Petronas Chemical == Just off the starting block

The chart above is for Petronas Chemical, which is just listed in BursaMalayisa on 26th November 2010.
This counter attracts institutional investors and has so far displayed great resilience when it is traded above the institutional IPO price of RM5.20. The weaker institutional investors would have sold off at least part of their holding and the resilience may be due to the stronger institutional investors still willing to accumulate on weakness. This counter is very liquid as it has eight (8) billion shares issued. coupled with the recent IPO there is ample free floating shares ready to find stronger hands.
From the chart above there is a possibility of a temporary double top at RM6.39 and a support at RM 5.93.
Also to be noted is that it is trading within an uptrend channel. Since it is now near the lower side of the uptrend channel and near to the support of RM5.93 it maybe good and possible to buy at below RM 6 so that a profit can be made if it goes up and away from the lower channel.It may move up to challenge the double top at RM6.39. If it fails to break through RM6.39 then it should be sold, otherwise if RM6.39 is successfully penetrated it can go higher and the wisdom is to let the profit run.
Another possibility is that it may go below the support line. If this happens a stop out will have to be executed say at RM5.80
The above is just my guess.

Phases of market

Market Phases
All markets, and certainly the share market go through phases that can be identified.
You will find the four central phases of the share market to be accumulation,
distribution, expansion and contraction. I have included an example of each below:
Accumulation
Accumulation generally takes place in a low sideways trending market and also
during an uptrend. Accumulation often develops when a stock has finished a down
trend and the market has found equilibrium (similar number of buyers an sellers) At
this point there are often institutional and long term value investors that have interest
in the stock as it would often be undervalued at this time based on fundamentals.
Distribution
Distribution generally takes place in a high sideways market and also during a
downtrend. And converse to accumulation, distribution occurs when a stock has
finished an uptrend and is beginning or is now perceived to be over valued by the
institutional and long term value investors based on its fundamentals.
Often distribution happens when the stock is still in favour with the general
public/media etc which means there are still plenty of willing buyers in the market.
However the distribution phase is the worst time to be buying a stock as a downtrend
often follows.
Note: Accumulation and expansion phases on Union Pacific weekly chart.
Expansion
Expansion occurs during an uptrend when there is disequilibrium in the market and
there are many more buyers than sellers. The share price often increases
dramatically and quickly. I have included below an example of a share during an
expansion phase. In order to profit from the expansion phase we use analysis and
theories like trend lines, Dow and Elliot wave theory.
Contraction
Contraction occurs during a downtrend when there is also disequilibrium in the
market and there are many more sellers than buyers. The share price often
decreases dramatically and quickly. I have included below an example of a share during a contraction phase

   

Kuala Lumpur Kepong (KLK) deserves a hard look, now

Crude palm oil (CPO) price is rising in tandem with Crude Oil price. Arising from there, KLK has a good revaluation by investors recently. KLK is well managed and is at the moment in the right sector of rubber and CPO, which both enjoy buoyant commodity price currently.
From the chart above, the initial climb is more gradual following the long term support line of S1S2.
Recently, it went over-drive to form a steeper uptrend channel C1C2, with a small hook down now.
With this chart formation, it will be an opportunity to enter a buy order around RM21.90, shown by the horizontal support line.

   

Bursa Malaysia looks good for an up turn

Bursa Malaysia Chart on 30th December 2011 

The chart shows that Bursa has a good chance to at least turn up in the short term fom here.

This counter is co-related to the volume of the market. As the market is having good volume lately there is a good chance for this counter to turn up at least for the short term.

The three (3) arrows show in the MACD, RSI and Stochastic chart seem to confirm that what I observe is true. MACD is about to form the golden cross and both RSI and Stochastic are in the lower area.

So it will be a good strategy to buy on weakness from now and sell it off when it hit the resistance shown by the upper parallel line.

Bullish Divergence... A lesson from hind sight with CBIP

This case study is based on the chart for CBIP, a counter listed on the Bursamalaysia.

The point of focus is bullish divergence.
This phenomenal of bullish divergence does not occur very frequently but once it appears it can be a good opportunity to act on it for profitable trade.

Look at the chart above, which is captured on 4th November 2010.
I have drawn two vertical lines to show the bullish divergence between price of CBIP and MACD
Bullish divergence here means that when the price of CBIP decline or make lower low the MACD forms higher low. Similarly there is also a bullish divergence between price of CBIP and its RSI.

Of  course, on 4th November 2010 it is already too late to use this information because from the occurrence of the divergence, which is around 22nd May 2010 , to the price level on 4th November 2010 there is a price increase of  about RM1.00. Just imagine you were looking at CBIP chart on 22nd May 2010 and a few days later you are convinced that bullish divergence has occurred and bought some CBIP shares and just hold on and wait,you would have made a handsome gain. Never mind we (including me) miss this opportunity but we should not miss the opportunity to learn the lesson of how to use the bullish divergence to trade profitably.


