising interest rate will be detrimental to the stock market, will this happen when everyone is expecting the same?