Author Archives: TA Talk

Ecclesiastes 9:11

“I returned, and saw under the sun,

that the race is not to the swift,

nor the battle to the strong,

neither yet bread to the wise,

nor yet riches to men of understanding,

nor yet favour to men of skill;

but time and chance happeneth to them all.”

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Brexit – the scapegoat

Good day all,

Let it be known: Brexit will not bankrupt the world; Brexit will not bankrupt the UK. If anyone says he is a free man, if anyone says he is free to make his decisions, then shame on those who lambaste the British people for bringing financial catastrophe on the world. The British people have voted – against the avalanche of an environment pushing a globalist agenda – and they have decided on taking 100% control of their own country. What crime have they committed? Yes, there is going to be a lot of work to be done by lawmakers, legislators, businessmen, etc; but is there any crime in that?

Since this is a website pertaining to the financial markets, I will keep the scope of this post focused on the financial markets’ side of the issue. Even till this day – 15 days after the referendum – the mainstream media is still raining a deluge of criticism at Brexit voters, and preaching about the impending collapses that will stem from a Brexit. What is worse for me, as a trader, and for all of you out there who have been following the markets for years, is when I hear of how a Brexit will cause the next 2008-style financial collapse. Seriously?

First, we do have at least a week’s worth of trading to see if we are on the cusp of disaster. To that end, we have a definite answer: no. The FTSE is already above levels seen during the referendum week! European indices are off the lows made after the referendum, ditto for Asian indices, and American indices have just about recovered all ground lost after the referendum. If Brexit was as bad as the media portrays, the markets would continue sinking. The Pound, I grant you, is still falling but give it some more time, and it should bounce back. The mainstream media may be fooling everyone else but I hope that we, as financial market followers, will stay calm and know that this is simply a knee-jerk reaction.

A little hindsight analysis while zooming in on the referendum week. It seems to me like the markets moved quite closely in tandem with sentiment portryed by the media. At first, the markets dropped 4 sizeable red (or black) candles 2 weeks before the referendum when polls seemed to indicate that a Brexit was actually in the offing, then in the week leading to the referendum, I remember very well that the Bremain camp seemed to wax stronger and stronger – especially coinciding with the shocking attack and subsequent death of MP Jo Cox. So, with the chart in view, it is very clear that price action was almost dictated as according to the media. Why the FTSE has shot up higher is beyond my comprehension although one thing we can be very sure of: Brexit is not to be the scapegoat for any kind of disaster hereafter.

FTSE

With that said, let us not climb onto the bull so quickly. For quite a long while now, I have been feeling uneasy about the markets in general. The generally huge, “toppish” patterns in many indices globally is certainly cause for concern. Some people in authority – including Brexit poster child Nigel Farage – have indicated that the UK will head into recession regardless of Brexit. According to the charts, this is quite a strong statement to believe in. Markets have been rounding off for some time already. While this can simply be a large breather in a continued bull-run – like in the aftermath of the US credit downgrade (how come the media did not blast Obama for that?) – generally-speaking, it is supposed to herald the stagnation or decline in the economy. So, taking the chart into account, it is a very probable scenario to expect in the coming twelve months. Why should Brexit take the rapping for this? The charts were already turning; the markets were already tanking long before anyone was concerned about Brexit.

In conclusion, I hope we can all bear the big picture in mind: financial markets have been tanking for quite a while now instead of sauntering up in a typically strong uptrend channel. If the UK does enter into recession, it is not because of the Brexit but for other reasons that have already been factored into the financial markets.

FTSE2

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Dilemma of dynamic patterns

Good day traders,

As the market would have it with me so often, the exact opposite of my sentiment usually happens. Ever since my last post, indices around the world have rallied hard. The sharp devaluation gave long-term players an opportunity to snap up bargains on the market. As we cross over to the latter half of the year, indices are either at or above their 200-day moving averages, and having made higher highs and higher lows after the scare in January. Unsurprisingly, price action over the last few months have developed a bottoming pattern of sorts: specifically, unconfirmed, inverted head-and-shoulders patterns are showing up on many charts. It may be a case of the breakdown from large, upright head-and-shoulders patterns resulting in a consolidation instead of further downside.

