IOI Corp Bhd (Symbol: 1961) Case Study

Today I will do a case study on IOI Corporate Bhd (Symbol: 1961). This is an investment holding company that deals with palm oil and rubber.

This stock closed at RM7.55 on Monday. This stock has made a transition from down trend to uptrend.

The price is currently above the 10 day simple moving average, 20 day exponential moving average and 30 day exponential moving average respectively. The last bar on the chart showed a Harami candlestick pattern.

The price managed to bounce off its 10 day simple moving average yesterday which is a good sign.

You can use the method described in my earlier post
HAI-O Case Study to trade this stock.

The trading result for the method when applied to this stock is as follows:

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Bars Held
6/9/2003	1.03	8/5/2003	1.14	10.68	41
2/24/2004	1.73	4/15/2004	1.89	9.25	37
7/9/2004	1.7	7/15/2004	1.65	-2.94	4
8/27/2004	1.7	10/20/2004	1.83	7.65	38
12/27/2004	1.88	12/29/2004	1.89	0.53	2
4/15/2005	1.82	5/18/2005	1.83	0.55	23
6/16/2005	1.92	11/15/2005	2.54	32.29	108
1/11/2006	2.52	1/24/2006	2.5	-0.79	9
4/25/2006	2.84	5/23/2006	2.94	3.52	20
7/10/2006	2.98	9/7/2006	3.28	10.07	43
10/25/2006	3.34	12/15/2006	3.72	11.38	37
1/10/2007	3.74	1/19/2007	3.68	-1.6	7
3/29/2007	4.28	6/5/2007	5.55	29.67	48
9/11/2007	5.35	11/23/2007	6.85	28.04	53
2/18/2008	8	3/4/2008	7.9	-1.25	11
4/23/2008	7.5	Open	Open	-0.67	3

The simulation data is from 2003 to 28 May 2008. In total there were 16 trades with 11 winners and 4 losers. The trade on 23 Apr 08 is still active. Lets see how this trade will turn out.

KLSE Update

KLSE index closed at 1288 points, gaining 20 points for the week. The ADX chart is looking strong with the +DI being above the -DI. ADX value is now at 21 and is turning up. This shows that the market is gaining momentum.





RSI is turning down and is now at 60 level. There may be a slight pull back to the Fibonacci Retracement level of 1266, 1257 and 1247 respectively. These three levels correspond to the 38.2%, 50% and 61.8% retracement of the upmove from 7 Apr to 24 Apr 08.

HAI-O Enterprise Bhd Update

The trade signal identified for HAI-O Enterprise Bhd did very well. From the identifed entry price of RM3.12, it has moved to highest point of RM3.58. It closed at RM3.54 on Friday. This trade produced a gain of about 13%. The method used is based on moving average crossover. For a detailed description of this method of trading please refer to my earlier post HAI-O Case Study

Based on candlestick pattern analysis, the Doji pattern that appeared on Friday trading session suggests that the bulls and bears are evenly matched. I will be looking at closing the trade if it drops below RM3.46 which is the low of the price action on Thurs 24 Apr 08.

KLSE May Performance

There is a saying that you should sell in may and go away. How through is this statement? If you look at past performance from 1994 to 2007, there is no concrete evidence that KLSE will do badly in May.

Entry Date	Entry Price	Exit Date	Exit Price	% Change
5/3/1994	1054.13	6/1/1994	991.6	-5.93
5/2/1995	950.38	6/1/1995	1058.13	11.34
5/2/1997	1080.17	6/2/1997	1107.55	2.53
5/4/1998	625.24	6/1/1998	537.6	-14.02
5/3/1999	675.78	6/1/1999	742.7	9.9
5/2/2000	898.66	6/1/2000	914.12	1.72
5/2/2002	795.07	6/3/2002	741.9	-6.69
5/2/2003	631.16	6/2/2003	672.92	6.62
5/5/2004	840.42	6/1/2004	811.66	-3.42
5/3/2005	878.79	6/1/2005	861.05	-2.02
5/2/2006	947.8	6/1/2006	927.65	-2.13
5/3/2007	1329.13	6/1/2007	1348.36	1.45

So keep investing but you will need to be selective on the stock to invest in.

ASTRO (Symbol: 5076)

ASTRO (Stock code: 5076) made a MACD crossover yesterday. That is a bullish sign.



The stochaistics chart has also made a crossover which indicates strength in the near term.

The 14 day RSI is at neutral level and is neither in overbought or oversold level.

The chart is indicating a support at RM 3.30. One approach is to buy when the price exceeds RM 3.46 and to set a stop loss at RM 3.29. The resistance after RM 3.46 is at RM 3.72.

KLSE Update

KLSE managed to break through its 50 day moving average yesterday.



