Learn TA from the Teacher of the Teacher

Everyone knows that I do conduct stock analysis classes for the general public, however I 'm not selfish to recommend to people who would like to learn advance technical analysis knowledge from a very dedicated teacher who is more than qualified to teach the course. He is also my teacher, Mark Lim.

Course: CFTe/ CMT online Masterclass in Financial Technical Analysis

Website: http://www.tradermasterclass.com/

• Course Format: online webinar
• Duration: 30 weeks
• Commencement Date: 15-8-2013
• Course Schedule: One online lesson per week
• Lesson Times: Thu 7:45pm - 10:45pm

To know more, please visit his website or contact Stella on 012-4994885

Correction Phase Continues

The US DJIA and S&P 500 had a critical move last night that finished both below their trendlines. This will be the first major correction since last year November if the DJIA and S&P 500 couldn't go back to their support within 3 days starting today. Below are the charts for the possible downside targets for the US markets:

Historical speaking, these kinds of major corrections happen once or twice a year in the US markets for the past 3 years. In 2011 had a 18-20% correction from top as the correction was overdued. The DJIA broke the 1 yr trendline in August due to debt ceiling crisis in the US, and it lasted for about 8 wks.

In 2012, there were twice, once in the mid-year May, the other end of the year November. Each correction is 9% from top and the duration was shorter than 2011.

Hence if 2013 experience like what 2012 did, most likely we shall see 2 corrections for the year with one in June, the next in November as well. The downside target for DJIA is 14,100 which is calculated from subtracting 9% from the recent peak in May. I see strong Gann support at 13,800 for the DJIA.

Similarly, for the S&P 500, downside target is 1530 (9% from recent peak) with a strong support at 1500.

For KLCI, most likely we will be supported by the long term trendline that started since March 2009 which is 1680.

As for STI, today we shall see the index testing the recent low at 3094, the immediate support is 3075, if this level is broken, the next support level will be 3000.

In short, it is very important we can identify whether this is a crisis where the stock markets undergo a major bear trend with multiple months or a healthy correction with 2-6wks of downtrends. For a crisis like the recent ones, we had the 1997 Asian Financial crisis, 2008 US Subprime Morgage crisis where wee saw rising interest rates, massive corporate failures and bank failures, and currency depreciations.

On the other hand, for a correction to take place, it will be preceded by news that erode investors confidence such as: possible Greek exit the eurozone, US debt ceiling limit, but not like the above crisis scenarios. This round, its the withdrawal of QE should the US economy improves further. Frankly speaking, I think what the US Fed is doing is on the right path as we do not want to see excessive money printing, which will give rise to a lot more problems in the future.

Finally, the above analysis is my own opinion, it is not for recommendation or advice. I'm just sharing my knowledge as I want to help people to see things in a more objective way, the more information you have, less uncertainty it is.

KLCI Correction Phase

Here are some charts looking at how KLCI perform during the correction phase.
Usually I consider a valid correction phase as price violates both trendline and the 20 day MA. Hence from the chart below we see once these 2 lines are violated, the correction phase will last  9 - 47 trading days or 2 - 9 wks depending on how bearish it was.

From the findings:
2009 - no major correction as just emerged from major bear trend in 2008
2010 - 2 times
2011 - 2 times
2012 - 3 times
2013 - so far 1 time

KLCI Historical Price Chart 1981 - 2012

Legendary investment guru, W.D. Gann once said: "Each decade or 10-year cycle, which is 1/10th of 100 years, marks an important campaign. The digits from 1-9 are important. All you have learn is to count the digit on your fingers in order to ascertain what kind of a year the market is in."

So I did a research on our KLCI prices for the past 32 years to see if there are any repetitive chart patterns and I discovered that:

1.      the years ending with 3, 6, 9 are usually bull years.
2.      among these 3 years, year ending with 9 has the biggest gain in history with 30% -175% gain, followed by 3 with 30% - 100% gain, and 6 with 18% - 22% gain. 
3.       years ending with 1 and 5 are the worst performing years with year end closing price below or equal to the beginning price. 

          4. years ending with 7 and 8 tend to have stock crashes with the exception of 1988.     

     Although the charts are only applicable to the KLCI component stocks, but these findings are amazing! Most people think that market is random, you can't predict the market, however, the research shows that history does repeats itself and market is made up of crowd psychology, human behaves repetitively to certain external stimuli. In addition, in cycle analysis, it is believed that the "Nature's Law" or the "Secrets of the Universe" are affecting human emotion which in turns affect the financial markets. At least this is what Elliott and Gann had proposed in their books. Gann seldom revealed his secrets in trading as he thought that "people are not ready yet!" Gann had his unconventional ways to forecast the financial markets that I will not elaborate further (but I may in the future if people are more ready). 

       Since It is always good to use both fundamental and technical analysis in stock analysis,  let's look at this findings objectively. For example, if 2013 is a bull year, then it must be supported by the fundamentals. The EU economy is weak with austerity measures, the US is recovering but unemployment remain high, international fund managers most likely will consider emerging markets to invest, especially the South East Asia nations like Indonesia, Thailand, Phillipines and Malaysia due to their vibrant economies that are undergoing  structural change. As standard of living is rising for these emerging markets, these economies have rising domestic consumption, improving infrastructures such as the construction of Mass Rapid Transit in Kuala Lumpur and Jakarta, and moreover, all of these emerging countries have pro-business / pro-investment governments to attract FDI into their countries. 