With every wek and month of upside, it does dent my confidence of the longer-term decline I am expecting. Being a long-term player is analogous to a huge ship’s maneuverability compared to a small speedboat: I cannot and will not change my outlook until way past the bottom. It is tempting to switch from a bearish to a bullish outlook now but I am still not convinced with the recent rally.The dilemma I face now is because of the presence of dynamic patterns that are suggesting upside to come. I use the term dynamic pattern to mean general price patterns that have a particular shape in recent history – these patterns do not have conventional names like the head and shoulders and others; or they may but with a certain “twist.” I will illustrate what I mean in the charts below.

The first chart is of the CAC 40. The turbulence late in 2014 produced a descending, broadening wedge pattern, which also turned out to be a inverted head and shoulders. Early in 2015, the market took off and the CAC 40 blasted off to new, major highs. Now, steer your eyes to the right half of the chart, and you will see a similar phenomenon. It is not so much the small, topping head and shoulders that matter but the similarity between the two huge, descending, broadening patterns. I have veered away from trading patterns in recent years but it is magnificent to see such huge patterns unfold, and even more important to gauge their sucess rates. Ditto for the STI and Hang Seng Index- albeit making reference to an inverted head and shoulders in 2011-2012.

A1

Moving on, I have the Dax. The dynamic pattern in the Dax starts with a good, long uptrend before a downward-biased contractional period. Then, price moves down in a classical a-b-c Elliot Wave retracement pattern. In this dynamic pattern I am identifying, the Dax then goes up and congests for a little while before flying up and away. Now, look to the right half of the chart, and see if you agree with my judgment of  the same phenomenon brewing. With such beauty in the charts, how can I ignore the case for upside?

The next chart is of the S&P 500. Bear in mind that I have highlighted the presence of a general, large, rounding pattern – a stalling in the long-term, multi-year bull run. Within that large pattern is wht we now see as a clearly-defined head and shoulders with a right shoulder breakout upwards some time in March of this year. Price is currently testing the head region. Take note of the smaller head and shoulders that is also undergoing a head test now. In this case, this dynamic pattern does not indicate anything since the head test is still ongoing.

a2

In the next few charts – FTSE 100, Hang Seng, and Russell 2000, you will see what I mean by the large, rounding, topping patterns strting to give way to what seems like a reversal, inverted head and shoulders. It is certainly not the first time I see such a phenomenon but my experience tells me it is ust about fifty-fifty where the market will head to next. Sometimes it carries on higher and proves the inverted head and shoulders to be correct – rendering the earlier head and shoulders to be invalid, or the market dives lower and proves the inverted head and shoulders (usually the smaller of the two) to be a false reversal indication. Tough call is it not? Such is the market!

a4 a5 a6

All in all, I am still wary of the multi-year bull run that has lost some steam in the last 2 years because the looming, gravely topping pattern is still intact; however, there could be short-term plays to the upside.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

 

Can it really be?

Greetings all,

It is always so much clearer to look at a chart once, wait for a few months, then look at it again. I find enjoyment in looking at how the market unfolds with hindsight; it is always crystal-clear – no fog, no blur, though there lies a possibility of deception in the short-term! Anyway, since my last post, markets rallied a little before making another dive. I have been feeling rather uneasy looking at the charts for the last several months. While we do not trade with our emotions based on empty feelings, my uneasiness stems from the general bearish picture I see on charts of most of the global indices. And with yet another plunge, the picture becomes clearer. I am now warning my friends to be careful in taking long positions on equities; likewise, I do the same here for you all: be wary, look at the charts, and see the general bearishness. Compare recent price action with that of previous major crashes. From my technical analysis point of view, the market is definitely behaving like it is at a major top.

As usual, when stating a belief – or, as unbearable as it is to me to use this term: a prediction – there comes along with it a sense of trepidation, a feeling of doubtfulness. “Can it really be?”, “No, you must be succumbing to the tendency of heralding doomsday prophecies”, are some of my thoughts. Seriously, can it really be? It was only in 2008 that the market collapsed utterly, and the following years saw entire countries, economies trying very hard to recover. Austerity was the often heard and hated word; both country and household had to rein in expenses, bite the bullet, endure hardship, and what have you. Can it really be that we are going to face another economic collapse?

The weakness of my mind then turns to irrational rationalization (if that makes sense): if I can figure out the case of fundamentals supporting a disaster, then it is confirmed! Maybe I went searching in the wrong places but I have not found many doomsday reports yet. At the same time, the Fed finally raises the interest rates in what was dubbed a “historic move”.  Perhaps, the markets are just pricing in the raise in rates, which at the basic economic level, is supposed to be a negative move meant to slow down much that is growing. (This is where I always find it hard to reconcile with basic economic teaching: should a rise in interest rates not be seen as a positive thing? Chances are, rates rise to combat inflation, too much investment, too quick or too much growth, etc. If that is the case, is the economy not doing too well? Is the economy not booming? Should a rise in rates not be evidence of a growing economy – “the good times”.) After some time, I got back on my horse, and remembered that I am a chartist, therefore, I should not fret over the fundamentals when it pertains to trading.

