Chart Patterns Part 2

In this video, I continue on a few more chart patterns, they are: Double top and double bottom, rectangle and triangles chart patterns.

Chart Pattern Part 1

I learn a lot of investing ideas and knowledge from youtube, so now its my turn to produce some learning videos to benefit others. In this youtube video, I go through the 4 principles of chart pattern so that you can understand better and utilise it in your investing.

March 2014 Market Report

A monthly report on the US, Singapore and the Malaysia stock markets, as well as the outlook of gold and the palm oil markets.

Gold

Since January, gold price has gained 10.6% from US$1220 to the current US$1350 due to the rising tension in Ukraine as gold always favours uncertainties. For people who are still keen on holding gold as long term investment, perhaps you might want to know what is the long term prospect for gold.

Below is the 100 year old chart for gold and silver. As you can see the precious metal seems to follow this repetitive price pattern - 10 years of bull run followed by 20 years of bear run.  Historically, gold spikes in the year 1934, 1979 and 2011. After these spikes gold price would seem to follow some prolonged period of bear trend. The bear trend would start with price slump for more than 50% followed by a few rebounds and then the price would move in a horizontal trend for many years.

If history were to repeat itself, we shall take 2011 gold price peaked at US$1900 as the starting point, divided by 2 gives us US$950. This is quite a scary scenario for gold investors who are hoping that their gold will go back to the historical high of US$1900. Hence, I believe the peak should be over and we are currently in the secular bear market of the precious metal.

Below is another chart to show  the short term outlook for the gold price. In the short term, gold is bullish as it has broken above its 200 day moving average and there was a double bottom formation in the chart. This chart pattern may bring the gold price to the US$1500 level which I think the maximum that it can go as my view is that US$1200 - US$1500 is a reasonable long term price range for gold.

At the moment US$1200 is a crucial support level for gold, should it break below this level, chances are it may move towards below US$1000 level. 

The above are just my personal view on gold price based on technical analysis. I'm sharing this because I think gold is an excellent investment for long term, however we must recognise that it is a commodity which has its own inherent risk. I would advice people to hold not more than 10% of their portfolio in gold, unless the gold price did go below US$1000, then I don't mind to hold a bit more.

Forex Trading

More and more people are asking me about forex trading, whether it is a sound investment and how they can be successful in forex trading.

Personally I think investors are good to expose themselves to various forms of investment as ways to diversify their portfolio provided they understand very well the risk involved in each type of investment. Forex trading involves higher risk than the usual equity investment that requires certain trading skills and discipline. Of course all these can be trained as you go along in the journey of trading, be it forex, futures or equity trading.

So if you were to ask me if it is a sound investment, my answer is "Yes" if you trade with a plan, this plan must state clearly your entry price, target price, and your stop loss.

Next, I would like to share with you my personal views on how to be a winner in world of forex trading.

1. Big Picture

Too many traders get too detail in the day to day, minute to minute trading which often make one get confused and frustrated. Identify the bigger trend first. For example, if you want to know which currencies are superior you need to know where the money is flowing to. In 2013 money has been flowing into the US market which caused the USD appreciated against other currencies. In 2014, analysts are expecting money should be flowing into the Euro zone markets especially the UK, hence we should expect USD, British Pound and Euro dollar are the superior currencies for 2014.

Next, which currencies are weak? The emerging market currencies are weak, the Asian currencies are weak, Yen is weak due to massive money printing, as well as commodity rich countries like Aussie dollar and Canadian dollars are weak too.

With these big picture, we shall come to the next step: selecting the pairs.

2. Currency Pairs
When choosing the pairs, always pair a superior currency with a weak currency to get a clear trend in your chart. If you pair 2 weak currencies or 2 strong currencies together, chances are you would see a very irregular chart pattern that often lead you to no where.

3. Trading Plan
Finally always trade with a plan that spells out exactly what is your entry price and at what price you need to cut loss. Calculate your reward to risk ratio for every trade and stick to your plan strictly.

