Wednesday, September 30, 2009

Wall Street was bullish last month as investors were anticipating favourable outcome from the 2-day FOMC policy meeting end September. The DJI climbed 125.90 points or 1.3% in a month to close at 9,665.19 points. The benchmark index went as high as 9,918 points but failed to hold after the FOMC meeting ends and the Fed announced that the US economy is on the road to recovery. Investors were quick to sell on news and the appreciating US dollar which caused commodity prices to decline adds the pressure.


Weekly DJI chart as at 25 September 2009 using NextVIEW Advisor

Despite the selling pressure in the past few days, the technical indicators are still positive. Momentum indicators are on the positive side, slightly above its mid-level. The trend is still strong and intact. The market would remain bullish if it stays above the support level at 9,100 points. There is a support from the short term 30-day average which is currently at 9,550 points. The DJI is expected to test this moving average level and if it is able to stay above this level, we may see the trend continue and make new highs. Earlier, an inverted Head and Shoulder pattern was confirmed with a level objective of 11,600 points.


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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Monday, September 28, 2009

The market faces heavy resistance when the FTSTI is at 2,700 points level. The market has been testing this level 4 times in the past one month but failed to break above it. The last test on the resistance level was on the 23rd of September and then fell for two days to close at 2,662.82 points on the 25th. It was another yo-yo month for the Singapore equity market which has gone into a bullish trend correction since mid-August. The benchmark index was still able to end positively month to month with an increase of 44 points or 1.7%.


Weekly FTSTI chart as at 25 September 2009 using NextVIEW Advisor

Technical indicators have been neutral for the past two months but are forming a divergence against the index. The momentum indicators on the weekly chart seem to be more bearish. The market may have peaked at 2,700 points. The FTSTI has increased almost 80% from the low of 1,500 points in March. If the index stays between 2,500 and 2,700 points support and resistance levels, it is still in a correction. If the FTSTI breaks above this resistance level, we may expect the index to test the next resistance level at 3,000 points and if market continues to fall and the FTSTI breaks below the support level, the index is expected to fall to the next support level at 2,200 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Friday, September 25, 2009

The market opened positively Wednesday with a new year high after the Aidilfitri holiday. The FBMKLCI opened 10 points higher from the closing before the holiday to 1,231.33 points Wednesday. However, the bullish sentiment was not sustainable as regional markets start to weaken and investors lock in profits. The benchmark index then fell to 1,219.07 points. Another 1 point is taken away from the index on Thursday as market sentiment becomes uncertain. The FBMKLCI closed at 1,218.06 points. Average trading volume for the past three days was 813 million shares, surprisingly higher than the average from the previous week of 731 million shares because the holiday mood was still fresh.

Market was uncertain mainly because of the markets’ reaction towards the US Central bank announcements after a 2-day policy meeting which seems to be positive. The central bank said that the fed-funds rate will remain near zero level and economic slowdown is probably over with developments in housing but job market may need time to heal. The Dow Jones Industrial Average fell after making a new year high Wednesday and continues to fall on Thursday. Other markets performances were also weak.

The Malaysian central bank is positive on the South East Asian nation economic recovery. The policy makers expect the Gross Domestic Product (GDP) to grow at the end of the year. Foreign investments into the Malaysian equity market inches up steadily over the past few months. The percentage of foreign trading by value has increased to 24% August from 21% June. However, it is still far below the average in year 2008.

US dollar rebounded against major currencies in the past few days and dragged prices of commodities lower. Light sweet crude oil futures in NYMEX fell US$6 or 8% a barrel from US$72 in the previous week to US$66.00 Thursday. COMEX gold fell below US$1,000 after staying above it in the past one week to US$998 an ounce. The 3rd month futures contract for crude palm oil fell RM67 or 3% to RM2,115 per metric ton in Bursa Malaysia in a week. Price of Rubber futures (RSS3) in TOCOM fell 3.8% from JPY$206 to JPY$198.10.

There is not much change in the trend characteristics of the FBMKLCI because there is almost no change in one week. The RSI, MACD, Momentum and ADX indicators are still making new highs and this indicates that the current uptrend rally is still strong. The FBMKLCI is still above the short to long term 30- to 90-day moving averages. The short term 30-day moving average which supports the FBMKLCI trend well is currently at 1,187 points. The longer term 90-day average is at 1,124 points.

The Bollinger Bands expanded further as the FBMKLCI continues to trade near the top band of this indicator. This confirms the trend strength as indicated by the momentum indicators. However, the index has started to move away from the top band in the past two days. The 3-day Average True Range (ATR) indicator increased from 6.5 points to 8 points in a week and this means that the volatility has started to increase marginally.


Daily FBMKLCI chart as at 24 September 2009 using NextVIEW Advisor

What is being feared now is that the positive economic news and fundamentals were expected and has probably been discounted in the price. The stronger volume but declining market shows some selling pressure. Strong catalysts were not present to boost markets which have already recovered more than 50% from the October 2007 down trend. However, indicators are showing strong bullish indication on the current trend, except for the past two days. The leading Ichimoku Cloud indicator is still ascending with the same width. This suggests that the market trend is still strong at least in the next one month.

With mixed indications, the Malaysian equity market is expected to be defensive as always and trade sideways next week as long as the FBMKLCI trades within the immediate support and resistance levels. The immediate support level is currently at the 30-day moving average at 1,187 points while the immediate resistance level is at 1,230 points. If the support level is broken, the index may correct further downwards to the next support level at 1,160 points. However, if the resistance level is broken, the FBMKLCI may head to the crucial resistance level between 1,280 and 1,300 points.


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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Thursday, September 24, 2009

Continued from Part 1...