Ultimately, as a chartist, a trader who bases my decisions on charts, I should not worry what the media is saying, or even what specific people are saying. Therefore, with my reputation on the line – as a writer on financial markets, with my money on the line – as a retail trader, and with my internal belief system on the line – for I know what I have believed, I declare the strong probability of a sharper downturn in equities in the year ahead.

Like Gary Neville, who should have retired a season earlier than he did, I should end this post with the earlier paragraph; nevertheless, a few more words need to be said. Time will go by, and the market will leave winners and losers in its wake. The adoption of the trend-following philosophy helps me to understand why I still persist in the game: if my prediction turns out wrong, I can still admit error, and switch. The learning will come after that, when the candles form on the chart, and price action reveals more of the nature of market movement; for that is what chartists ultimately rely on for direction: a chart – price over time.

P.S: What is with the STI?

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

 

Battered, concussed, and now, done for?

Hello traders/investors,

It has been a very long time since my last post. Nevertheless, it should not come as a surprise if you have read my last post titled “The conclusion of the matter“. In the space of time between this post and my last, the markets dived sharply – and probably the nastiest one in a very long time. I remember getting ready for a trade on the VIX two weeks before the strong decline; however, as my luck would have it, I did not enter trading parameters because I was too busy attending to life’s other cares, and so, what happens when you miss the biggest trade of your life? You make your computer do what the markets did, and I ended up having to buy a new one in the Comex show.

Anyway, the consensus immediately after the drop had been that it was the perfect time to buy the huge dip and wait for the recovery; after all, Looking at how the markets had sailed along prior to the sharp drop, it seemed like the stock market was just holding the best sale in many years (while stocks last!). As the days and weeks lingered, the other side of the coin emerged: it could be the first warning – the first rung down – before a truly huge economic catastrophe? Sentiment started to balance between the two sides. I was first very bearish – maybe this was because I wanted another bite – or rather, revenge for missing the boat – at the VIX; however, I have since changed my view and am now looking for entries to catch short-term upside.

Most charts of major global indices are painting a largely bearish, rounding, stalling kind of pattern. There is no well-defined formation but a form of the large head-and-shoulders pattern seem to be emerging – not fully formed but a work-in-progress. This is a serious cause of concern for long-term bulls. Most major declines have a large, loose form of a head-and-shoulders that precede the precipitation of markets. Look at the charts below for examples of what I mean by a gathering storm on the charts.

a1 a2 a3

Note that this picture that I am painting is unconfirmed, unfinished, and large in time frame.  Having missed most of the upside in the last several years – especially on american indices – I am poised to take advantage of downside set-ups. One thing we should all remember is that in general, markets take the stairs up, and ride the elevator down. Generally, comparing in a same timespan, downsides are sharper, quicker, and bigger than upsides. Therefore, even though my trading philosophy leans on longer-term plays, I still acknowledge the rewards of the principle of fast downside in times of panic.

In the short-term, I actually see a higher probability of some upside especially in american indices – less so for european and asian stocks in general. Earnings season in the US has not started well, and probably will not end well as a whole too but remember that stock markets are forward-indicators of the economy, so do not let the release of such results sway any immediate set-ups.

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

 

The conclusion of the matter

Good evening,

It has been a long journey – this site, trading, and life through the duration of this site. I started this website in 2009, with the aim of finding out my pathway in trading, and also to share my views publicly – which I explain in the “About Site page“. I like to write in general, so writing about technical analysis provides an avenue for introspection: mulling over different techniques, methods, styles; looking back to check the outcome of a prediction (as much as I try not to use this word); and just a virtual journal to record my opinions, observations, thoughts, etc. At this point, if I ask myself whether this website has been a success, the answer is a resounding yes. From my first post to the latest ones, there is a definite improvement in my writing, command of the language, and most importantly, my brand of technical analysis, and trading (though I made sure not to share much about my trading because this is not the point). I set out as a young trader who has been given the technical analysis ropes first, and through my experiences analysing and trading, I have found technical analysis to be my pathway in the financial markets – much like a non-first-generation religious person who was born into a certain religion but reaffirms his beliefs through life experiences. At this point, I feel like I have found my sweet-spot in a map of all the different styles and methods of market analysis. I have read many books and online articles during my younger days, and I have applied different techniques to chart-reading; it has been all, if not mostly, documented in this website. After years of trading and looking at charts, I am confident that I now have a trading philosophy to carry with me from here onwards; bearing in mind that as with many things in life, outside of dead-end work, there is obviously no such thing as a concrete, set-in-stone template of “standard operating procedures” that produces timeless success – especially so in the dynamic world of financial markets.