The recovery that began on 18 Mar 08 has brought the index from a low of 1166 to 1280. The index has also broken through the down trend line which is another positive sign of a recovery.

If the index can stay above 1264, the Fibonacci objective will be at 1314.

Dow Inverse Head And Shoulder Pattern

Dow broke through 12800 points on Friday boosted by better earnings result from Google which rose about 20%.




The Dow chart is looking like a breakout of an inverse head and shoulder pattern. During the beginning of the week, it looked as if the right shoulder would not be formed. However due to better earning results, the index managed to claw back and break out of the 12800 level which is where the neckline resides (point C).

The price objective based on this pattern is (B-A+C) which gives an objective level of 13950.

Tradewinds Plantation Update

The MACD crossed its Signal line on 7 Apr 08. It has gone up from RM3.32 on 7 Apr 08 to RM3.54 on 14 Apr 08. A 6% move in a week.

Looking at the ADX indicator, it is below 30 which means that we are not seeing a strong up trend yet.

The RSI is at 56 level which is not in overbought region.

The Fibonacci 38% retracement level is at RM3.62, so this stock may face resistance at RM3.62

Dow And VIX

There is a saying in the market that goes like this. When the VIX is high it is time to buy and when the VIX is low it is time to sell.

VIX is a volatility index created by The Chicago Board Options Exchange in 1986. It is an important gauge of market volatility.

VIX measures the implied volatility of SPX options hence it will go up when traders expect volatility to increase.

You can treat the VIX as a fear indicator. When traders are afraid that market will drop sharply, VIX will go up. The reverse is true. When traders are more complacent, thinking that market will continue to go up, VIX will be low.






The VIX closed at 23.46 on Friday.

If you look at the VIX chart, you can draw a trend line ("Blue Line") connecting the bottom formed on Oct 07, Nov 07 and Apr 08 respectively.

These 3 points marked the beginning of significant drop in the Dow Industrial Average ("Red Line").

The VIX is not painting a good picture for trading next week. So do trade with care.

Sime Darby Bhd

The KLSE index staged a comeback for the week to close at 1246.79. That is about 2% rise for this week.

Sime Darby Bhd, one of the biggest palm oil producer closed at 9.10 on volume of 26.6 million.

The stock price reached a high of $13.4 on 11 Jan 2008 and set a low of $8.50 on 7 Apr 2008. The stock price has been affected by a decrease in palm oil prices which reached a high of RM4,204 a tonne on Mar 4.

Looking at the technical charts,


The ADX is turning down from high values which show that the down trend is weakening. The stock price will most likely move sideways. For reversal in trend, the +DI needs to cut above the –DI and the ADX value needs to be above 30 for a good up trend to resume.

The MACD line made a crossover on 28 Mar 2008. The low established on 7 Apr 2008 was not matched by a low in the MACD histogram. This is positive for the Bulls as MACD divergence usually mean the stock will move up in the near future.

With the Dow industrial average down 256 points on Friday session, the stock price may test $8.50 support line next week. Resistance is at $9.50.

HAI-O Enterprise Bhd Case Study

Moving average can be used to identify change in trend.

One of the methods is to use the order of 3 moving average to detect change in trends.

Assuming that you use the following 3 moving averages:
1. 10 day simple moving average
2. 20 day exponential moving average
3. 30 day exponential moving average

When the trend is up, the 10 day simple moving average is greater than the 20 day exponential moving average, the 20 day exponential moving average is greater than the 30 day exponential moving average. This is the proper order of the moving averages for an up trend move.

Similarly when the trend is down, the 10 day simple moving average is less than 20 day exponential moving average, the 20 day exponential moving average is less than the 30 day exponential moving average. This is the proper order of the moving averages for a down trend move.

Let’s do a case study. I have chosen HAI-O ENTERPRISE BHD as an example.

Entry rules
1. Today the 10 day simple moving average is less than 20 day exponential moving average and the 20 day exponential moving average is greater than 30 day exponential moving average.


2. For the past 3 days, there is at least one day in which the 10 day simple average is less than the 20 day exponential moving average and 20 day exponential moving average is less than the 30 day moving average.


3. If condition 1 and 2 are true, buy at the opening price of the next trading day.

Exit rules
1. If the closing price today is less than the 30 day exponential moving average, sell the long position at the opening price of the next trading day.

The chart with the moving average is given below:


The "Red" line represents the 10 day simple moving average, the "Green" line is the 20 day exponential moving average and the "Blue" line is the 30 day exponential moving average.

Based on the above rules, we have the following trades.