DAY 2 EXIT


This is a two day trading strategy. Day two is about profits. There is no intention to extend this trade into a third day. Prior to the open our focus is on the order lines. We look for evidence that buying pressure is continuing. There are two ways to determine this.



The first uses the estimated match price. This is set at $0.61 and represents a gap above the previous day’s close. It is not a real gap above yesterday’s high, but it does suggest that the upwards move is likely to continue.

The second considers the balance between buyers and sellers. These figures take into account all the orders in the order line. This includes some very old buy orders which have little chance of execution at $0.42 and lower. However, the balance is tilted very heavily towards buyers with 1,581,150 of buying volume. This includes an undisclosed buyer sitting at $0.57. It is unlikely that prices will fall to this level, but the presence of this large buy order provides additional support for continued momentum during the day. If this buyer is really that interested in PEM then he may well decide to chase prices higher.

If the undisclosed order was on the sell side it sends a bearish signal. The sell orders total 625,625. The line is shorter than the buy line and confirms continued bullish pressure on prices.
Prior to the open we lift the stop loss to the same level as yesterday’s close. At worst, if triggered, this will lock in a 3.45% return.

Exit management calls for close monitoring of intra-day price activity. Early in the morning prices test $0.63 as a support level. Our stop loss is lifted to $0.63, locking in a potential 8.62% return.

During the day prices hit $0.66 on low volume, and then pull back from this level. In the late afternoon sellers flood the market with orders at $0.65 and $0.64. This suggests that the momentum generated by the gap on the previous day is losing strength. Our objective is to do the best we can on the day, and in the face of this selling pressure we meet the bid at $0.64. This exit locks in a 10.34% return. A few trades later, prices drop to $0.63 which would have triggered our stop loss exit.



Prices do climb back to $0.66, but they close on just a handful of trades. The volume traded is not enough to close our position.

These trades return significant short term gains. They are more effective that day trading strategies which rely on buying near the low of the day and selling near the high of the day.

These gap trades reduce overnight risk because they rely on a continuation of demonstrated momentum. When traded with the advantage of price leverage these trades can return 5% to 15% on a 36 hours trade. The strategy is straightforward but the execution calls for well developed trading discipline.

> Related Articles:
OVERNIGHT GAP TRADE MANAGEMENT I
OVERNIGHT GAP SELECTION Part 1 and Part 2

To read more articles and commentaries from Daryl Guppy, click HERE

***

Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE.

Tuesday, September 22, 2009

The market extends its bullish rally last week as sentiments continue to improve. The FBMKLCI gained for the 4th consecutive week. The FBMKLCI rose another 17.52 points or 1.45% from the previous week to close at 1,218.80 points, another high for this year. The benchmark index traded in a narrow trading range between 1196.46 and 1,220.47 points. With a long break coming ahead of the Hari Raya Aidilfitri public holiday, market volume was slightly but surprisingly higher than the previous week. Total trading volume for last week was 731 million shares as compared to 702 million in the previous week.

Market sentiment was a little bullish following some improvements in the US economy. Jobless claims were lower and housing starts in August was the highest in nine months based on the Labor and Commerce Department findings respectively. Regional manufacturing rose to a 20-month high, according to the Philadelphia Fed Index. The Fed chairman statement that the worst in the US economy is over boosted investors confidence. The benchmark Dow Jones Industrial Average closed at the highest level this year at 9,738.92 points. In Malaysia, vehicle sales rose 2.8% on-year but fell 6.5% on a monthly basis. Normally, vehicle sales would rise before the Raya holidays but consumers are cutting back on their spending and becoming more cautious.

The US dollar continues to weaken and have caused prices of commodities to increase despite some declines in exports from producing countries. Price of crude oil futures maintains above US$70 a barrel and is currently at US$72 in NYMEX. Spot gold has gone above US$1,000 an ounce to US$1,012. Gold was trading around US$950 a month ago. However, price of Crude Palm Oil was almost unchanged since last week. The 3rd month futures contract for crude palm oil is trading at RM2,182 per metric ton in Bursa Malaysia. Price of Rubber futures (RSS3) in TOCOM however, fell from JPY$218 to JPY$206 as the yen strengthen against the US dollar.

Momentum indicators continue to be bullish since the resistance breakout last week. The resistance level for the FBMKLCI was 1,200 points. The RSI, MACD, Momentum and ADX indicator continue to create higher highs in the short term indicating strength in the current rally. The FBMKLCI up trend rally is well supported by the 30-day moving average and the uptrend line since April this year and both these levels are currently at 1,184 points. The longer term 90-day moving average currently stands at 1,120 points. The uptrend is intact as long as it stays above these averages.

The Bollinger Bands are still expanding with the FBMKLCI trading at the top bands for the past two weeks. This indicates that the market was at a bullish more, creating new highs. Despite having higher highs, the short term market volatility has declined. The 3-day Average True Range (ATR) has started to fall after gaining for two consecutive weeks. The ATR reading fell from 11 points to 6.5 points. This shows some resistance in the market, preventing the bulls from charging.

The immediate support level for the FBMKLCI is currently at 1,180 points and the uptrend is expected to continue if the index continues to stay above this support level. The resistance level stays between 1,280 and 1,300 points. The leading Ichimoku Cloud indicator is still increasing and the thickness of the cloud is still firm. The increasing cloud means that the price trend is still intact and the firm width of the cloud suggests that the benchmark index up trend can be supported at least in the next one month.


