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Sunday, August 08, 2010


DongFeng Motor : IPO'd at 1.60 in Dec 2005, shot up but dived to 1.50 level during the low in Nov 2008. Since then, it has been UPTREND(bull in China's auto stocks) reaching the peak at HKD14 in April 2010. That is one year plus rally, up 7-fold. Recently, due to the sharp correction in China's market, and some 'bad' news for the auto sector, many auto-stocks retraced 30-50% discount from the peak!!

BYD was at HKD8 when WBuffett decides to move into the battery stock and it went all the way up above HKD80. That is 10-fold, I know. It is trading at HKD50 level now.

So, when do you buy a stock again?

Above in the chart, I've highlighted 4 period of time where the stock were at RSI below 30(or near to 30), oversold region. DO NOT TELL ME ABOUT catching the bottom. I do NOT believe in such, ya. Anyway, at the most recent correction in June 2010, it was at oversold level and at HKD8 ... it was a steal, a huge bargain from the peak at 14. Besides, it PE was at 12!! Excuse me, when do you buy a stock again? Low PE, market bearish and oversold stock, right? NO?? We are in different platform, that is all.

Guess the price now?? it is trading at HKD11 ... cool?? In TWO MONTHS, ok? How many percent is that?? I PREFER such a waterfall ... good stocks, unwanted sector which will rally again due to BUSINESS(not speculative and empty shell).

Yesterday's The Edge mentioned 'China's car market slows'. Do you know how much I like such news?? I hope the whole market in China could collapse again or at least many more reports of OVERSUPPLY, COMPETITIVE PRICES, FINANCE TIGHTHENING ... whatever broker house will like to mention to show they done some 'research' and their job!!

So, my point is simple - buy a GOOD stock when everyone is selling and the whole sector in correction. THIS IS FOR INVESTORS who do not know charts like me. I believe the auto-sector in China will continue to rally as it is still at ground level!! DongFeng moved from HKD1.5 to HKD14.

Geely : It was at HKDo.20 in 2008(unseen, unwanted,unheard of, untouched) and shoot all the way to HKD4 ... that is 20-fold your money??! It retraced after formed a double-top to 2.30(I was waiting for HKD2 but I was fishing too low). It reached 2.90 now. I m seeing 2.60 for my first entry tho I dont think so it will retrace to that low. I might be wrong again ... so, I must standby to grab when its RSI at 30 and collect when it moving lower!! NO TA needed here ... common sense, with simple RSI. Its PE at 15 level. Unless there is a DOUBLE DIP in current situation, we wont see its PE in single digit anymore.
When do you buy a stock again? Hmm ....

Sunday Morning ... time for my morning jog soon.

Eason Chan 陳奕迅 十年





Relative Strength Index(RSI)

A bearish stock could be in oversold region for a looong period of time and the stock price may retrace further and stay in oversold region. That is also true to overbought stocks. So RSI alone may not be a 'right' way of BUYING or SELLING a stock. I m using 'common sense' of a contrarian ... and NOT timing the bottom of a stock. For example : buying of JCY at 1.36 and 1.26 levels. JCY's RSI has been hoving below 30(oversold) for some time now. That doesnt mean that it will SURELY rebound. In fact, on the risk side, it may DIVE further down or slowly retrace further down to new lows. JCY does not have a 'long' history in market for us to gauge its 'historical RSI'.

From its chart, JCY's RSI only shown twice in oversold region and this time is the THIRD time and the longest period(compared to the previous two which rebounded immediately!). So, with RSI being in oversold, will it rebound this time?





TopGlove : Let us look at this bearish stock which brought the glove-index with her. Last Friday dive broken the MA100 line(green line). MACD lines going below zero level, with stochastic pointing lower in oversold region. RSI is moving lower too, with l;ong RED histogram registered. ALL the above mentioned are SIGNS of BEARISH-ness. And with a looong black candle-stick, it triggered SELL signal on Friday. So, as a short-term trader it is a SELL(cut loss or take profit) and exited on Wed-Fri. Friday is the LAST warning day that this is a rubberish stock. SELL SELL SELL, in other word. Notice that the HIGH volume confirming SELL.


Is my interpretation of TA right?

TEH

2 comments:

elliott waver said...

dude, TA dont say that if rsi is oversold u buy. buy on breakout of patterns or downtrend line. that'd be better.

CP said...

yes, I did not say TA saying BUY when it is oversold, did I? I m using my common-sense to BUY when it is oversold.

Thanks for pointing out.

TEH