Tuesday, April 29, 2008

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 DateEntry PriceExit DateExit Price% ChangeBars Held
6/9/20031.038/5/20031.1410.6841
2/24/20041.734/15/20041.899.2537
7/9/20041.77/15/20041.65-2.944
8/27/20041.710/20/20041.837.6538
12/27/20041.8812/29/20041.890.532
4/15/20051.825/18/20051.830.5523
6/16/20051.9211/15/20052.5432.29108
1/11/20062.521/24/20062.5-0.799
4/25/20062.845/23/20062.943.5220
7/10/20062.989/7/20063.2810.0743
10/25/20063.3412/15/20063.7211.3837
1/10/20073.741/19/20073.68-1.67
3/29/20074.286/5/20075.5529.6748
9/11/20075.3511/23/20076.8528.0453
2/18/200883/4/20087.9-1.2511
4/23/20087.5OpenOpen-0.673


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.

Monday, April 28, 2008

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.

Sunday, April 27, 2008

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.

Wednesday, April 23, 2008

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 DateEntry PriceExit DateExit Price% Change
5/3/19941054.136/1/1994991.6-5.93
5/2/1995950.386/1/19951058.1311.34
5/2/19971080.176/2/19971107.552.53
5/4/1998625.246/1/1998537.6-14.02
5/3/1999675.786/1/1999742.79.9
5/2/2000898.666/1/2000914.121.72
5/2/2002795.076/3/2002741.9-6.69
5/2/2003631.166/2/2003672.926.62
5/5/2004840.426/1/2004811.66-3.42
5/3/2005878.796/1/2005861.05-2.02
5/2/2006947.86/1/2006927.65-2.13
5/3/20071329.136/1/20071348.361.45

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

Tuesday, April 22, 2008

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.

Sunday, April 20, 2008

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.

Tuesday, April 15, 2008

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

Monday, April 14, 2008

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.

Sunday, April 13, 2008

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.

Wednesday, April 9, 2008

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 DateEntry PriceExit DateExit Price% Change
10/16/20031.1611/18/20031.15-0.86
9/2/20040.989/7/20040.95-3.06
1/9/20061.062/24/20061.125.66
10/9/20061.3812/13/20061.519.42
3/23/20072.018/7/20072.9546.77
10/11/20073.112/3/20073.120.65
3/31/20083.12OpenOpen3.21

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.

Tuesday, April 8, 2008

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 DateEntry PriceExit DateExit Price% Change
4/4/1994958.685/4/19941040.448.53
4/4/1995966.495/3/1995944.55-2.27
4/2/19961158.65/3/19961184.972.28
4/2/19971187.765/5/19971099.39-7.44
4/2/1998700.445/5/1998627.56-10.4
4/2/1999529.095/4/1999681.7528.85
4/4/2000966.655/3/2000900.14-6.88
4/3/2001650.655/3/2001615.98-5.33
4/2/2002756.915/3/2002795.125.05
4/2/2003626.695/5/2003627.620.15
4/2/2004886.945/6/2004845.74-4.65
4/4/2005874.345/4/2005895.52.42
4/4/2006927.95/3/2006950.992.49
4/3/20071247.415/4/20071346.377.93


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%.

Sunday, April 6, 2008

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%.