Daily FBMKLCI chart as at 17 September 2009 using NextVIEW Advisor

There are only three trading days next week as the market is closed for the first two days of the week because of public holidays. Profit taking activities is expected on Friday (this analysis is prepared on Thursday) before the long weekend as short term punters may want to lock in their profits. However, it may not affect the index much because sentiment is still bullish. If there is no selling pressure on Friday, then the market may continue may rise marginally after the holiday if the regional markets turn positive as investors may continue to accumulate.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Monday, September 21, 2009

The gap trade may be executed using ordinary stock, or using a derivative, such as a CFD. The derivative increases the return from the strategy. It also increases the risk in the strategy particularly if the CFD is based on bid-line triggers rather than traded price.

Management of the gap trade covers two days. Broadly they can be described as the entry day and then the exit day. The analysis for this strategy does not start until 20 minutes after the open of the market. By the time the analysis is completed the market may have been trading for an hour. This means that prices may have moved well above their open. If we are particularly lucky, price may have experienced a retreat as often happens after an initial market rally.

The important point is to remember that the success of this strategy rests on entering the stock on day 1 with the objective of exiting the trade on day 2. Rather than attempt to buy the bid it is more effective to hit the ask. The order screen shows a bid at $0.57 and the ask at $0.58. Getting a position is more important than haggling about the entry price. We take the entry at $0.58.

In this trade we miss the low of the day set at $0.56. We miss it because we are still involved in analyzing the potential trading candidates. This is significant if our focus is on trading the extremes of price action. It is less important in this strategy as our objective is to capture a portion of the price movement. We continue to stress this because so many traders feel cheated if they miss the price extremes. This attitudes blinds them to many other successful trading strategies.

Success depends upon running a tight stop loss. Using the low of the day we set a stop loss 1 tick below this level. A tick is the minimum price move permitted in the stock. With PEM, prices move up or down by one cent at a time. There are no half cent bids. Our stop loss is set at $0.55. This is an automatic stop loss. This has several advantages. The first is that the stop is executed automatically so you do not need to sit in front of the live screen all day. This automatic execution overcomes the temptation not to act. It is an artificial boost to discipline.



The second advantage is the speed of execution. Traders who use mental stop loss points have to watch the screen all day. Once the alert is sounded as a trade takes place at the stop loss price they must contact their broker. This means ringing, or logging onto the net, bringing up the screen, locating the stock, creating the order, and then clicking the sell button. The time from the stop loss alert to order execution may be a minute or more. In that time it is possible that prices may have slipped several ticks below the planned exit point, creating an unexpected large loss.
There are several critical features of this strategy. Rapid stop loss execution is one of them which is why I use an automatic electronic stop loss order.

It takes time for news to travel through the market. PEM has gapped upwards on the open, but it drifts sideways for an extended period. In the afternoon a new flood of buyers come into the market. They temporarily lift prices to $0.62. Some traders start to take profits at this level, and their selling drops prices back to a close at $0.60. Our objective is to remain in the trade, so we do not chase this rise as a selling opportunity. However, the rise provides the opportunity to lift the stop loss and shift the trade into a breakeven opportunity.

The initial, or morning, stop loss is placed one tick below the low for the period. The afternoon stop loss is placed after prices start to pull back from the high. The objective is to protect our capital. Lifting the stop loss means that the worst outcome is a break even trade – unless prices gap down past the stop on the next day’s trading. However, with a gap open today and a higher close on increased volume this is an unlikely outcome.

In a position trade – a trade designed to be open for days or weeks – it is sufficient to set a stop loss at the end of each trading day. On an intra day, or short term trade, there are significant advantages in shifting a stop loss several times during the day. The first shift should provide total protection for capital. Later shifts should start to lock in profits, and this is the first step on the second day of the trade. Stop loss points are only lifted upwards. They are never lowered.

Will continue in the next article...

> Related Article: OVERNIGHT GAP SELECTION Part 1 and Part 2

To read more articles and commentaries from Daryl Guppy, click HERE

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Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE.

Saturday, September 19, 2009

N.I.N.E. wishes all Muslims readers "Selamat Hari Raya Aidil Fitri".




Malaysian Stock Exchange, Bursa Malaysia will be closed on Monday (21 Sept) and Tuesday (22 Sept)

Singapore, Philippines and Indonesia stock exchanges will be closed on Monday (21 Sept).

Thursday, September 17, 2009

Corporate Malaysia was stunned by the surprise appointment of the 51-year-old (now former) Malaysia Airlines managing director/chief executive officer, Dato’ Seri Iris Jala @ Idris Jala as minister to oversee the implementation of the government’s key performance indicator (KPI) initiatives.

The main question on everyone’s mind is, has he been deployed to a position where he can deliver results? This is particularly relevant for someone who has been in the corporate world (with two large companies) since 1982 and whose political influence is unknown.

There are also questions on whether he has, since assuming the MD/CEO position in MAS on 1 Dec 2005 until 28 August 2009, taken the company out of turbulence to a stage where his successor can cruise comfortably.

Another equally important issue is MAS’ succession plan. There is no argument that one is in place: the main question is whether the plan is sufficiently mature at this point in time, given that Jala’s contract was extended just last year for three more years until 2011.

As expected, Jala’s appointment was greeted with positive responses from mainstream political and corporate figures. However, this is not the case for MAS staff and some advisors of institutional investors.

MAS Employees’ Union (MASEU) voiced its disappointment over Jala’s departure as MAS has not even completed half of its five-year Business Transformation Plan 2 (BTP2) that Jala initiated. The plan targets an annual profit of RM2b to RM3b by 2012. MASEU executive secretary Mustafar Maarof also questioned the frequent change of MAS’ CEO. There were three over the last 10 years.