After years of trying out different techniques and thinking through the rationales and philosophies of them all, I have decided that trend-following is the way to go. Before I delve into trend-following I will explain why I do not pore through financial statements and other information under the wing of fundamental analysis. First, it is not so much that I discredit it; as explained in one of the paragraphs above, I started off with charts, and enough success and reason kept me in the technical analysis camp. Second, there are reasons why I do not feel the need to use fundamental analysis but this is a whole story by itself, and there are pages in this website where I talk about this matter. There are other sources around that explain why there is no need for fundamental analysis. Another school of thought apart from the two traditional sides is trading with statistics and computers. The reason why this school of thought (it actually sounds inappropriate to use this term since there is not much thinking involved in exploiting inefficiencies) does not fall under either technical analysis or fundamental analysis is because it does not have anything to do with making educated guesses about the future. Being a retail trader with very basic infrastructure at home, there is no way I can rely on technology solely to make money from the market. Also, I am a discretionary trader rather than a mechanical one since my IT skills are subpar in the trading world. What all these mean is that I end up with just the chart in front of me and executing trades. Some people may say that gone are the days where you can make money as a recluse at home: “the markets are rigged by the banks,” or “you cannot fight against the big boys.” However, the way I see it, my analysis can always point me to the direction the “big boys” are taking; why does it have to mean that I will always be on the side on the losing minority? And, do the minority always lose?

I am now a proponent of long-time trading. By long I mean more than six months – which is just an arbitrary number, honestly – or basically entering and not having to monitor the market regularly. When I first started trading, I played around with forex simulators, and day-traded very frequently. As time went by, my time-frame kept getting longer to the point I was settled with week-long or month-long positions. Years went by, and I kept getting frustrated with how such a time-frame coincided with market movements in a negative way. Philosophically, I am now a much longer-term trader. The reason behind this is that I think trading on shorter time-frames means more fights with the “big boys”. The short-term movements in the market do not indicate the true direction the market will take in the long-run. For experienced traders, the term I am referring to is whipsaw. So many times you may have been stopped out of a trade only to see the market reverse and go “according to your initial plan”. It has happened too many times to me; hence by results and reasoning, I have decided that long-term is the way to go. Every day, money flows from one hand to another; for every buyer there is a seller. The market moves very quickly, and it is alive. For a small retail trader with only a “home computer” to aid in trading decisions, how can I possibly predict what is going on in the market for one day – even worse, one hour – or a few days, or even a few weeks? How is it possible? I have experienced success before, but looking back, it has been mostly luck. At the essence of it all, the market can either go up or down after you enter – fifty-fifty. You can throw in all the indicators in the world, but the market does not have to listen to them! In the long-run, luck will not sustain – it does not for me, at least. Over time, I realize I need to get over all that noise, all the haziness of short-term plays. In-and-out, in-and-out, dodging bullets, fighting fires, limit hit, stop-loss hit, profit, loss, profit, loss, loss, anger, denial, false hope, even more anger, resignation, anguish. At some point, I have learnt that a good trader should be emotionless. That I have done, but it only becomes frustrating when the losses pile up and eat away into the profits, no matter how detached I am from making decisions emotionally. Slowly, I have begun to realize that longer-term set-ups have been lifting me up out of all the short-term noise in the market. The load of false signals in a trend are so many – so many booby-traps lying in wait for the short-term trader. Of course, this does not mean that long-term trading is so clear-cut and without pitfalls; but from a philosophical point of view, long-term set-ups help the trader to fly under the radar and avoid most of the commotion.

