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Friday, November 26, 2010

Will KLCI move above 1,500 level again and we shall see the peak? There is one new IPO today and many anticipating a bull-day. I will like to see if I could trim further some of my holdings especially YTLPower which I m holding on hugely.

Yesterday I met a friend who is an accountant. He is strong in his FA. So, I used the opportunity to ask him some 'valuations' point of views. You see, I m going to show my 'students' how to check on P/E and such, I need to tell them to be practical. Market is NOT efficient, in my opinion. A low P/E does not mean BUY and/or a high P/E doesnt mean not good. Such a statement could be very confusing to a new market-babies. No doubt we would prefer to check on a low P/E ratio stocks but we need to understand too that P/E ratio is only ONE of the many ways we could value a company.

LionInd having a low P/E(read latest MB) and seen as undervalued by the analyst. How true could that statement?

UEMLand having such a high P/E ratio but isnt she attractive with Sunrise coming in and huge Iskandar Malaysia(IM) in Johore buzzing?


No-brainer method

Lets say you like LionInd for whatever reasons/excuses.

On 27th Oct, its RSI above 70 and it touched a high of 21.5. So, we dont buy at that level, right? We wait for it to retrace. Support at RM2, it correct for 3 days, I bought into it the fourth day when doji seen at 1.98. Fine. RSI was at 55. Then it rebounded to 2.11 level, which is my current resistance. RSI was at 65. I did not sell.

So, it retraced back to RM2 level before on 23rd Nov recently it DIVED. Two factors used - poor report and korean-news. The next support at 1.90, so grabbed at 1.89. RSI was at 38. And going into next support at 1.83, I waited the next day ... it was opened at 1.78, I think. I grabbed my third portion at 1.80. RSI at 41.

Now, my three portions done. If we bought at RM2.00, RM1.90 and RM1.80 evenly, the average should be RM1.90. No need to trade much ... just wait. Wait for it to go to RM2, sell the portion you bought at RM1.80 for more than 10% profits. Wait for next resistance at 2.11 to sell our second portion we bought at 1.90 and so on.

When it dives from 2.11 to 1.80, RSI will be pointing lower(of coz) but when it goes back from 1.80 to 2.10, expect a much high RSI. If it shoot very fast to 2.10, no question asked please ... SELL ALL. If it continues to shoot higher and you want her back, wait for pull-back and correction.

Seriously, these are no-brainer way of averaging many 'smart' investors using for their stocks. No need so many indicators for on TA etc etc. At times, when I see someone's chart with 8 TA indicators, I wonder ... need so much of brain to trade a counter? For the average us, try out no-brainer averaging method. ONLY apply to the counter you like(for whatever excuses). Dont ask me about Karambunai which are karam-ing now.

I am using such a no brainer for UEMLand now. On 8th Nov, RSI at 73, it was at 2.50. It corrects to recent 2.19 support level. RSI at 45. Buy portion one. Next support seen at 2.00. Say, suddenly South Korean retaliates, and it gives me good reason to grab at 2.00 for my second portion. With the next support at 1.77, allocate third portion below 1.80.

After these, WAIT WAIT WAIT ...

I m only using these two for illustration on this so-called no-brainer method. I m going to hold on both using this method. It applies to my Evergreen too.

Note : We should allocate a greater amount at lower price say, 20%, 30% and 50%.

Note : This is open to readers who want to learn my no-brainer way of investing. I m planning for a 'class'(Subang Jaya) to show some FA and plus using the above no-brainer way of investing to profit from YOUR stock(s). Those interested, please e-mail me with brief introduction and I shall furnish you with some details. Yes, this will be my first 'public meet my readers' session. Hehe. Ok, I m serious tho I m a joker.

This is for INVESTORS who want to learn a little of TA(I will use the simple RSI). The time frame will be 3 - 6 months. This is also NOT for buy-n-hold mentality. I m a trader, and one of my no-brainer system could be used for a time frame or 3 - 6 months. Stocks move UP and DOWN always ... and good stocks moving lower deserve our attention. Then, take the plunge once our 'homework' done.

So far I have 3 'potential students'. I want to limit it to 6 for my first session. Let me get it serious. We are talking about investing. KARAMbunai kaki wont like this one as I will use it as a ridiculous example to speak about GREED. Investing with good fundamental, good track records, good DY(if any), good management team and good what-ever FA. Karambunai-kaki are not welcome. I will also invite 2 of my friends to join. If they are OK, I will have 5 then. So, I need one or two more to start with!!

Day : Should be Saturday noon/night.

6.50 pm : Preparing for my class at 7.30pm now. Mentally prepared, I mean. That is how I prepare for my Maths classes - mentally.

Topics

1. Explaination on P/E for each market, sectors and stocks.
2. Type of P/E and when and why could be used as FA pointer.
3. NTA or BV - are there relevant? My friend mentioned RNAV.
4. Cash and DY - are they a must to buy into a stock?

I dont think so I could share much in the two-hour class as my 'students' are science-based lecturers!!

I spoken to my young finance-lecturer colleague. He must be wondering how come I know much being a science-based person. Now, reading ONLY could give us THEORIES. You could have deep understanding of 10 ratios BUT if you cant even apply it in your stock picking AND profit from it, then you may keep your 10 ratios in the closet! Haha. Yes, I m a practical person. I m more interested if these ratio(s) could be used in this particular sector for me to cmpare it to its peers. Then, I m more interested when I could buy into it, using WHAT strategies and what are my plans for it!! PRACTICAL ... dont tell me you know the formula of RSI. APPLICATION is more important than theories, ya.

I m going to give them an example : Hmm ... supposingly I m going to Jusco at Sunway Pyramid to buy my kids Pampers and a tin of Milo. Then, I used my Standard Chartered Platinum card to pay for the amount. I signed the dotted line and the transaction is on. I went off with my items. I walked down to the parking place and drive home.

Think ... how many business transactions actually going on with one simple swipe of card?!

It could be challenging for them. Haha. It is difficult to be my students! Haha.

Yes, I m teaching them how to FISH, not giving them the fish. They need to THINK and use their OWN judgement to evaluate the companies performances. P/E could NOT give us that, for sure.

All the ratios in FA and all the indicators in TA are for references only. Using appropriate FA and then TA could enhance our chances in a trade. Of coz, it needs to back up by a strategy and plan!! Arrghh ... why buying a stock is so complicated one? Hai yah ... tmr I hentam the Karambunai at 0.17, sure make money when it goes to 0.20 ma, right? Yeah right ...

I m already SIMPLIFIED for them(otherwise, why do they need to PAY me for classes?? Might as well by few books and STUDY those theories??).

Enough for today, no posting tmr as I will have 7 hours of tuition(collecting my bullets!! hehe) and then family time till Sunday night. Shall be back on Sunday night?

KLCI down 4.44 points. Oh boy, chinese wont like this number!! haha.

TEH

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