Research houses were divided on the move. Some, such as OSK Research, ECM Libra, MIDF Investment and Credit Suisse, have issued an “underperform” or “sell” call on MAS. Credit Suisse considers Jala’s departure as a reinforcement of its negative view on the company;

MIDF Investment fears that a hastily appointed new CEO could hamper MAS’ return to stability and profitability; ECM Libra questions the ability of the current management team Jala left behind to guide MAS out of the woods, given the massive operating losses incurred in the first half of this year.

Jala was instrumental in turning around MAS from its worst ever loss in FY2005 to a record profit of RM851m two years later. However, economic conditions over the past year pushed MAS into another round of turbulence, evidenced by its performance in the last two quarters.

If not for derivative gains in the second quarter of 2009, the national carrier’s bottom line could have been more than half-a-billion ringgit in the red in 1H09.

MAS – Quarterly Performance

Source: MAS website

MAS – Net Profit before Derivative Gains

The ball is now at the feet of newly appointed MD/CEO Tengku Dato' Azmil Zahruddin bin Raja Abdul Aziz to prove the critics wrong, and that he can take MAS out of the turbulence in a matter of time.

Having joined MAS in August 2005 after running Penerbangan Malaysia Bhd as MD/CEO for more than one year, the 39-year-old chartered accountant partnered in Jala’s restructuring program for MAS. Now, he certainly needs a good caliber second man as Jala had enjoyed before.

As for Jala, will he be able to achieve his own KPI in his new position as a minister without portfolio in the Prime Minister’s Department, and chief executive of Performance Management and Delivery Unit? This is not so much a question of whether he is capable or otherwise. It is more a matter of having to deal with politicians instead of corporate men.

One also wonders why he does not report directly to the Prime Minister or his deputy, but rather, to another minister in the PM’s Department who also has a KPI to deliver.

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Article Contributed By Ameer Ali Mohamed. Ameer is Director, Financial Research of NextVIEW. He has a total of 20 years experience as a corporate journalist, investment analyst and fund manager, including as research head of two stockbroking firms and CEO/CIO of a funds management company.

Republished with permission. This article was published in the Just Say It column in Shares Investment (Malaysia edition) September 2009. You can get the latest copy of Shares Investment (Malaysia edition) at leading bookstores in Malaysia.

Wednesday, September 16, 2009

Continued from Part 1...

Alternatively we use the JustData snapshot service. We take the first available snapshot of market data at 11.30. This downloads all open, high, low and close prices to that point in time. From this data we can assess the difference between the high of yesterday and the open of today. We then run the Metastock gap exploration scan shown at the bottom of these notes. The filtered list is printed and the charts created with GTE. Speed is not important, but nor do we want to take too long to make this initial assessment. Of the 53 stocks in this example, only 8 meet our conditions.

The next filter is volume on the previous day in particularly, and over the previous week in general. We are planning to trade crowd enthusiasm, so we expect to see some evidence of this on the day prior to the gap. The appropriate volume depends on our trading objectives. If we want to trade $5,000 position size then we accept a lower volume than if we want to trade a $20,000 position. We need some evidence that there is sufficient volume to support our planned trading size.



If this is supported by trading volumes during the week then it is an added advantage – a double tick. This is not a critical factor. Many of the best gap trades happen when volume floods the market. The previous week, or weeks of trading activity may be very low. The stampede changes that. This is why volume on the day prior to the gap open is more important than volume in the previous week.

In the next column I include the bar pattern. An excited crowd will close prices near the high on the day prior to the day. This is the most bullish pattern. A close above the open is the next most bullish. A close equal with the open is acceptable, but it must be supported by other bullish factors, including a very strong Guppy MMA relationship. A close lower than the open is the least effective chart pattern. This a crowd that lost enthusiasm and this makes it unsuitable for our strategy based on continued enthusiasms.

The final note in this first selection process is the trend pattern. This combines both Guppy MMA analysis and recent trend direction. The best pattern is a straight edge trend line pointing upwards. The next most bullish is a rising trend that has shown a small retracement. The current gap open signals a resumption of the up trend. This may be extended to include a retracement followed by a sideways move and then a rebound from the consolidation pattern.

The least attractive opportunity is created by a breakout from a downtrend. Instead of a gap trade, this becomes a breakout trade using gap strategies. The danger in this type of trade is that the rally may collapse when it hits a resistance level. There is a higher probability of a rally being overwhelmed by sellers. There is less probability if this is a trade that takes place in an established up trend. The desperate need to sell to cut losses or lock in small profits on the first breakout has usually disappeared.



We want crowd enthusiasm and trend strength.

The eight candidates are reduced to six, although we have included PCE in this example. Normally we would eliminate PCE because it is a rally breakout in a strong trend. It has a low probability of success.

We are left with three final filters. We shift from the chart to the live depth of market order lines. The first uses the current order line to determine the volume of trading activity. The best relationship has three characteristics.

a) More buyers than sellers.

b) good trading volume on the buying side. We want to be able to place our order.

c) A reasonable spread between the bid and the ask. If it is too wide we either have to wait for prices to pull back, or pay more than we should to get hold of stock.

PEM and BRY meet all these conditions. The spread with PCE is too large. The buyer wants to pay $0.24 but the nearest seller is asking for $0.345. This spread eats away at the potential profits in this strategy, so we ignore it.

ABK has very low trading volume. Our order would dominate the market. SSI has more buyers than sellers, but the order line has low volume.

We are looking at this screen up to forty minutes after the open of trade. Our strategy is based on continued crowd enthusiasm so this should show up in two ways. The first is a continued increase in prices, or at least, not a slip back to the level of the previous day’s high. Secondly, there should be lots of activity in the stock. We want a large enthusiastic crowd fighting amongst themselves to get hold of stock.