Last but not least, the reason I have settled on a very simple trend-following method is that it makes sense to me. It makes sense to ride on one long wave than to go in-and-out of the haphazard zigzags, and getting burnt occasionally (or usually!). It makes sense that if I am wrong with a long-term play, I am probably dead-wrong (lesser chance of whipsaws). For those who want to know the exact parameters of how I define a “playable” trend, there is none – or not for now, at least. I have tried to objectify in very specific ways on the trends that I consider strong enough to warrant an entry, but after a while, I find that there is no way of telling for sure whether a trend can last. Of course, it is a game of probabilities, and by now, I favour certain conditions and circumstances; however, I think it should not be rocket-science to figure out whether a market is trending or not. At the essence of it all, I identify a trend, then consult my money management strategies to see if the chart is good enough for trading – analysing is one thing, trading the analysis is another – after which, I execute and wait.

There are a few reasons why I decide to write a the-conclusion-of-the-matter post. I have noticed in the last two years or so that my monthly post count has been dropping. Although I can say that my life outside of blogging has become quite packed and cluttered, I have to admit that I am running out of things to say, and I attribute this to attaining a mature understanding of how I should approach trading. There are two ways a company can grow: organically – which comes from within, and inorganically – which comes from the external. Similarly, after years of deep thinking and learning through external sources – and a mixture of both at the same time sometimes – I feel like I have reached some kind of end. Is this just a way of saying I have struck the jackpot recently and so I have nothing more to gain from the financial markets? Or, have I gone bankrupt and given up on trading? The answer is neither of the two. Rather, in a philosophical way, I feel like I have learnt all I am meant to learn, and I am now more sure of my beliefs; but, I will sound very foolish by thinking that I am done with learning, so what I mean is that I am done learning the “foundation stage” – a certain stage where there is so much information and so many different decisions to make, that ultimately results in a base that is tailored to whatever that will be built on it. This may not make sense to some of you as it may seem paradoxical or outright nonsensical contradiction. Nevertheless, I am sure of what I am saying. To use a cliché phrase, this seems to me like an “end of the beginning”.

I realize that my future posts will all seem the same, which makes it quite boring and pointless in some sense. Also, I have decided to devote more time to writing about other topics outside of financial markets. Trading is not the only thing that I do. I have many things that I pursue as passionately as I do with technical analysis, and in some ways, trading and analysing the financial markets has shown me parallels to other fields. If you have been on this site for a long time, you will know how much I like parallels, the analogies that can be drawn, and how certain things that mysteriously agree with each other hold true in the end. I have spent much of my time trading short-term and writing about technical analysis over the last several years; but as you may have observed, my trading time-frame has gone up, my analysis time has gone down, and trading volume has decreased too. By no means are all these a result of dampening morale because of piss-poor trading performance; rather, I perceive it as maturing and growing into the trader that I am supposed to be – finding my style.

NON-TECHNICAL SIDE

I devote this section to the non-technical side of technical analysis and trading. The principles of any field should not, and do not, stand entirely alone and independent of the other areas of life. My experience has taught me that there is more relation between different planes and fields in life than how much people usually think so.

I like the idea of long-term profiting rather than getting rich quick. Greed drives us to want to amass fortunes very quickly, and enjoy life until death after that – who will not want that? But is life always that easy? It may be for a few individuals in the world but not me, at least. I know some of you may wonder how a moral principle has anything to do with technical analysis or trading, but my approach is a very holistic one. When I first started trading, I often had the mentality that “if things went according to plan”, I would double, triple my account in a certain short period of time. The feeling was the same as when I once received an “Ang Bao” (Chinese New Year tradition in Singapore) from a person outside blood circles, and there was a “Toto” ticket inside. Since I never had anything to do with Singapore Pools (only Singapore Exchange Limited!), I thought that I was destined to win the lottery because the opportunity was given to me by chance and it was my first. I told my friends, “I sincerely think I am going to win!” Of course, they gave me the “nevermind-you-will-know-soon-enough” look. Similarly, when I was trading, I would have the same naïve, foolish, and greedy mentality: I often saw in my mind how my account balance would make somersaults upwards, and then all the wishful thoughts of material wealth would start appearing: the car, the house, the holidays, the VIP treatment everywhere, the status, the popularity, etc. Is this not the mentality of most beginner investors and traders? Many years on and I now know the reality – but not as soon as I would have wished for.

