Chart Analysis tips : Clear your mind before analyzing

Sometimes analysts and traders like myself tend have a bias when reading charts and this can be detrimental when analyzing charts.

For example, if I am holding a buy position on stock A, I tend to be bullish on stock A when analyzing the chart and make recommendations. I'll try to find reasons that price may continue to go higher by using indicators that suggest so and ignoring other indicators that provide weak signals.

Another example is that when analysts hear good news about the market from all sides, they tend to be bullish in their bias. Furthermore... analysts always wanted to be in the safe side. If the analyst is wrong, at least others are wrong as well and they share the blame. If the analysts is the only one who is wrong, then all the blame will be on him/her. Furthermore, people tend to remember mistakes more than good things.

"We sometime want to see things that we only want to see... hear things that we only want to hear".... This quote is not from me but I remembered I learned this somewhere.

To analyze a chart effectively, we need to first of all take our biasness out of our mind. Clear our minds. I know it is hard, but we need to have clear minds, not having any prejudices.

Once you are able to this, you will find improvement in your analysis...

Article by Benny Lee

Smooth Sailing for Alam Maritime?

Alam Maritim (Alam.KL, 5115.KL) stock price has been trading in a range of RM1.90 to RM2.10 since April this year, after a rally from RM1.70 in March. At this level, analysts from broking houses still keeps Alam with a BUY. Below are some recommendations excerpts from Dow Jones Newswire (subscribe to Dow Jones News from HERE).

2008/08/06 13:19PM : Alliance keeps Outperform call on Alam Maritim (5115.KU) with MYR3.10 target price.

2008/08/06 12:27PM: Aseambankers keeps Alam Maritim (5115.KU) at Buy, target price unchanged at MYR3.13

2008/08/06 10:32AM: Affin Investment keeps Buy on Alam Maritim (5115.KU) with unchanged target price of MYR2.53

2008/07/04 12:21PM: MIMB keeps Buy call on Alam Maritim (5115.KU) with MYR2.71 target price.

2008/07/01 15:19PM: OSK Research keeps Buy on Alam Maritim (5115.KU), ups target price to MYR3.00

Price as at noon today is at RM1.97. In the past few weeks, there were some surges in the volume to push prices higher but the price did not move. This shows heavy resistance.

Technically, the current price trend is in a correction and this is one stock that does not attract retail investors because it has been moving sideways for so long and its liquidity is low. Trading volume is only about 1.4m shares a week averagely. The momemtum indicators (like MACD and RSI) are showing weaknesses in the the current price action. These indicators are suggesting that the bears are still in control.

Furthermore, the news/recommendations come after the rally in March and since then, there were no other developments. We'd probably see some speculation on buying because of declining oil prices. Therefore, there may still be opportunity for this stock, but on a short term basis. Resistance is strong at RM2.10, although analysts have much higher price targets (See above recommendations made). Stop loss should be set at 1.90 if traded on a short term basis. at current price of RM1.97, the potential profit to risk ratio may not be attractive. Therefore, lower risk entry is when price around 1.91 to 1.95.

Commetary and analysis by Benny Lee

Strong rebound on DOW and other indices update

The benchmark Dow Jones industrial Average (DJI) made a strong rebound today, climbng 331.62 points or 2.94% to close at 11615.77. I believe it is caused by declining oil price and strengthening of the US dollar. Light crude oil futures is currently traded at US$118.25 per barrel and still has room to decline. The DJI may face resistance at 11,700 points.

Other regional indices which were weak yesterday, are expected to rise today, because of this.

The Singapore's STI closed at 2,900 points yesterday. If there is a rally, it may find resistance at 3,000 points.

Kuala Lumpur Composite Index closed at 1134.50, and may find resistance at 1,180 points.

The Hang Seng Index closed low yesterday at 22514.92. Therefore expected a bigger rise today. However, it may find resistance at 23,370 points. UPDATE (12.30pm): Stock market shut down because of Severe Tropical Storm Kammuri... Click HERE to read more.

Thailand's SETI closed at 667.12 points yesterday. We may not see a strong rally on SETI because their major concerns were not just oil price but the problems in the current goverment where confidence level is low. It is expected to trade in a range of 660 and 700 points.