This is the penultimate filter. Those candidates with active trading go to the top of the list. RBT which met the order line conditions, fails this activity test. Forty minutes after the open, only a few trades have been completed. There is no crowd here.

The final filter is price. Our preference is to select the opportunity with the best price leverage. A $0.10 stock is preferred to a $0.50 stock, or a $1.00 stock, all other factors being equal. Lower prices mean there is more opportunity for a substantial price rise today, and tomorrow. It increases the percentage return from the trade.

From this list we select PEM because we believe it has a stronger chart pattern than BRY.

To read more articles and commentaries from Daryl Guppy, click HERE

***

Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE.

Tuesday, September 15, 2009

The market turned bearish last month after a short term bullish rally from RM2,000 per metric ton in July to a high of RM2,515 in just one month. It turned bearish when the price of FCPO tested and broke below the RM2,300 support level early September. I have mentioned that if this support level is broken, the price may hover around the averages at about RM2,100, from the intermediate up trend line from October 2008. The price of FCPO closed at RM 2,145 on September 11, RM319 or 13% lower from a month ago. The thought having the price of FCPO going to test RM2,800 again this year fades away.

The decline in palm oil prices were mainly due to decline in exports. Malaysia palm oil inventories were up at the end of August. MPOB reported palm oil stocks increased 6.2% on-month to 1.42 million tons. Malaysian palm oil exports declined due cutbacks in palm oil imports from the European Union and China. MPOB said that exports were down 9.5% on-month to 1.32 million tons in August. Cargo surveyors SGS Services and Intertek Agri Services estimated palm oil exports for 1 to 10 September to decline 17% and 15% on-month respectively. Favourable weather in Malaysia and India's Meteorological Department announcing a revival in monsoon rains may ease drought in India, boosting crop development. These fundamental provide resistance for the price of crude palm oil to move higher.

The price of FCPO has gone below the moving averages and the 30, 60 and 90-day moving averages have just started to decline. The averages are between RM2,200 and RM2,300. The FCPO price is currently right above the intermediate up trend line. Trading volume has slightly improved with a daily average of 10,400 contracts as compared to 9,200 contracts in the previous month and this indicates a selling pressure because of the price decline in the past one month.

Because the price did not rally upwards, a long term correction chart pattern called the “triangle” has formed and this can be easily identified on the weekly chart. The support level of the triangle pattern is currently at RM2,050 while the resistance level of this pattern is at RM2,400. Therefore, price is currently near the support level. As long as the price stays within this support and resistance level, the price is still in a correction. A breakout above the resistance level would cause the price to rally but a breakout below the support level would cause price to decline further.

Momentum indicators are mixed with a slightly stronger bearish strength. Indicators on the daily chart are bearish. The Relative Strength Index (RSI), Momentum indicators are below the mid-level. The MACD indicator is declining and is now below zero which means that the trend is down. The rising ADX indicator also shows strong bearish trend. However, in the longer term, momentum indicators on the weekly chart are mixed where the indicators are almost neutral.

Price is currently near the support level and a rebound is expected at around RM2,000 to RM2,050 to at least the average price in the correction period and that is RM2,300. In the longer term, the price trend direction depends on whether the price breaks above the support or resistance level. In the short term, the FCPO price is expected to stay between this support and resistance levels. If FCPO price is unable to stay above RM2,000 and breaks below it, the price is expected to fall and test the next support level at RM1,700. If price breaks above RM2,400 resistance level, then we may expect price to rally to test the RM2,800 resistance level again.


Daily FCPO chart as at 10 September 2009 using NextVIEW Advisor

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Friday, September 11, 2009

The strategy for this trade was discussed last week. The objective is to capture the momentum of an excited crowd and trade its continuation overnight and into the next day. The strategy recognizes that it is unlikely that we will identify a gap trade before it happens. It is also unlikely that we will be able to buy stock at the opening gap price. Instead the trader waits for gap confirmation, then buys the stock. The intention is to sell on the next day. We expect other traders to be attracted to this gap trade when they see the gap on the end of day download. This includes traders who already own the stock, and traders who are searching for gap, or price volume breakouts.

The objective is to sell on the next day when we consider that the buying pressure is declining. Enthusiasm may carry prices higher next day but unless this is part of an extreme momentum trade, the most likely result is that prices will peak during the second day and then decline.



The strategy does not call for an exit at the top of the second day, although at times the exit may occur near this level. The strategy recognizes that it is more likely that we will capture prices as they fall back from the peak of the day. The potential returns range between 5% and 20% or more. Returns are lower when trading stocks, but higher when trading warrants and other derivatives. The objective is to take a low risk overnight trade and collect a quick profit.

For success the strategy requires access to live data and live trading screens. It also calls for good stop loss execution. This is best achieved using automatic electronic stop loss conditions and where necessary, contingent orders. The technology is available, and it helps make these strategies more successful.

SELECTION

Opportunity screening starts with the WebIress market heat screen. The scan does not start until 30 minutes after the open of trading. This gives time for every stock to have traded, and allows us to find all those stocks which have gapped on the open. These show up as bright green patches because the opening gap creates a higher percentage gain. The search compares the close of yesterday with the open of today. Not all of these candidates will meet our requirements of a gap between the high of yesterday and the open of today.



The gaps identified in this screen range from 1.53% to 50%. The MOL gap in this example is 35.88%. Our interest is in gaps greater than 3%. The screening process starts by eliminating stocks that do not meet our gap requirements. There is no easy way to do this. We start by making a full list of stocks that have gapped up. We immediately eliminate any below 3%.

Watch out for Part II...

