Big Money

While everyone else has been talking about recent market correction the real fact is that the correction has been haunting China for many months.

The Shanghai index market has formed downtrending slope since Nov last year and the trading pattern was forming a big triangular formation with the final breakdown on 19th  April (see my earlier posting on 19th April).
The important support is at 2643 level with the final downside towards 2400 before a potential meaningful rebound.

Click here for SSE chart

In my opinion the US market has been acting within consolidation range. The 1000 points blip in Dow could be due to the technical glitch and any pullback towards the previous low made in Feb 2010 is considered a normal pullback behavior. Take a look at the Dow chart on how it’s moving upwards with a higher-high and lower-high swing which confirms a strong bull market. There is no trend reversal yet unless the Feb 2010 low is broken.

Click here for the Dow chart

My earlier posting in April suggested that Shanghai could retrace toward 2400 level (see SSE Direction) if I take into consideration the usual bad sentiment in May and low liquidity in June during the worldcup.

On shorter term trend analysis the index has tested the support today and this could provide a reaction for shortterm technical reversal.
click here to see SSE chart.

Some of my clients were asking me what to buy 2 weeks ago and my advise was that the upside was limited with greater downside unless they intraday trade which is not advisable.
And now I told them many stocks are at buying point but many already stucked at the top of the market. The fears come in and they refuses to buy and waiting to sell their stocks.

Trading requires patient and not always action.

This is how you see the response of the market towards good news:

1. Intel 4Q earning up 875% (14th Jan)
The stock rose prior announcement but saw huge selldown after the announcement.
And it’s dropped around 10% from the day of announcement.

2, Apple 1Q earning up 150% (25 Jan)
Stock rosed briefly on the date of announcement but closed unchanged.
It starts to fall the next 3 days on heavier than average daily volume.

3. Microsoft earning up 57% (28 Jan)
Stock rose briefly to 29.90 but closed -3.36% on 3x average volume indicating fierce selldown.

Most technology bellwether saw the earning above estimate however the market punished those stocks.
Last Friday’s announcement of US GDP grew by 5.7%, the fastest since 2003 only managed to keep indices to stay positive for first 2 hours before the continual selldown.

The dance in the market sounds to me like bear tango instead of one step down, two step up bull-salsa.
The key of profitability is to dance the music played in the market.

After trading sideway for past 4 months sembcorp finally breaking out from its resistance and could be heading to $4.50 on midterm target.
I’m rather bullish with its market action today.

Sembcorp chart

This stock moves along the BDI strength. And if you look at its chart, it’s still at the base and may breakout from current consolidation.
http://www.panocean.com/

STX and BDI charts

Noble Group Ltd: Best proxy to economic recovery
Summary: Noble Group Ltd (Noble) has recently strengthened its balance sheet via an equity placement and a separate non-convertible bond issue, raising net proceeds of over US$1.4b. The group’s enhanced capitalisation not only equips it with financial flexibility for acquisitions, it also ensures sufficient working capital in the event of a surge in commodities prices. Furthermore, the bond issue effectively extends the group’s debt maturity profile. We expect commodities to be key beneficiaries of an economic recovery and highlight Noble as our preferred pick within this sector by virtue of its diverse exposure to hard and soft commodities, coupled with a strong balance sheet and proven execution. We maintain our BUYrating on the stock and raise our fair value estimate to S$3.14 (from S$2.67) based on 17x FY10F PER.  (Lee Wen Ching)