Generally, the Asian markets will rebound sharply today, but still, in my opinion is that the bears are still in control.

Analysis and commentary by Benny Lee

FKLI - Intraday Money Making Opportunity today

There was a money making money opportunity today if you know how to use the Daily Pivot Trading System.

Based on this system, the Short signal is at 1143 with a profit target of 1131 points. Stop loss was at 1145.50. At 8.55 am, the short was triggered and less than an half an hour later, at 9.20, the target achieved. A profit of 12 points (or RM600) made in 20 minutes with just one contract traded.

If you would like to know how to do this, learn it from this workshop Opportunities to Profit Everyday in FUTURES Regardless of Market Direction by Benny Lee on 07/08/2008 (K. Lumpur), 14/08/2008 (P. Jaya) and 23-24/08/2008 (K. Lumpur)

5-min FKLI August contract chart as at 12.05pm, 5 August 2008, using NextVIEW Advisor.

Jim Rogers in Bangkok, Thailand

Jim Rogers needs no introduction to the financial markets. He is one of the "best thinkers" of the financial markets.

James B. Rogers, Jr. (born October 19, 1942) is an American investor and financial commentator. He is co-founder, along with George Soros, of the Quantum Fund, and is a college professor, author, world traveler, economic commentator, and creator of the Rogers International Commodities Index (RICI). Read more about him on wikipedia.

Jim Rogers in Bangkok, Thailand

The Agricultural Futures Exchange of Thailand (AFET) is bringing this legendary investor/trader to bangkok on the 21st of August 2008. He will be presenting in an Executive Dinner talk with the title "Commodities: The Thailand opportunity " from 6:00 pm to 9:30 pm.

So, if want to know what this financial "oracle" has in store in commodities for Thailand, make sure not to miss this one-of-a-kind opportunity to attend this talk. Tickets and more information are available HERE.

Here are some recent thoughts from Jim Rogers:

About Gloomy Markets
Here's a quote from Jim Rogers in a recent interview with ResourceInvestor. "What’s gloomy? Hold on. What’s gloomy? That was gloomy for Wall Street. I told you if you’re a farmer, you’re about to get rich..." Read more here.

What are his investments now?
Short on banks, investing in airlines. Read his recent interview here on CNBC.



On Fed's move, credit and mortgage crisis, inflation , the finance industry and Frannie May/Freddie Mac.

The goverment is forming a disaster for America, with mistakes after mistakes... Read another recent interview here on Bloomberg

Catch Jim Rogers in Bangkok on 21 August 2008. CLICK HERE.

A Lesson in Trading Psychology - Dr. Brett Steenbarger

Back in 2004, I joined Kingstree Trading, LLC, a proprietary trading firm in Chicago. There, I had the good fortune to get to know--and observe--many successful traders at work.

One lesson particularly stands out in my mind. A trader saw buying come into the market, and he quickly jumped on board. He saw that the odds of taking out a recent high were good, given the size of the buying. To his surprise, however, the trade stalled out before the target and reversed. He quickly exited with a tick loss.

He turned to me and said, "I just paid for information."

When the market bounced higher a few ticks several minutes later, the volume was weak. No big players were taking the long side. He aggressively sold and quickly made a couple of points.
He placed a good trade, and it didn't work out. He didn't view that as a threat, as a loss, or as a failure.

He viewed it as information. The market was telling him that we weren't going to take out the recent high.

How he entered the first trade and exited it and how he used the loss to prepare himself for the winning trade: *There* was a clinic in trading psychology.

If your setups are valid, there are only two kinds of trades: Those that make you money and those that give you information.

* This article is re-published with permission from Dr. Brett Steenbarger.

Brett N. Steenbarger, Ph.D. is Associate Clinical Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY and author of The Psychology of Trading (Wiley, 2003). As Director of Trader Development for Kingstree Trading, LLC in Chicago, he has mentored numerous professional traders and coordinated a training program for traders. An active trader of the stock indexes, Brett utilizes statistically-based pattern recognition for intraday trading. Brett does not offer commercial services to traders, but maintains an archive of articles and a trading blog at www.brettsteenbarger.com.