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Sunday, July 25, 2010

Learning Corner : Sideway Trading

Example : China DongXiang (03818.hk)





Historical chart(listed since 2007)

Two lines drawn. Since listed, markets dived. So, the stock dived to 1.70 level in Nov 2008 and 1.90 level in Mac 2009, formed a double-bottom. Then, the uptrend started and it surged all the way to the 6.00 level, that is more than triple its historical low. Then, it retraced to 4.50 level, and have been trading between 4.50 - 6.00 range. 4.50 level becomes its strong support level and 6.00 is its strong resistance.






A year chart(since May 2009) : The blue arrows showing that each time it tested its strong support level at 4.50, it will rebound to 5.70, the first resistance level and then if that broken, it will go to 6.00 level again, its strong support. For it to continue in uptrend, it needs to break 6.00 with high volume and going to its historical high!! Our discussion here will be SIDEWAY trading.

So, it is at 4.50 level AGAIN for the fifth time in a year!! If I m to grab this one at 4.50, profit taking shall be at 5.20, but a break of this resistance, we shall see 5.70 level. Lets say, I will take profits at 5.20 level, without fail it rebounded from 4.50 to 5.20. That is 70 cents profits (definitely more than 10%, ok? Do your Math!). So, I have taken 15% profits FOUR times in ONE YEAR. Nice sideway trading example, right? Note that its RSI always oversold when it was at 4.50 level. It is NOW.

Imagine you buy at HKD4.50 a year ago, and didnt take profits ... guess what is your profit?? ZERO. So, I repeat ... buy-n-hold is NOT trading. It is a lazy way of buying a stock. Anyway, we are all different. Some ignorant, some lazy ... but majority of them DO NOT have much knowledge about investing/trading!! Are you surprise to hear that 90% of people in markets are actually LOSING money? I was surprised when I first heard in a market talk, I thought the speaker was pulling my legs. I was one of the 90%(feeling better, phew!).

Be realistic ... how long could one really hold? Like Warren Buffett? Do you know that the stock PROTON was at RM16 before market crashed in 1997? Today we are atlking about RM5 is the resistance for Proton!! Hmm ... buy-n-hold? Just admit that you DO NOT have the knowledge to be in markets, ya. Even if you have little knowledge like me ... profitting from market means we have to be the 10%, doing what others DO NOT do.

Ok ok ... learning corner here is meant for those novices or newbies, like me ... and we learn together, ok? I have known few uncles/auties who are in markets for ages but dont know what is sideway trading!! Beacuse once they bought a stock, they will hold ....

BTW, there are counters in KLSE which are in the mode and by choosing a good fundamental or good dividend stock to trade even though it is in sideway could benefit us BETTER than those ignorant buy-n-hold investors.

Hope thats help.

TEH

p/s : Personally I will NOT buy into this one as it is a sports-apparel company. I m more into energy or mining or materials stocks.

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