Index uptrend intact?

For fun, let's validate if the runup of the PSE index is still intact based on one Technical Analysis (TA) concept that's fairly easy to follow.

The check is through MACD analysis. The requirement is actually just a quick glance to see whether or not the short term moving average (orange macd in the most bottom graph below) is above the intermediate moving ave (violet) and long term (green). If the orange is above the other two, that's good, the uptrend is suppose to be "holding."

Further in TA parlance when any of these lines cross, it is an important event.

This means we should have bought some time end-December when orange line crossed intermediate-term (violet) and bought even ore when orange crossed green (long-term). 

Same principle applies when lately orange crossed below violet when you should have sold the index, if you are trading only for the short and medium term. You should have gained minimum 7.5% through this system. If you are in it for the longer term, you should still be holding because the orange line is still above the green, and moreover, orange is threatening once again to cross above intermediate just last Friday.

Not that hard to follow, aint it? It is also not that hard to do as well given that BPI and most other banks have UITF anchored on index today that you can quickly invest in online. FMETF also exists and can be traded in the PSE. Youre not any more relying on bogus fund managers who pick speculative LC, DMPL, and the likes that can deplete your hard earned money.

But among the problems in using this method is 1) when the index breaks down too fast and too hard. You might not have the time to pull out. 2) You wont have the chance as well to "beat the market" (beat the index) on the basis of your own belief on companies and strength of your own research. It also doesnt take into account how expensive (can be interpreted as how 'scary' in terms of risk/reward) already is the market, and 3) the lines might be crossing too often in a volatile market, every investment just becomes virtually casino bets.

As Ive written elsewhere, Im not a full believer in TA. Im more into the value of the company (I wont call it pure value investing yet a la Buffett) and the caliber of the people that run the company. I also get a bit of 'entertainment'--I get fulfilment and satisfaction in managing my money myself rather than just allowing the market or another fund manager to do it for me.

To compensate, I invest in UITF that is based on index invested on the side, but the bulk of the funds are still divided between a nimble 'short-term' traded portfolio (brokerage under BPI), and intermediate and longer-term under Firstmetrosec. It works for me. Although Im not beating the index year to date, it brings me fulfilment to pick and put money where my talk is.

Technical Analysis and Multiple Trendlines

As most of the readers of this blog knows, Im not fully into Technical Analysis. I like more 

1) the news (especially if my current disposition is that of a short-term to intermediate trader)

2) balance sheet and p&l statement, 

3) the caliber of the CEO and other executives of the company, 

4) the current price of the stock compared to its growth potential, 

5) and the inherent growth story of the firm 

to speak for themselves. 

I also try to make myself aware of foreign buying. 

But TA believers would say that the chart should be able to reflect all these. Meaning the sentiment on fundamental and management should all be in the chart. I dont agree. 

Within the chartists sphere, these have some weight on my buying or selling moves:

--the cup and handle patterns is based on a solid psychological nature of humans, so Im on the lookout for this pattern always. 

--simple moving averages at 50 (for short term) and exponential moving average at 150 or 200 (for intermediate). I also watch these because many chartists are supposed to buy (or sell) in droves when these are broken. We of course want to ride with them, and hopefully pluck some short-term profit. 

--RSI is okay as a guide if the increase or decrease is fairly gradual. A jerky increase up and down are more news or hype-based; RSI is invalidated in these cases. 

--spikes in volume are also very meaningful. 

--psychological supports and resistances (especially if the number converges with a moving average) also appear valid, especially on large-volume traded stocks 

--if i know i will have time to monitor short-term trading (where, win-or-lose, I intend to sell back the same position that I bought in  to 3 weeks), I also check candlesticks.  

One TA area that appears iffy to me is the turf of trendlines. 

A famous chartist getting paid for his analysis (selling subscription) was spouting last year that our index will reach 8500, solely because of the black, purple, and moss green trendlines that are supposed to be pointing upward of 8000. Those to me seem arbitrary, especially since the P/E of our index was already a very expensive 20+.

And then beginning on the sell-down last June, an infinite number of triangles and lines can be formed, almost at leisure. Could trendlines be nothing more than pastime for investors, as kids enjoy drawing sketches and figures on their play time?  

In any case the most optimist among us should be happy that chartists should be joining the buying today since there appears to be an upward channel that formed early this year (see the two short parallel lines on the far right of the chart below). 

Speaking if channels, TEL is supposed to be on an upward channel Oct 2012 to near July, but it was turned into a 'confirmed' downward channel since June 2013 to February 2014. But an upward channel can also be simultaneously from last November 2013 to present. So even with channels, there are multiple readings possible. 