To read more articles and commentaries from Daryl Guppy, click HERE

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Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE.
Selected blue chips rally continue to push the FBMKLCI to a new year high last month. The benchmark index was able to test the 1,200 points resistance level while other regional markets have not yet created a new year high. The optimism in the market was generally led by news reporting increasing business activities and continuous improvement in the local and global economy. The FBMKLI closed at 1,201.28 points Thursday, 27.62 points or 2.35% higher from the previous week. Market volume has only increased marginally last week. The average daily trading volume was 702.41 million shares as compared to 616 million shares in the previous week.

The confidence in the market was also led by massive liquidity from the government stimulus package and the fund raising activity by government investment arm which was oversubscribed. The upcoming tabling of the national budget this month was expected to focus on bringing the economy back to growth. There is a concern however about the weakening US dollar which may slow down imports from the world’s biggest economy. However, growth in China may support economies in the Asian region.

The weakening US dollar has caused price of commodities to increase. The price of crude oil is above US$70 a barrel. Crude oil has been trading around US$70 since June. Price of gold has also increased and trading at about US$1,000 an ounce in the past one week, the highest since February this year. Malaysian crude palm oil however has declined from RM2,500 per metric ton last month to RM2,179 Wednesday. Price of crude palm oil is expected to increase because it is technically oversold.

Last month, I mentioned that the bulls were back in July and the index has a high chance of moving higher. The index continues to be dominated by the bull and resumed the uptrend which is generally strong. The strong bullish momentum indication last month has pushed the FBMKLCI higher from hovering around the short term 30-day average. The 30-day average is currently at 1,178 points while the longer term 90-day average is way below at 1,107 points. The index is now 43% higher from the low in March this year.

Momentum indicators started to agree each other now. Most of the momentum indicators were indicating strong bullish momentum except for the ADX and MACD indicators in the previous month. This time, these indicators are also showing strong bullish momentum. The MACD indicator started to become higher than its moving average after being below it for one month. The same goes for the ADX indicator. The divergence between the short and long term moving averages also confirms the strong bullish momentum

There is a breakout in volatility on the upside. The Bollinger Bands which were contracting since early August has started to expand. The FBMKLCI is now trading at the top band of this indicator and this indicates strong bullish momentum. The weekly average volatility however, remains firm with the 3-day Average True Range at 11 points, higher than the previous week’s average trading range of 6 points. The market is currently moving out of its correction with a steady move.

The strong bullish momentum and volatility breakout confirms a breakout of the market correction and a rally is expected. The FBMKLCI is currently above the 1,200 points resistance and the market is expected to make newer highs for this year. Resistance level is currently between 1,280 and 1,300 points. The leading Ichimoku Cloud is still wide and rising which means that the uptrend is being supported very well. Being a leading indicator, this indicator also shows that there are no signs of a bearish reversal in the next one month.


Daily FBMKLCI chart as at 10 September
2009 using NextVIEW Advisor

Opportunities arise as the bulls awaken from a one month slumber. The market is generally expected to rise in the short term. The low volume indicates the market is not in full force yet. The FBMKLCI is expected to rally upwards to the next resistance level at 1,300 points, provided that it is able to stay above the underlying up trend support level, which is currently at 1,160 points.

The opportunity should be a short term one because the correction that the market has gone through was a short and small one. Risk is high if trading and holding for long term as prices are above the averages. If you want to accumulate long term, then look for stocks that are trading below the average price (A 200 day moving average can be used as a yardstick).

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Tuesday, September 8, 2009

Preparing for the Worst


by Robert Kiyosaki

"Is the crisis over?" is a question I am often asked. "Is the economy coming back?"
My reply is, "I don't think so. I would prepare for the worst."

Like most people, I wish for a better future for all of us. Life is better when people are working, happy, and spending money.

The stock market has been going up since March 9, 2009. Talk of "green shoots" fill the air. Yet, in spite of the more positive news, I continue to recommend that people prepare for the worst. The following are some of my reasons:

1. I believe the stock market is being manipulated. I suspect the government, banks, and Wall Street are doing everything they can to keep the market from crashing. Our leaders know that nothing makes the world feel better than a raging bull market.

Do I have any proof that the market is being manipulated? No. I just smell a rat, or a pack of rats. I believe greed, self-interest, arrogance, and fear control the financial markets. I suspect those in charge will do anything to keep us all from panicking... and I don't blame them. A global panic would be ugly and dangerous.

2. In my view, this global crisis has been caused by the Federal Reserve Bank, the U.S. Treasury, Wall Street, and the central banks of the world. They caused the problem, profited excessively in doing so, and now profit by being asked to fix the problem.

Every time I hear a politician mention the word stimulus, my mind flashes back to high school biology class, when I touched battery wires to a dead frog to make it twitch. Today, you and I are the dead frogs. Pretty soon the dead frog will be fried frog.

In the 1980s, our government's hot money stimulus was measured only in the millions of dollars. By the 1990s, the government had to ramp the stimulus voltage into the billions in order to get the frog to twitch. Today the frog has jumper cables with trillions in high-voltage hot money pouring through the lines.

While most us feel better when we have more high-voltage money in our hands, none of us feel good about higher taxes, increasing national debt, and rising inflation for the long term. Another old saying goes, "Sometimes the cure is worse than the disease." I say the government stimulus cure is killing us frogs.

3. Old frogs don't hop. Another reason I am cautious about the future is that the Western world has a growing number of old frogs. Between 1970 and 2000, the economy responded to bailouts and stimulus packages because the baby boomers of the world were entering their greatest earning years -- their purchasing power increased, and demand for homes, cars, refrigerators, computers, and TVs boosted the economy.

