Helping Investors Avoid Pitfalls

Small caps are the early indicators whenever market starts to pullback.
if you look into Singapore small caps you could see that they’ve been retreating since last week. Similarly if you look into US indices the Russell 2000  has just broken down from its two weeks sideway movement.

Russell 2000

I don’t hold any stock as of last Friday (2nd March) except the short position on Dow futures.
I only traded 2 stocks last week: WhirlPool (WHR) which I let go on 28th Feb and NOL which I held for 1 day and let go last Friday.

I’ve been trying to short Dow for past 3 trading days last week but each weakness was followed by rebound and this has caused me to cover back my short position.
I should have shorted Russell 2000 instead but the value was too big for me to bet on this.

As of this weakness I’m watching closely some us counters for new re-entry such as Whirlpool(WHR), Dryships (DRYS) and others which I would compile in a spreadsheet. Last February was a good month for my trading performance with return of over 60%. I believe I can’t repeat this return this March as the market is on consolidation pattern. So I may just trade Forex for little scalping activities.

I’ve exited all position on 20th Feb and prefer to stay sideline and occassionally nail some pips in FX.
Despite my still bullishness in the market, the market needs break. And I learn to know myself that I can’t sit in the market for too long.

I’ve attached a new watchlist for my US market observation.
I may trade more US stocks than SG stocks in the future.

Nice uptrend swing with immediate target at $1.20

This is one of the sad story among the longterm investors where longterm investment often times proves to be more harmful than useful. The stock crossed $5 in 2007 (after share consolidation) and dropped recently below $0.50 (end 2011).  Despite all this significant drop Raffles Education is still among the star performer if you were vested since its IPO in 2002.

I love how Mr. Chew runs his business. He is smart. His business model works. The only thing he can’t predict is the change of regulation by a government where he operates his business.
The change of regulation in China impacted his business greatly hence he can only adapt and manouvre the situation to have less damage. Despite drop in profit RE remains profitable each quarter and expanding in Asia Pacific becoming the largest private education group in Asia Pacific.

With current valuation below its assets and potential new emerging growth story from other part of Asia, Raffles Education could be in 1 or 2 years time become a multi bagger investment. It is a longterm investment worth looking.

Technical Analysis

My entry at $0.55 is based on divergence in RSI as well as base formation which took around 6 months; which should be a solid base.
During the day of quarterly announcement the share price shot up from $0.465 to $0.525 but in the following 2 days it revisted $0.485. Yes there were too many bears trapped for the past 6 months and were too eager to get out.
I looked into its weekly chart and saw the tremendous volume breakout. And personally I won’t be shaken out with such retracement. My immediate target is $0.65

HG Metal chart points the end of secular bear market. Its new CEO, Mr. Goh Kian Sin who is also the founder of the Oriental Castle Group (OCG), one of the key player in the foundation steel, would allow HG Metal to leverage on the expertise and relationship network of OCG to execute its growth in ASEAN.

The Group achieved a 18% growth in top line to reach S$238.8 million, while gross profit rose 10% to hit S$26.0 million.

On the prospect
The World Steel Association forecast that world steel demand will grow by 5.4% in 2012, with emerging and developing economies accounting for 73% of world steel demand.
ASEAN’s steel consumption continues to have room for growth because of its political and economic stability and high growth potential. ASEAN’s domestic production of 19.6 million tonnes of semifinished steel is insufficient, and is a large importer of finished and semi-finished steel. In 2010, ASEAN’s steel imports hit 41.1 million tonnes, up from 35.3 million tonnes in 2009.

Given the economic uncertainties and volatile industry conditions, the Group is cautiously optimistic of its performance for FY2012. Since the entry of OCS as its major shareholder in FY2011, the Group has leveraged on OCS’s expertise and network and embarked on a multi-pronged strategy to create long term shareholder value. Specifically, the Group has focused on the creation of new business units to increase the value-add of its products and services, as well as on expansion in the ASEAN region.

I love OUE not because I bought the shares only on Wednesday ($2.24) prior its huge run but because this undervalued Gem (RNAV $4.30) has so much growth potential. If you haven’t known OUE visit its website here.

Take a look how the management unlocked the value of old hotel such as Mandarin Orchard, from an old boring hotel, to become a chick shopping gallery (see Mandarin Gallery). This unlocking of the value in Hotel Mandarin Orchard has increased the hotel’s valuation by at least $500m as well as a new flow of steady rental income from the shops.  And soon you’ll see the DBS Tower 1/2 to be converted to a new chick shopping mall at its basement.

There is also Meritus Hotel management arm which offered hotel management service; Prime grade office tower such as OUE Bayfront, DBS Building and One Raffles Place.

To know more detail please check out their site.

Technically Analysis
Technically it has just confirmed its uptrend last week. The share price rallied strongly but snapped buck last Friday to offer missing out players a chance to join a new bull market. Yes, I believe this is multi year secular bull market despite talking of slow down by world government. I’m a price action trader. I believe on what I see in price movement instead of from what is said on paper.

The immediate target will be $2.80 with medium term resistance at $3.30.

Technology sector in US leads the new bull market with stock such as Seagate breaking into new high.
So if you’re interested with technology. Take a look any seagate supplier in Harddisk industry.

I did not have much time to post long emails discussing my strategy however I’ve sent out some friends my purchase of Tiongwoon at $0.235.
My rational of the purchase was that Tiongwoon appeared to be basing and if I keep it at least for 1 year it could reward me as multi bagger.

The reward is so tempting (see above monthly chart) and I just entered my 1st batch of purchase.

As for technical reading of my entry: RSI divergence.

If you recently have made millions out of your property investment, don’t count yourself a property guru yet as you could just be lucky to be sitting on the plot of property booming cycle. Similarly you could be making millions out of your stock market just because you are lucky to be awarded stock options during the bull market boom. That happened a lot to google employee and others during the dot com era.

A good investor is not always measured by one time excessive gain but it shall be measured by continual return of his investment over various type of circumstances. An example if you are a property investor and earned a windfall through enblock sale, you could still be making good investment return with new purchases. To do this it requires good analysis and timing which you could have defined as your investment strategy unknowingly.
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