Anyway, there's no use becoming snobbish of methods. I would agree that the best compromise is to choose a 'pet' based on present value and fundamentals (or 1 to 5 above), and then use TA to decide on the moment when to bet high. In short, choose a company that you will trust and then read some chicken intestines to reinforce the decision when to make big bets or... cut loss for that matter. 

Pick of the week for Wk 16 is to accumulate your favorites; give a special eye on banks

I was about to post yesterday LRI as the pick of the week because of the merger news, but because of an early morning meeting, I wasn't able to go online even to open brokerage and post a market opening buy (to add up early). LRI since flew away. Im selling current position--entered into months ago--in LRI at +20%..

I suggest you already position on other previously-good performing stocks. Check their upsurges during the bull run last year. These are my off-the-cuff suggestions:

--GTCAP still has a very probable +5% in short-term.

--then the banks BPI and MBT still have big room to increase, until before BSP announce an interest rate increase (you must watch out for news on this; we must exit some positions before they do the announcement and then just buy again below. bsp has no choice but to increase interest rates because the increase in inflation is also imminent at this time).

--BEL is a good stock to accumulate until Q4 when they open their casino and a surge will occur (if you wait that long, the price might already be too high). See the trend of BLOOM months before they opened Solaire in 2013.

--TA has room until it reaches another resistance at 2.18 - 2.23

But these are not strong recos at this point. I suggest you still look around. Look around on your own. Research. Check history, previous price movements of specific stocks, news, committed milestones. For power companies, for exampl, check when plants and increases in capacity are planned to happen.

For me--Im still maintaining a good cash position just in case AGI, MEG, SCC, or PGOLD temporarily goes on sale. I have already GTM buy points set for these stocks.

Pick of the Week for Wk12 is FLI (and buy a bit of TA if it does another short handle)

I'd like to speculate a bit this week, and so I added on my existing position in FLI. I saw some foreign accumulation recently and thought that it has gone sideways long enough. FLI has good below-10 valuation, it is among the properties that hasnt gone up much yet, and its projects have a clear path and sched, their mall and hotel in Albang are both doing well, their land bank at that part of Manila is uneatable, BUT... this at best is still a very risky hunch-based bet more than based any deeper analysis. The stock is not trading as high a volume as MEG (it can be brought down any time by a big fund--local or foreign), it's not a 'visible' in terms of press releases compared to A Tan stocks, it failed to break resistances several times in the past, it's also not nearing a div announcement (this usually pays in June).

[In fact, if you chose to place your bet in SMC, you could have achieved much much higher gain upfront. I just decided last year to place zero money with RSA, until his borrowing stops to a level in balance with SMC's earnings growth].

Also, TA might go down to 2.0 before it goes up again. Im going to add to my existing position in TA, at that level, partly for the purpose of releasing some cash. My faith in this company presided by Dean Viray remains.

Pick of the week for Wk5: stand by for hoped-for short term fall

I'll obviously be biased by my move the past few days. Again, I unloaded all of my DNL and BDO, substantial of MEG and TA, and some MBT, hoping these will 'cool-off' a bit before I reenter.

So the pick of the week is to observe these five to go lower by 25% of their recent increases. Most of them jumped by at ~15%, so I would like to see them go down by  3.75%-5% from their peaks or before  I enter again.

As usual, since we are not yet in a clear general uptrend (for the market overall), our entries will be in minimum tranches.

Waiting and Hoping for Handles

Many of our favorites are overbought, and small-time investors like us, expectedly, are on the sidelines waiting for them to "cool down" before getting in again. In Technical Analysis parlance, this means that the RSI is already above 70. DNL for example is already hitting 85 and TA 75. Chartists want this to go down to a 'healthy' 50 or so for these stocks to resume an uptrend again.

If all goes according to plan, a familiar cup and handle pattern would also emerge. So this means that many are also waiting for the handle portion You should read up about it if you're not familiar with cup and handle.

I have unloaded completely DNL and BDO. Also, offloaded substantial MEG and TA, and a small amount of MBT. All of them green. The critical thing now is to know if a real handle will form and how deep a handle to wait for before getting in again.

References say that the handle downtrend shouldn't last longer than half-the-time of the previous uptrend. So, if DNL has been on the second half of the cup for 5 weeks, the downtrend should not last longer than 2.5 weeks.

The depth of the downtrend should ideally not be more than 25% of the cup's tip. So, if DNL peaked at around 7.1 from cup's bottom at 6.03--the handle's bottom should only be around 6.8.

Finally the volume should not be going up (preferably very small) during the downtrend of the handle.