Entry Date	Entry Price	Exit Date	Exit Price	% Change
10/16/2003	1.16	11/18/2003	1.15	-0.86
9/2/2004	0.98	9/7/2004	0.95	-3.06
1/9/2006	1.06	2/24/2006	1.12	5.66
10/9/2006	1.38	12/13/2006	1.51	9.42
3/23/2007	2.01	8/7/2007	2.95	46.77
10/11/2007	3.1	12/3/2007	3.12	0.65
3/31/2008	3.12	Open	Open	3.21

The simulation data is from Jan 2003 to 8 Apr 2008. There are a total of 7 trades with 5 being profitable. The average profit is 13.14% whereas the average loss is 1.96%. The lastest trade is a buy signal on 31 Mar 08. The position is not closed yet and it is showing a gain of 3.21% as of 8 Apr 08.

KLSE Apr Performance

We are in the month of Apr. Global market has been trying to recover from the sell down since the beginning of the year. US market started the week with a narrowly mixed performance Monday, with many investors moving to the sidelines as they wait for quarterly profit reports.

Looking at the historical data from 1994 to 2008, there were 8 Apr months that showed a profit and 6 Apr months that ended with a loss for the KLSE index.

Entry Date	Entry Price	Exit Date	Exit Price	% Change
4/4/1994	958.68	5/4/1994	1040.44	8.53
4/4/1995	966.49	5/3/1995	944.55	-2.27
4/2/1996	1158.6	5/3/1996	1184.97	2.28
4/2/1997	1187.76	5/5/1997	1099.39	-7.44
4/2/1998	700.44	5/5/1998	627.56	-10.4
4/2/1999	529.09	5/4/1999	681.75	28.85
4/4/2000	966.65	5/3/2000	900.14	-6.88
4/3/2001	650.65	5/3/2001	615.98	-5.33
4/2/2002	756.91	5/3/2002	795.12	5.05
4/2/2003	626.69	5/5/2003	627.62	0.15
4/2/2004	886.94	5/6/2004	845.74	-4.65
4/4/2005	874.34	5/4/2005	895.5	2.42
4/4/2006	927.9	5/3/2006	950.99	2.49
4/3/2007	1247.41	5/4/2007	1346.37	7.93

So if you buy the KLSE index in the beginning of Apr and sell in the beginning of May, you will be able to win with a probability of 57%.

KLSE Turtle Trading

Dow closed at 12609.42 on Friday trading session. For the week ending 4 Apr 08, Dow was up 393 points.

KLSE did not perform as well. It closed at 1221 down 36 points for the week.

Let’s take a look at a simple breakout system called Turtle Trading System. This system was popularized by Richard Donchian. It uses 20 day breakout as an entry rule for both long and short trades. The duration of the test is from Apr 1998 to 4 Apr 2008.

Let’s assume the following breakout rules:

Entry

1. Today’s Close must be greater than the High of the previous 20 trading day
2. If condition 1 is true, buy at the opening price on the next trading day.

Exit

1. Today’s Close must be less than the Low of the previous 20 trading day
2. If condition 1 is true, sell at the opening price on the next trading day.

The trading result is shown below:

Winning trades:

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Bars Held
9/8/1998	457.44	2/9/1999	525.13	14.8	103
4/7/1999	557.07	7/27/1999	772.04	38.59	79
12/14/1999	771.57	4/18/2000	888.89	15.21	82
6/12/2001	584.75	9/18/2001	612.79	4.8	68
11/16/2001	633.86	5/22/2002	782.11	23.39	120
12/27/2002	646	2/25/2003	651.46	0.85	37
4/8/2003	640.03	11/20/2003	766.4	19.74	157
1/8/2004	805.18	4/15/2004	866.81	7.65	64
6/11/2004	823.99	8/3/2004	828.03	0.49	37
9/3/2004	844.64	2/22/2005	903.8	7	112
6/14/2005	894.82	8/29/2005	916.02	2.37	54
1/6/2006	906.6	3/7/2006	915.96	1.03	37
7/13/2006	928.46	3/6/2007	1,117.51	20.36	158
4/4/2007	1,263.19	8/2/2007	1,349.20	6.81	83
9/21/2007	1,305.06	11/23/2007	1,346.45	3.17	43
			Average	11.084	82.266667

Losing trades:

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Bars Held
5/22/2000	949.63	5/29/2000	884.08	-6.9	5
10/17/2000	766.51	11/17/2000	728.81	-4.92	22
1/30/2001	720.99	3/2/2001	702.5	-2.56	22
8/19/2002	736.6	8/30/2002	715.08	-2.92	9
10/25/2002	655.91	11/20/2002	636.94	-2.89	17
5/4/2005	895.5	5/26/2005	868.94	-2.97	15
9/27/2005	925.33	10/20/2005	914.8	-1.14	17
3/29/2006	932.59	5/23/2006	924.69	-0.85	37
12/4/2007	1,415.45	1/24/2008	1,401.25	-1	32
			Average	-2.90556	19.55556

There were a total of 24 trades with 15 winners and 9 losers. The average win is 11% and average loss is 2.9%.