Other factors such as interest rates, current account deficits and other economic issues will affect the currency of a country too, but the above 3 items are basic ingredient for forex trading that I hope will help those who just started in currency trading to have a better picture.

Below is the USD index chart for 40 years. I see that the USD seems to follow a 7 year bull run chart pattern. 1978 - 1985, 1994 - 2001. If history repeats itself, the next bull run is 2011 - 2018. This is just my personal view that at least this is what the chart is telling me, you may view it with an open mind.

Good Luck in your trading!

How To Avoid Losing Money In Scams

Recently a close relative of mine was scammed away more than RM100k and I think I need to write this article to warn people about scams.

This can happen to anyone, whether or not you are educated and you have seen many times these things happened in the media, you may well be a victim of a scam. You've saved all your life and you've been investing wisely to accummulate your wealth, but one unlucky day you encounter a professional syndicated group of people who got hold of your emotional weakness and you may lose your life savings.

Internet Scams

The most common is through internet. It is reported that many scams are initiated through the Internet; victims range in age from 18 to 81 and come from all socio-economic backgrounds.

All types of advance-fee scams have one point in common – the targeted person is led to believe that he or she has a chance to attain something of very great personal value (financial reward, a romantic relationship, etc) in return for a small up-front monetary outlay.  As a general rule, if it sounds too good to be true, it probably is.

If you feel you have been a victim of an Internet scam, please consult the publications below for help and send all reports of Internet fraud directly to the Internet Crime Complaint Center.  If the scam originated through a particular website, notify also the administrators of that website.  When it becomes apparent you are the victim of a scam, it is best to end all communications with the scam artist, rather than attempt resolution.  It is extremely rare for victims to recover lost money.  If you feel threatened in any way, you should report your situation to the local police. 

Investment Scam

It is reported that every month, RM100million is lost to commercial crime in Malaysia. The most common investment scams are gold investmet ad forex. Mohamad, an airline clerk had lost RM52,000 in a forex scam; Another victim, Yusof (not the real name) had lost US$100,000 after investing in an online get-rich-quick scheme that promised  a “guaranteed” return of US$1million.

Any person or company who commits an offence under Section 25(1) of BAFIA 1989 shall, on conviction, be liable to a fine not exceeding RM10 million or to imprisonment for a term not exceeding 10 years or to both. Any person or company who commits an offence under Section 4(1) of AMLATFA 2001 shall on conviction, be liable to a fine not exceeding RM5 million or to imprisonment for a term not exceeding 5 years or to both.

Members of the public are advised to be cautious of investment schemes promoted on the internet, through phone calls or through seminars conducted by individuals or companies that are not licensed or authorized by Bank Negara Malaysia to accept deposits or to conduct foreign currency dealings. A list of all licensed institutions that accept deposits is available on Bank Negara Malaysia's website at www.bnm.gov.my.

While it is important to invest wisely to accummulate your wealth, it is even more important to prevent your money lost through scams.

A Review of 2013

In review of 2013, I made a few predictions based on my research on the historical price data that:

1. 2013 was generally a bullish trend
2. Support and Resistance was 1600 - 1840
3. Aug - Nov was volatile
4. Buy in the month of Feb, May, Aug and Nov
5. Last quarter of 2013: Oct mixed, Nov down and Dec up month

Most of them were right on except: October was a clear up month not mixed, and that the year end closing was above my 1840 resistance price target which closed at 1866.

In recall the year before 2013, that was at the end of 2012, people were generally bearish about the Bursa Malaysia due to the uncertainty in the coming election, but it turned out fine and many people make big money in the stock market. So this year 2014, although people are worried about the cooling measures of the property market and rising prices, but I think our market is quite resilient with strong support at 1680.

Last year I kept mentioning about investing in the right sectors because we had clear theme such as "Iskandar", "MRT", and projects on Oil and Gas. But this year I've been searching for investment themes and come up with few possibilities: Tourism, KL-Spore High Speed Train, MRT, health care, and plantation.

Wishing everyone Happy New Year! May this year be full of opportunity in the stock market and the property market!