Any comment can be addressed to the writer, Lee Huong Sing

Lessons on balance sheet by investopedia

A balance sheet, also known as a "statement of financial position", reveals a company's assets, liabilities and owners' equity (net worth). The balance sheet, together with the income statement and cash flow statement, make up the cornerstone of any company's financial statements. If you are a shareholder of a company, it is important that you understand how the balance sheet is structured, how to analyze it and how to read it.

The main formula behind balance sheets is: Assets = Liabilities + Shareholders' Equity
This means that assets, or the means used to operate the company, are balanced by a company's financial obligations along with the equity investment brought into the company and its retained earnings. The total assets must equal the liabilities plus the equity of the company.

Current assets have a life span of one year or less, meaning they can be converted easily into cash. Such assets classes include cash and cash equivalents, accounts receivable and inventory. Cash, the most fundamental of current assets, also includes non-restricted bank accounts and checks. Cash equivalents are very safe assets that can be readily converted into cash; U.S. Treasuries are one such example. Accounts receivables consist of the short-term obligations owed to the company by its clients. Companies often sell products or services to customers on credit; these obligations are held in the current assets account until they are paid off by the clientsAdd caption

Non-current assets are assets that are not turned into cash easily, are expected to be turned into cash within a year and/or have a life-span of more than a year. They can refer to tangible assets such as machinery, computers, buildings and land. Non-current assets also can be intangible assets, such as goodwill, patents or copyright. While these assets are not physical in nature, they are often the resources that can make or break a company - the value of a brand name, for instance, should not be underestimated. Depreciation is calculated and deducted from most of these assets, which represents the economic cost of the asset over its useful life 

On the other side of the balance sheet are the liabilities. These are the financial obligations a company owes to outside parties. Like assets, they can be both current and long-term. Long-term liabilities are debts and other non-debt financial obligations, which are due after a period of at least one year from the date of the balance sheet. Current liabilities are the company’s liabilities which will come due, or must be paid, within one year. This is includes both shorter term borrowings, such as accounts payables, along with the current portion of longer term borrowing, such as the latest interest payment on a 10-year loan

Shareholders' equity is the initial amount of money invested into a business. If, at the end of the fiscal year, a company decides to reinvest its net earnings into the company (after taxes), these retained earnings will be transferred from the income statement onto the balance sheet into the shareholder’s equity account. This account represents a company's total net worth. In order for the balance sheet to balance, total assets on one side have to equal total liabilities plus shareholders' equity on the other

Financial ratio analysis uses formulas to gain insight into the company and its operations. For the balance sheet, using financial ratios (like the debt-to-equity ratio) can show you a better idea of the company’s financial condition along with its operational efficiency. It is important to note that some ratios will need information from more than one financial statement, such as from the balance sheet and the income statement.

Case study .. Bollinger Band buy signal

Using Technical Patterns to Spot Money-Doubling Trades

Here are a few of the classic chart patterns and technical analysis tools that lead us to triple-digit winners over and over again:

Bear Flag: A sharp, strong volume decline on a negative fundamental development and several days of sideways-to-higher price action on much weaker volume followed by a second, sharp decline to new lows on strong volume. The vertical downtrend that precedes a flag may occur because of buyers' reactions to an unfavorable company announcement, such as a court case, or a sudden and unexpected departure of a CEO. The sharp price decrease is sometimes referred to as the “flagpole” or “mast.”
Bearish Pennant: A sharp, strong volume decline on a negative fundamental development and several days of narrowing price consolidation on much weaker volume followed by a second, sharp decline to new lows on strong volume.
Breakout: A period where a stock's value increases. Typically immediately follows a consolidation.
Bull Flag: A sharp, strong volume rally on a positive fundamental development, and several days of sideways-to-lower price action. The vertical uptrend that precedes a flag may occur because of buyers' reactions to a favorable company earnings announcement, or a new product launch. The sharp price increase is sometimes referred to as the “flagpole” or “mast.”
Bullish Continuation Wedge: A bullish Continuation Wedge consists of two converging trend lines. The trend lines are slanted downward. Unlike the Triangles where the apex is pointed to the right, the apex of this pattern is slanted downwards at an angle. This is because prices edge steadily lower in a converging pattern i.e. there are lower highs and lower lows. A bullish signal occurs when prices break above the upper trend line.
Over the weeks or months that this pattern forms, the trend appears downward, but the long-term range is still upward. Volume should diminish as the pattern forms.
Bullish Pennant: A sharp, strong volume rally on a positive fundamental development, and several days of narrowing price consolidation on much weaker volume, followed by a second sharp rally to new highs on strong volume.
Candlestick: A charting method used to display open, high, low and closing prices for a security, it uses the top and bottom of its bar to indicate high and low prices of the time frame indicated.
Consolidation: A period where a stock's value declines.
Cup and Handle:  Similar in appearance to Rounded Bottoms, this pattern includes an elongated U-shape. However, the pattern also includes a short period of consolidation of 1–2 weeks in duration, which tends to be down-trending. The pattern is similar in appearance to a coffee cup with a right-side handle, and indicates the potential for an uptrend.
Diamond Patterns: These patterns usually form over several months in very active markets. Volume remains high during the formation of this pattern.
Diamond Bottom:  This pattern occurs because prices create higher highs and lower lows in a broadening pattern. Then the trading range gradually narrows after the highs peak and the lows start trending upward until they break upward through the diamond formation.
Head and Shoulders Top: An extremely popular pattern among investors because it's one of the most reliable of all formations. It also appears to be an easy one to spot. Novice investors often make the mistake of seeing Head and Shoulders everywhere. Seasoned technical analysts will tell you that it is tough to spot the real occurrences.
The classic Head and Shoulders Top looks like a human head with shoulders on either side of the head. A perfect example of the pattern has three sharp high points, created by three successive rallies in the price of the financial instrument.
The first point—the left shoulder—occurs as the price of the financial instrument in a rising market hits a high and then falls back. The second point—the head—happens when prices rise to an even higher high and then fall back again. The third point—the right shoulder—occurs when prices rise again but don't hit the high of the head. Prices then fall back again once they have hit the high of the right shoulder. The shoulders are definitely lower than the head and, in a classic formation, are often roughly equal to one another.
A key element of the pattern is the neckline. The neckline is formed by drawing a line connecting two low price points of the formation. The pattern is complete when the support provided by the neckline is broken to the downside on a closing basis.
Megaphone Bottom: Also known as a Broadening Bottom, it is considered a bullish signal, indicating that the current downtrend may reverse to form a new uptrend. This rare formation can be recognized by the successively higher highs and lower lows, which form after a downward move. Usually, two higher highs between three lower lows form the pattern, which is completed when prices break above the second higher high and do not fall below it.
Moving Average: The average price of a security over a specified time period (the most common being 20, 30, 50, 100 and 200 days), used to find pricing trends by flattening out large fluctuations.
Moving Average Convergence/Divergence: A technical analysis tool that shows the relationship between two moving averages of prices.
Resistance: Price levels where sellers have shown a better-than-average willingness to sell.
Reversal Patterns: These patterns break out in a direction opposite to the previous trend. They mark a change in direction of the price of the stock. After pausing to consider their investment strategies, investors decide to reverse an existing trend in a stock's price. Examples of this type of pattern include head-and-shoulders tops and bottoms, double-bottoms or -tops, triple-bottoms or -tops, ascending triangles, descending triangles and symmetrical triangles.
Rounded Top: This is considered a bearish signal, indicating a possible reversal of the current uptrend to a new downtrend. A Rounded Top is dome-shaped, and is sometimes referred to as an inverted bowl or a saucer top. The pattern is confirmed when the price breaks down below its moving average.
Support: Price levels where buyers have shown a better-than-average willingness to buy.
Trendline: A line constructed by connecting a series of descending peaks or ascending troughs. The more times a trendline has been touched increases the significance of a break in the trendline. A trendline can act as either a support line or a resistance line.

Using Chart patterns for profitable trades

Let’s Take a Look at a Few “Classic” Patterns

 Technical analysis is based on historical pricing patterns, so how far back do technical analysts look for patterns?

That all depends.
Some patterns can be traced back to a market's inception, some go back a number of years, some are seasonal and some chart patterns can even be seen happening by the minute or second. Because technical analysis focuses on historical prices, patterns can emerge in the pricing during any time period.
“Classic” refers to a group of patterns that typically have a longer-term horizon (greater than 12 days) and that have distinct price movements that form distinctive patterns.
In technical analysis, the names of classic patterns generally describe the shape of the formation such as the double-top, double-bottom, head-and-shoulders top, ascending triangle, etc.
But, as I stated at the beginning, there are really only two trends to technical analysis: continuations and reversals. If we can remember that trends tell us direction, then we've got the important parts down.

Ascending Triangle

You may also hear this called an ascending right triangle. It's a bullish indicator.
Technically speaking, what happens is that an ascending triangle is a rally to a new high, followed by a pullback to an intermediate support level, then a second rally to test the first peak, followed by a second decline to a level higher than the intermediate-term support level and, finally, a rally to fresh new highs on strong volume.

Descending Triangle

A descending triangle is a decline to a new low on news that's followed by a rally to an intermediate resistance level, then a second decline to test the recent low, followed by a second rally toward (but not through) intermediate resistance. Then, finally, there's a decline to new lows on strong volume.
This happens when The Street becomes extremely bearish and, subsequently, a stock looks like it's done for.
Most analysts consider descending triangles to be the most reliable of all chart patterns because it's easy to define the supply-and-demand relationship.