“To every thing there is a season…”. Life is full of trends, or more commonly, many people use the phrase “ups and downs”. I have observed that many things in life can be “quantified” in a certain way and to a certain extent such that you can generate a chart; for example, a chart of personal happiness – how happy or sad you are every day. What I realize is that just like the financial markets, there are trends that appear most of the time. The truth about life – and the financial markets in particular – is that things go in a certain direction until something causes it not to. When you apply this principle to the financial markets, it is this motion that presents the opportunity to make a profit. Hence, this is yet another reason why I choose trend-following. The first component of the term is trend; this approach is only possible because of the trends that direct so many things in life. The second component is “following”. Character-wise, I am a non-conformist, I am actually the type who likes to go against the trend. But, in trading, I see the need to follow rather than resist. This theme of following a trend versus going against it is actually one that polarizes different trading styles. On one hand, there are those who believe in doing the opposite of what most are doing. It is well-known that Buffet says to buy when others are selling and sell when others are buying. I have seen people who think they are following the great investor by applying this principle to their own time-frame, which is much shorter than Buffet’s by many years! Needless to say, destruction ensues. The mentality of going against the herd can be very pleasing, especially in the financial markets when a person goes against the prevalent sentiment and ends up winning. I know this because outside of trading, I frequently go against the wave. It makes me feel special and different. It can make a person feel like he is smarter because he probably knows something that everyone does not. Socially, going against the trend just means that it is part of the kind of person you are. When it comes to trading the financial markets, this theme can cause havoc. This theme can be expounded greatly, and it will take a whole other post. For this post, I will only say that it is difficult to fight prevalent sentiment. For a trader to go against the market, he must know something that everyone does not. When a great investor does it, it is not a haphazard move; it is not just going against the trend for the sake of it. However, oftentimes, many amateurs do it because it makes them feel good that they are being different. Therein lies the incorrect application of the contrarian mentality. As for me, I admit that I am not a good economist; I admit that my foresight is not that accurate; I admit that I do not have the ability to gather enough information to conclude against prevalent sentiment. Therefore, I choose to have a trend-following mentality when it comes to trading. It may not be the most profitable strategy to enter a trend when it is confirmed and to exit it after the top has formed, but I know that this is the best way for me with the time and resources that I have as a trader. Many people are myopic to trends in life. In any given trend, there is the “noise” that goes on inside the main trend. The cause of the noise is largely from emotions running wild from day to day. I have observed some relationships among people in my life. When a relationship is going downhill, people do not seem to see the decline. Once in a while, there are encouraging moments that give them hope that things may change for the better (much like the corrections in a trend), and so they hold on. After a period of time largely dominated by negative events compared to positive ones, “explosive events” will erupt, and by then it is too late – the cost of the fall-out is much greater than it can actually be. Elevate yourself and see the forest for the trees.

I realize that as with many things in life, there is no one way to success in trading. I know that most of you have already heard this being preached in different words: “there is no holy grail”, or “all paths lead to Rome”, etc. However, I want to reiterate and beg you to see that there really is no one way to make money out of the financial Markets. There are so many successful traders and investors who each have their own way of extracting profits from the market. Of course, when you take out the exact numbers and rank them all individually, people will hail the number one and discount the rest. I will bring in an analogy from the world of professional sprinting: everyone knows Usain Bolt for what he did at Beijing in 2008: smashing the then world-record and celebrating even before the finish line; and not just that event but for the following years to come. However, do people not know of the other world-class sprinters who occasionally beat Usain Bolt when he does not run his best? How can we disrespect them for being milliseconds behind, or beating Bolt when he does not run a record timing? There are so many examples of how successful people in different fields do not have the same approach, training, style, etc, and why must it be any different when it comes to trading and investing? I think that if there is to be an ultimate lesson I want you to learn from coming to this website, it is that you have to find your style. You may need to imitate others in the beginning of the process, but whatever it may be, the end result is your own style that will make you successful.

My style is trend-following – technical analysis. I hope my beliefs will bring me bountiful profits in the time to come; and I will definitely help those who want to know more about my style. But even as I continue on my path, I know that it is not the only one.

ADMINISTRATIVE

1. While it may seem like this is a farewell post, it is not. More so, I am taking a different direction with this website – this site will no longer be written in a kind of diary or journal style. I intend to make this site a purely educational one – sharing my beliefs for whoever who cares to learn from my style of seeing the financial markets. From time to time, when I feel the burden to write on a certain topic, I will do so. Most likely, the article will be tagged under one of the menus at the top of this website as a “page” (as it is called in WordPress dashboard). So, I think the main difference will be that my articles from now on will  not have a time element to them.

2. Some of you may have noticed that I started work on a technical analysis course, and there is only one section out of a projected ten that is completed and published. I have realized that it will be much easier for newcomers to this website to know the style of technical analysis that I use if there is a course for them to look through. I hope to complete the publication of this course in time to come; it will not be easy and quick to full fruition, but I am sure my “manual” will be out when the time is right.