     On the other hand, we must not forget history shows that with the influx of FDI, or foreigners purchasing our properties and shares, these emerging economies are subjected to the risk of hot money being pulling out if there is any negative news. 

      I do see some similarity between now and the 90's. Knowing what had happened before, it is important not to let the history repeats itself. These economies must do some precautionary measures such as cutting budget deficits, curbing asset bubble, and of course, let's build a more efficient government together!  

  

      Below are the historical charts:

   

Musing On Election

Some after thoughts on the Malaysian General Election:

High Turnout Rate

The 13th GE has the highest voting rate in Malaysia's history with 85%! This shows that Malaysian citizens are politically conscious and we want to take part in this meaningful event.

Super Senior Citizens

Super senior citizens age 90 and above have shown their keen support for the country. From the statistics, there are close to 40,000 of these people voted. Among them, East Malaysia including  Sabah and Sarawak has the highest rate of participation with more than 10,000 votes. For secrets of longevity can ask these people!

Social Media

For this election, social media plays an important part in getting the youngsters to be interested in politics. Of the 13.3 million registered voters, about 40% are aged below 40 years old, these people are active users of social media such as Facebook and Twitter. Hence social media becomes an information hub for the voters where they can learn the procedure for voting from the youtube videos and photographs. 

Chinese Tsunami

The prime minister made a statement after the election stating that the Chinese tsunami is the contributing factor for the poor win by BN. However, from the statistics, we can see that urban Malay votes are deserting the BN too. It is clear that it is more than ethnic issue here. From various sources of surveys, the top reason why the Malaysian are not happy with the government is: Corruption! And it is this "fighting for anti-corruption spirit" keeps the Malaysian together regardless of race.

KLCI

Now that the election is finally over and BN won, the market responded with a big rally. My forecast for KLCI, based on Elliott Wave Theory, is 1800 by June or July, looks like it has already touched this level (intraday) yesterday, which was the next morning after the election day. Hence I will raise my target for this year to 1840, with a strong support at 1600 till end of the year.

Finally here's a quote from Obama: "In the end, that's what this election is about. Do we participate in a politics of cynicism or a politics of hope?"

My next investment workshop for the beginners will be:

Date: May 18th 2013 (Saturday)

Venue: Women's Institute of Management (KL)

Contact: 03-77250268 for more info.

Price Range for KLCI

I would like to share with you one of my recent research on our KLCI prices. From 2010 onwards, KLCI seems to react well with these prices.

In your chart, draw horizontal lines with numbers 1320, 1400, 1480, 1560, 1640 and 1720 across the KLCI chart, and you will realise these are support and resistance lines for our KLCI.

Notice that I use 80 points for the lines, you may try 40 points for shorter term analysis. The purpose of this exercise is to establish a bigger picture of where are the possible turning points. I hope this helps in your KLCI futures trading.

Please note that the study of price range alone does not generate buy or sell signals, this is just an addition to your tools of arsenal for trading. Always remember to use with trend lines to spot the key reversal points.

Happy trading,
Pauline Yong

BTW, my price target for KLCI for 2013 is 1560 - 1800.

Choosing Stocks With PRINCE D Criteria

In my book "I Love Stocks" I used a set of financial ratios as stock selection criteria, they are:

PE ratio, Return on equity, Institutional (big players) support, Net tangible asset, Current environment scan, Earnings per share growth and Dividend yield. Taking the first alphabet from each we can get: PRINCE D or we call it the Prince D, like Princess Diana.

In January, I have come up with a list of stocks to share with my students who attended my stock analysis workshop (see the tables below). Many people have been telling me they are waiting for the big crash after election then they will enter the market. Then I asked them, what if there is no crash, and the price shot up after election, would you still buy then?

If everyone thinks there is a crash on certain dates, most likely you won't see one because a stock market crash happen unexpectedly, not on anticipation.

Then when can I buy (into the stocks)?

One good strategy is to buy on stages. Buying on stages will eliminate the negative emotion that is affecting your judgment in stock selection. For example, you may invest 1/3 before election, another 1/3 of your available funds in May, and the final 1/3 in November and hold the stocks until 2014 - 2015. The reason why invest in May and November is because if you look back at the historical prices for our KLCI, there are certain months always experience cycle low, they are: February, May, August and November. If you are a long term investor who has decided to invest regularly in the stock market these months are good entry points for you.

Below are 3 categories of stocks for selection. The first is the dividend stocks, good for FD alternative. 2nd group is small cap stocks as I think small cap stocks offer better capital appreciation than the larger caps now. The 3rd group is the political linked stocks which I believed if BN wins, these stocks will soar.

Everyone has their own investment style, personally I do not like to speculate, I prefer to buy and hold, or I hold until there is fundamental change in the investing environment such as inflation is too high, interest rates are rising or there's a war.

This article is not for stocks recommendation, its for educational purpose.

Happy investing,

Pauline Yong