The stimulus plans seemed to work. But when a person turns 60, their spending habits change dramatically. They stop consuming and start conserving like a bear preparing for winter. The economy of the Western world is heading into winter. Hot wires and hot money will not get old frogs to hop. Old frogs will simply join the bears and stick that money in the bank as they prepare for the long, hard winter known as old age. The businesses that will do well in a winter economy are drug companies, hospitals, wheelchair manufacturers, and mortuaries.

4. The dying frog economy will lead us to the biggest Ponzi schemes of all: Social Security and Medicare. If we think this subprime financial crisis is big, it's my opinion that this crisis will be dwarfed by the crisis brewing in Social Security and Medicare...Medicare being the biggest crisis of all. As old frogs head for the big lily pad in the sky, they will demand young frogs spend even more in tax dollars just to keep old frogs from croaking.

5. The 401(k)Ponzi scheme. A Ponzi scheme, like the scheme Madoff ran, depends upon young money to pay off old money. In other words, a Ponzi scheme needs tadpoles to finance old frogs. The same is true for the 401(k) and other retirement plans to work. If young money does not come into the stock market, the old money cannot retire. One reason so many people my age are worried, not only about Social Security and Medicare, is because they're concerned about getting their money out of the stock market before the other old frogs decide to drain the swamp.

The facts are that the 401(k) plan has a trigger that requires old frogs to begin withdrawing their money at a certain age. In other words, as baby boomers grow older, more and more will be required, by law, to begin withdrawing their money from the market. You do not have to be a rocket scientist to know that it is hard for a market to keep going up when more and more people are getting out.

The reason the 401(k) has this law related to mandatory withdrawals is because the Federal government wants to collect the taxes that they deferred when the worker's money went into the plan. In other words, the taxman wants their pound of flesh. Since they allowed the worker to invest without paying taxes, the government wants their tax dollars when the employee retires. That is why the laws require older workers to sell their shares ¬-- and pay their pound of flesh.

Demographics show that we are entering a battle between young and old. I call it the "Age War." The young want to hang onto their money to grow their families, businesses, and wealth. The old want the tax and investment dollars of the young to sustain their old age.

This war is not coming...it is upon us now. This is one of many reasons why I remain cautious and say, "The worst is yet to come."

Monday, September 7, 2009

The market has been fed with conflicting views about the equity market. Some are positive that the economy is on a recovery and it is a good time to invest now. Some are negative that the current improvements in the economy and the rally in the financial market are just a correction in a longer term bear market. The others have no idea what is happening and are confused. That’s the reason why the market has been in a short term bull trend correction since mid-August and this can be easily identified from the chart. A breakout from the current correction would determine where the market is heading.

I have been expecting a breakout for the past two weeks, especially last week because the market was in a very tight trading range. Normally, a correction is expected to end when the trading range is narrow. The market again was trading sideways last week with the FBMKLCI trading within the immediate support and resistance range between 1,160 and 1,200 points. The FBMKLCI closed at 1,173.66 points, not much change from the previous week. The uncertainty in the market has caused trading volume to shrink further. The daily average trading volume for last week was only 616 million shares as compared to the previous corresponding week’s volume of 720 million. The average was above 1 billion before the market went into a correction in mid-August.

There is not much economic development in the past one week in Malaysia. Only news related to politics made highlights. Regional equity markets were shaken by a sell down in the China market on Monday when the Shanghai Stock exchange Composite Index fell 7% on speculation of rising interest rates but recovered later in the week. Investors and traders should be relieved that the market is closed on Monday for the National Day or they may go into a volatile ride.

Prices of commodities continue to decline because of lower imports from importing countries. Price of crude oil (futures) failed to stay above US$70 after hitting a high of US$75 and is currently at US$68 on the NYMEX. Crude Palm Oil futures on Bursa Malaysia fell 5.4% from last week to RM2,218 per metric ton. Price of rubber (RSS3 futures) fell JPY$5.00 or 2.4% at JPY$202.20 per kg on TOCOM. However, the uncertainties in the market caused price of Gold to increase. The price of gold is currently at US$978 per ounce in the futures market, up about US$20 from the previous week.

Generally the FBMKLCI up trend is still considerably strong. The short to long term 30 to 90-day moving averages are still increasing and the index is moving with the short term 30-day moving average. The 90-day average which provides a long term support level is currently at 1,100 points and the intermediate uptrend channel support level is at 1,160 points. The Ichimoku Cloud indicator which is a leading indicator is increasing with an expanding width and this shows that the trend is being supported well and a reversal is not expected at least in the next one month.

The strength of the trend is neutral as the momentum indicators are providing mixed signals. The Relative Strength Index (RSI) and Momentum indicators are right above the mid-level indicating some bullish strength while the MACD and ADX indicators continue to decline indicating a weak bullish momentum. The PDI and MDI lines are converging showing a correction between the bulls and bears strength. The ADX, PDI and MDI lines are parts of the Direction Movement Index indicator.

Market volatility continues to weaken in the intermediate and short term. The Bollinger Bands continue to tighten and the FBMKLCI is right between the bands. The bands provide a similar pattern on the chart in July when the market went into a correction and resulted in a bullish rally once the resistance is broken. Therefore, we are expecting a breakout soon and the direction depends on whether the FBMKLCI breaks above the immediate resistance level or below the immediate support level. The short term volatility indicator, the 14-period Average True range (ATR) continues to decline from 10 points to 6.5 points and this means that there is no significant short term movement.