3. As it has been, my email, technicalanalysistalk@yahoo.com is always available if you wish to contact me.

Flavours for 2015

Evening traders/investors,

Apologies for the inactivity during the last few months. It seems to me that I trade less, and have less to say as a blogger too – probably all due to the more patient and relaxed trend-following approach I have been making a transition to over the last year or so. Belated Christmas and New Year greetings to all of you. As market participants, it is best to wish one another a better year ahead! Every year the word “volatile” is used to sum up the markets but it is inevitable that markets will fluctuate and throw up some surprises somewhere inside a whole calendar year. 2014, however, was not so exciting as compared to other years. The local bourse certainly did not give me that many trend opportunities; so much so that I had to look at some other equity markets for the first time. The USD’s languid state in the first two-thirds of the year did not present any concrete trend set-ups too. There were a few set-ups in certain markets, and those set-ups are still valid over the turn of the year.

The first flavour I have for the new year is the possible divergence between Europe and US. I first discussed this view in this post https://technicalanalysistalk.wordpress.com/2014/11/05/end-of-europes-uptrend-while-america-advances/ . It seemed difficult to envision an inversely proportional divergence between those two markets; so I concluded that it probably means general sideways movement in Europe while American equities continued the charge north. For now, the picture is the same to me: nothing has changed in the broad sense for those two markets.

The local bourse- the STI, still does not look that bullish to me even with a decent 6% showing last year. I think this is because I do not see that many bullish set-ups in the constituent counters. The banks did well for the STI last year, and they look set to hold the gains this year, though this will require analysis in the months ahead. SIA also surged suddenly late last year so I will see what is up with the national carrier. The “Jardines” jumped a little in the second half of last year but do not look to improve much from here on. The “agris” are tanking quite badly, and as a trend-follower, I will look for further downside. (Exclude Olam from this list; Olam is an example of what happens when some people interfere. Of course, I do not know what goes on behind their curtains and that of other places, but the way I see it, Olam was saved from utter embarrassment “unnaturally”.)

Funnily, most if not all of the counters in the STI with the word Singapore in the company name have bearish-looking charts. The general stance I am taking on the local equity market is a bearish one for the blue-chips. However, I think there may be better rish-reward opportunities outside the STI, therefore, I will look at the second- and third-tiers more closely. Judging from the last few months of last year, I do not have many interesting charts to share, hence what I mentioned in the first paragraph, “The local bourse certainly did not give me that many trend opportunities; so much so that I had to look at some other equity markets…”. Oil and gas and shipping sectors are looking quite horrible, and property counters do not look promising too (I would have said outright bearish if not for the performance of one or two big players).

I will continue to watch Gold quite closely. The glittery metal seems to be on the verge of a continuation of a major downtrend. Somewhere last year, I was alerted to a break of major support. Gold managed to hold on after the slight violation of support but time will tell if gold can find favour or if investors will ditch gold for other asset classes.

gold1

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Blue-chips in trouble

Evening all,

I have some words on the local market for today. After a fall starting in September, the STI has regained lost ground, and closed at 3350 on Friday. Two periods of rejection at this region in recent history mean that the STI is testing resistance now. When I look specifically at charts of the component stocks, I see more bearish-looking charts than bullish ones; and this was what I thought a few months back too – which makes me wonder how the STI managed to follow international indices higher. I want to share a few counters that have confirmed their mid-term sluggishness.

This is SIA Engineering – S59.SI. In my last post on this counter https://technicalanalysistalk.wordpress.com/2014/04/10/sia-engg-cruising-at-all-time-high/ – I mentioned my disappointment at SIA Engg failing at an all-time high, and prompted the chance of a downtrend emerging from a consolidation. SIA Engg traded in quite a volatile fashion from August to November before a decisive break down from the range (in black) in the middle of November. The sell-off put SIA Engg 10% below levels seen a few months back. Significantly, SIA Engg is now in a clear downtrend.

sia engg

Next, SembCorp Marine – S51.SI. In my last post on SembMar https://technicalanalysistalk.wordpress.com/2014/02/18/sembmarine-looking-bearish/ – I identified a huge descending triangle. True to theory, SembMar continued downwards. Based on the height of the pattern, SembMar is reaching its target. Incidentally, the downward target from the triangle is where a major low is: $3.10 region.

sem

Finally, ST Engg – S63.SI.