Technical Analysis Takes Shape

In addition to triangles, technical analysis is full of other patterns, most aptly named for the type of shape they make.
Below, I'll describe a few of the more common ones for you that are considered classic longer-term patterns.

While there are a considerable number of patterns, many of them shorter-term in nature, the following will give you a solid grasp of the basics you need to become a pro at reading the charts.

Double-Bottom

A double-bottom occurs when prices form two distinct lows on a chart. A double-bottom is only complete, however, when prices rise above the high end of the point that formed the second low.
The double-bottom is a reversal pattern of a downward trend in a stock's price. This formation marks a downtrend in the process of becoming an uptrend.
Double-bottoms are among the most common of the patterns. Because they seem to be so easy to identify, the double-bottom should be approached with caution by the investor.
A double-bottom consists of two well-defined lows at approximately the same price level. Prices fall to a support level, rally and pull back up, then fall to the support level again before increasing.

The two lows should be distinct. According to technical analysis experts Robert D. Edwards and John Magee, the second bottom can be rounded while the first should be distinct and sharp. The pattern is complete when prices rise above the highest high in the formation. The highest high is called the confirmation point.
Traders should pay close attention to volume when analyzing a double-bottom.
Generally, volume in a double-bottom is usually higher on the left bottom than the right. Volume tends to be downward as the pattern forms. However, volume picks up as the pattern hits its lows.
Volume increases again when the pattern completes, breaking through the confirmation point.


Double top

 

A double-top occurs when prices form two distinct peaks on a chart. A double-top is only complete, however, when prices decline below the lowest low—the “valley floor”—of the pattern.
The double-top is a reversal pattern of an upward trend in a stock's price. The double top marks an uptrend in the process of becoming a downtrend.
Sometimes called an “M” formation because of the pattern it creates on the chart, the double-top is one of the most frequently seen and common of the patterns. Because they seem to be so easy to identify, the double-top should be regarded very carefully.
As illustrated above, a double top consists of two well-defined, sharp peaks at approximately the same price level. A double-top occurs when prices are in an uptrend.
Prices rise to a resistance level, retreat, and return to the resistance level again before declining. The two tops should be distinct and sharp. The pattern is complete when prices decline below the lowest low in the formation. The lowest low is called the confirmation point.
A double-top often forms in active markets that are experiencing heavy trading. A stock's price heads up rapidly on high volume. Demand falls off, and the price falls, often remaining in a trough for weeks or months.
A second run-up in the price occurs, taking the price back up to the level achieved by the first top. This time volume is heavy but not as heavy as during the first run-up. Stock prices fall back a second time, unable to pierce the resistance level.
These two sharp advances with relatively heavy volume have exhausted the buying power in the stock. Without that power behind it, the stock reverses its upward movement and falls into a downward trend.
Generally, trading volume in a double-top is usually higher on the left top than the right. Volume tends to dissipate as the pattern forms. However, it picks up as the pattern hits its peaks.
Volume increases again when the pattern completes, breaking through the confirmation point.

Cup-and-Handle

As the name would suggest, a cup-and-handle pattern includes an elongated U-shape followed by a short period of consolidation of 1–2 weeks in duration, which tends to be downtrending.
The pattern is similar in appearance to a coffee cup with a right-side handle, and indicates the potential for an uptrend.

 

The depth of the cup indicates the potential for a handle and subsequent breakout to develop. The cup should be fairly shallow.
The handle tends to be down-sloping and indicates a period of consolidation. Consolidation occurs when the price seems to bounce between an upper and lower price limit. You can track the down-sloping angle of the handle by drawing trendlines across the upper and lower price limits.
If the price ascends outside of the trendlines, then it has the potential for breakout. If the price ascends beyond the upper right side of the cup, then the pattern is confirmed, particularly if it is accompanied with a sharp increase in volume.
Volume tends to parallel the price pattern. Consequently, during the cup formation, as price descends, volume tends to decrease. Following a period of relative inactivity (at the bottom of the cup), the price pattern starts an upward turn and volume tends to increase.
During the handle formation, the volume decreases. However, you will notice an increase in volume when the price breaks out beyond the right side of the cup.
Cup-and-handles are long-term patterns that can be observed from about three weeks to several years.

POS Malaysia ... buy opportunity?

POS Malaysia chart as at 11.2.2010. Observe that price movement has become volatile for the last 10 months or so. At the moment there is a bullish divergence between price, RSI and MACD.(see chart above)
I believe that buying it at RM2.10 or below will have a good chance to make a profit in the time frame of 1 or 2 months. Just my suggestion.