Daily FBMKLCI chart as at 3 September 2009 using NextVIEW Advisor

The conclusion is the same as last week. A breakout above the immediate resistance level at 1,200 points may see the index climb higher to test the next resistance level at 1,300 points. A breakout below the immediate support level at 1,160 points may see the index to extend its correction to the next support level at 1,100 points. The market is not moving anywhere if the FBMKLCI continues to trade within the immediate support and resistance levels.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Thursday, September 3, 2009

The Vietnam market is clearly dominated by the bulls last month. The VNI surged almost 16% in one month to close at 536.53 points. The level is currently the highest in nearly a year. It easily broke the 520 points resistance level and is probably eyeing the 575 points resistance level, which is the highest since mid of March 2008 and the 38.2% Fibonacci retracement level. The market performed better than the rest of the others because it the market value shrank nearly three quarter.

(Read more here - Market Insight)
The SETI broke the 640 points resistance levels as the bulls are controlling the market. It is one of the best performing markets in the Asian region despite government protestors planning to stage massive protests in the last weekend of August. At 656.98 points, the benchmark index is almost at a year’s high. The SETI is still hovering above the 50% Fibonacci retracement level from the bear trend in early 2008.


Weekly SETI chart as at 28 August 2009 using NextVIEW Advisor

The trend continues to increase but with a weaker strength. Momentum indicators like the RSI and Momentum are showing short term bearish divergence. If the index is able to maintain above 640 points, it is likely going to test the next resistance level at 700 points. However, if the index falls below the 640 points support level, expect the market to correct further.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.
Price action on the Gold chart has been creating a very clear triangle, which has developed over the past six months.

A test of the July low, around $900 per ounce cannot be ruled out. That in itself would not prevent price from subsequently rising dramatically to the upside.


(Read more here)

Wednesday, September 2, 2009

The June 24th high of 1.1021 has capped all price action since that date. The market is currently testing an important level of support around 1.0556. This level has been tested several times and is likely to be exceeded to the downside. A logical next target is between 1.0370 – 1.0200.


Daily Gold chart as at 28 August 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

MACD – declining, in negative territory.
Stochastic – weak, around the 20 level.
SMA 200 – flat at 1.1160.
R1 – resistance at 1.1020
S1 – 1.0650
S2 – 1.0367
S3 – 1.0020

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

The trend is down. Small upward reactions should not be significant (assuming there is no major intervention), at least until support is reached, between 92.60 – 91.75.

(Read more here)
The price of FCPO went into a bullish rally for one month in the mid-July to mid-August. The price climbed RM525 per metric ton or 26% from a low of RM1,990 to a high of RM2,515. The price then went into a correction, goes to a low of RM2,234 before settling at RM2,366 at the end of the month. The RM2,234 low was a 50% retracement from the one month bullish rally and the 30-day moving average line.

Technically, the price is still in a long term up trend but in a correction. The 90-day moving average is still increasing but the shorter averages are mixed. In the last one week of the month, market was uncertain as it traded in a tight trading range. The price of FCPO is currently slightly above the long term 15- and 30- week moving averages. A new up trend line is developed and is currently at RM2,300 and increasing.

Read more here

Tuesday, September 1, 2009

The sideways correction with a slight upward slope, continues. Previous lows were not exceeded when the market printed a short term low at 1.4044 on August 17th. The market is in a relatively weak uptrend.

At this moment EURUSD is range bound between the August 17th low and the August 15th high of 1.4446. That high, marked R1 on the chart, is being tested right now.

Recent price action implies that resistance at R1 may be penetrated soon, but because resistance is strong, that cannot be predicted with absolute certainty.

What is expected, is that the market will eventually reach higher objectives as mentioned in last month’s commentary. Near term objectives are between 1.4490 – 1.4690.

Failure to exceed 1.4446 in the near future could send this currency pair down towards support around 1.4044.


Daily Eur/Usd chart as at 28 August 2009 using NextVIEW Advisor. Click on chart for larger view.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

The US equity market continues its bullish trend with a marginal increase. The DJI closed 4% higher month-to-month at 9,544.20 on Friday. Increase in housing sales, better than expected corporate earnings and positive statements from the central bank boost investors’ confidence. Investors were trading cautiously as the job market has not been improving much. The market has been supported well. For many days, the market started with a bearish note but turned bullish in the later session.


Weekly DJI chart as at 28 August 2009 using NextVIEW Advisor

Momentum indicators have been in convergence with the current upward rally. RSI and Momentum indicators are able to stay above its middle level and the ADX indicator started to rise again. This means that the uptrend is still strong and there is a high chance that the trend may continue to go higher. The inverted heard and shoulder chart pattern was confirmed when the DJI broke above 9,400 points and this pattern has a price target at 11,600 points. However, there is also a technical resistance at 10,330 points. However, if the benchmark index fails to stay above the immediate support level at 9,100 points, then we may see further correction downwards.


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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

The Singapore equity market was in a yo-yo swing last month after being bullish for five months. He similar situation happened in the month of June and the market continued its upward rally. The FTSTI traded in a sideway range between 2,521.36 and 2,700.78 points before closing at 2,642.80 on Friday. A month ago, the benchmark index was at 2,659 points. Investors were taking some profits as they are not sure whether the rally can continue. Prices are relatively high or overbought in the short term.


Weekly FTSTI chart as at 28 August
2009 using NextVIEW Advisor

The 20-day Bollinger bands difference is in a level where the current one-month correction is about to end. The momentum indicators are mixed. RSI and Momentum indicators are slightly bullish while the MACD and ADX shows a weakening up trend. Therefore a breakout below or above the immediate support or resistance level will determine the direction of the FTSTI. A break above the resistance level of 2,680 points is likely going to cause the index to rally to the next resistance level at 3,000 points. A break below the 2,520 points support level would likely push the index lower to the next support level at 2,400 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.