After coming out of a triangle in November of last year, ST Engg went range-bound for almost a year. In August of this year, ST Engg started sliding even lower. A sudden spike sent ST Engg to the 200-day MA but rejection kept the general downtrend intact. The recent sell-off is with heavy volume. The picture looks quite similar to SembMar’s. I see downtrends confirmed in these and other counters.

st

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

End of Europe’s uptrend while America advances?

Good evening one and all,

While browsing through charts of my workstation, I noticed quite a difference between major European indices and American ones. The general picture of the European indices seems to be that of a high made in the middle of the year, then a collapse, followed by a quick recovery, then another fall, and a small recovery to where the markets stand now. American indices were tested when selling pressure came in a few weeks ago, but buyers came out fast and the indices made V-shaped recoveries. These V-shaped recoveries are quite reliable to be traded on: the buying pressure simply blasts the market back to where it was before the decline. What this all means to me – even as my previous sentences summarized the markets on both sides of the Atlantic. – is that US indices are still considered to be in their tremendously strong uptrends but European indices are looking quite “questionable” now – at least with regards to a long-term uptrend.

I will briefly say how I think the charts may be saying something about the general economic picture: If you consider the strength and shape of the uptrend of the US indices – and basic theory about how markets relate to one another internationally – it is quite obvious that US indices have been pulling the global indices along over the years – generally-speaking, of course; however, with my recent assessment of the charts of European indices, it seems to me like Europe may be facing harder headwinds soon. There are countless factors that can come into play – and I obviously do not want to go into them; not on this site at least –  and only when events come to pass can we look back and see everything play out on the charts. But it is something I will take note. American indices are definitely back on track, and there is no indication to me of any reason why American stocks will not continue higher.

In the first three charts below, I have the Dax, CAC 40, and the Footsie. The general picture is the same: a huge consolidation after a long and strong uptrend. The worrying thing is that the recent retracements cut deep, and the markets were not able to recover back to prior levels. This is very different from American indices that have shown healthy recoveries into the prevailing uptrend. I am not suggesting a crash in European indices – barring a global decline – but when I see such trends stall, it simply means more sideways trading in the months to come. Contrast with advancing US indices, Europe certainly should not be overweight in a portfolio.

Dax   Cac  ft

sp5

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

When a trend stalls

Evening all,

Pardon my inactivity for the whole year. I feel that my writing frequency has gone down like how my trading frequency has. In part, the local market threw me quite a number of surprises – but that is what money management and rational decision-making are for. US indices have recovered very strongly from the slight scare a few months ago, and other global indices have taken cue. Locally, the STI has drifted slightly higher, and continued strength will mean quite a good showing for the STI. My watchlist, however, shows a very mixed bag of performances by counters of different levels of market capitalization. Quite a while back, I got into Osim – O23.SI – when it was below $2.00; I posted a few articles during that time. As time passed, Osim kept climbing while financial reports posted positive numbers. Market sentiment was more or less like the chart – not much opposition and mainly praise. When “all sides” seem to agree with one another, it culminates in an easy trade to hold on to. I never had a reason to sell – so I did not.

os

In the chart below, I set the data range from the start of 2013 to the present day. The last two years of Osim’s stock performance are probably satisfactory to a trend-follower: steady up trend, small and mild correction, and a second leg of gains. Straightforward story, straightforward trade.

Only, Osim has started to tank: after hitting an all-time high of $2.94 in March, 2014, Osim has been trading sideways, and the latest trading session brought the 200-day MA into focus.

os2

Strong resistance above $2.84 is born out of the failure to hold that level on numerous times – as highlighted in red. Taking a slightly macro view of the chart, I see two regions that look like the peaks of a simple double top formation. An interesting thing to note is that the 200-day MA is near the neckline of the potential double top formation (which is bearish, generally-speaking) (see if you can spot another one in the middle of 2013), which only serves as confirmation of further downside if Osim does not start finding support. A bearsh indication on the chart is an ugly gap (circled in aqua). The gap came with tremendous volume, and the selling does not seem to have stopped. The picture this year looks worrisome. Some upward movement may be expected since Osim is near a good support zone. After tanking for quite a while, I will consider Osim as flat, so I expect a small rebound. A few more weeks will give a better picture if the market thinks Osim is now trading at a fair range or if Osim should be priced significantly lower. Are the good financial results taking a turn soon? Some more time will give me a better idea. As for now, it does seem like I have sat on Osim for long enough.

os3

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.