I dont fully believe and subscribe to Technical Analysis as a whole, but the The RSI can be just a simple tool to check if the stock is just going down or up too fast, so we should also check it from time to time.

Cup and Handle I think is also solidly based on a psychology of investment crowds, so I always look for its emergence myself. Although in the end, all of these could be crapshoots/casino_bets only, especially if the PSEi and the overall market is really not in an uptrend (not confirmed up to this day).

So, in the words of the great Philosopher Inday Badiday... if youre still playing the PSE, still be "careful, careful. Kailangan parating maging careful."

Pick of the week for Week 45 : TA TEL, and look out for buy-again points in GTCAP, SCC, MEG, AGI, JGS, and AEV

TA has good momentum currently and the sell volume is getting thinner and thinner since late last week after it surged up. Im heavy on TA; I was able to get back to my previous big position after I sold near half of holdings at its 2.8 peak months ago. Even though TA was not in my pick of the week list, I just bought tranches gradually when it was hovering at 2.1 - 2.2. This was done on faith given TA's growth potential, the management of the company, and its clear plans. Any one can read up on the plants and windmills under development, as well as Dean Viray's existing clout in the industry (including regulators). Lastly, Ive never lost yet a trade in TA and it gave me consistent hefty profits since to start of the year, so to support the stock's price at 2.1 can be sheer returning debt of gratitude (utang na loob) on my part :-) Further, Im still expecting gains on the property divs for Trans-asia Petroleum.

I was not expecting TEL to go back to below 2900, more so to go back insider its previous strong support at 2800-2830 range. This is always a safe stock to accumulate given its dividend yield. Furthermore, its current P/E is 15.8 while GLO is already at 21. I think the market is mis-pricing TEL and we should take advantage of the opportunity handed to us. Im ready to just add and add tranches even if TEL goes down to 2500. After adding earlier today, I now hold 5 tranches of TEL in my two ports (two brokers) combined.

Both TA and TEL I believe should gain +10% within this month, but I'll be starting to sell at +8% vs. their current price, considering that we are still not in a confirmed overall uptrend.

One should also keep an eye on stocks that may offer good reentry points within the week. MEG I think is a buy-again/add at 3.69, AGI at 25.30, JGS at 41.50, and AEV at 49. I have already set GTM buys myself at these levels. Part of the wishlist is also for solid favorites (but not holding currently) GTCAP to go back to 803 and SCC to 240ish before we enter 2014, but these could be far fetched.

And now we're starting over again...

Our market's year-to-date gains were erased last Wednesday. Yes, it's like starting over again... and worse, to some, present sentiment is bleaker than in January. There are doomsayers who want the index further back to 5200, back to exactly a year ago (instead of just beginning 2013), when Ghost month was also ending.  

Fortunately, the index bounced back +6% in two days, and I profited from the swing. The first gain was from a purchase in GTCAP, which I believed did not deserve falling -10% in one day. And then by early Thursday, when there's an apparent chance of a big bounce, I got in in AGI, CPG, TA, and VLL (these also tumbled down to below 'strong support' on Wednesday). By Friday, there was already a positive general sentiment. Our sell points for AGI and VLL got hit, bringing back cash position to above 30%. We came out okay for the week.

Now, what's next? We're ending Ghost month next week and the past 3 years show consistent good performance from this time up to year end. The problem though is the volatility that remains in our market. Bleak conditions, not present last year, like the impending bombing of Syria and QE easing of US Fed, continue to bring us a shaky market. If you observe the exchange of trades in a stock like SM, even for just a few minutes, you can see the extraordinary tussle between bulls and bears. And worse, the bears are mostly foreign funds that seem violent, with bad intentions, seemingly intending to leave carnage, when they exit. Although I have some doubts in divesting AGI (this stock prove to be one of the most resilient across the PSE), it's only right to secure some profit and better our cash positions in this backdrop.

It's also useful to consider that many traders are resigned to the scenario that we will not be able to go back to a 7 K index this year. Most of them are just hoping to go back to 6600. And 6600 should be an easy target, if we base on the +11% that happened last year. I would also be happy if we hover between 6600-6800, BUT with stability. It feels not an even playing game when there's always a threat, that 'easiness' from foreigners to bring down a blue chip by -10% in a day. And the minute they decide to do that, you may be occupied in a meeting in the office in your day job.

What would bring that stability? 1) the Fed should announce a firm timeline on what they want to do. 2) the foreigners should finish withdrawing 3) probably more Pinoy buying strength. It's interesting to note that we're still net-foreign-sell days during the big bounce on Thurs and Fri. Local funds believe in our companies in that two days enough to prop our market back. I think this is not empty fear, but a threat that is apparent and which we should be defensive against.

On another macro point of view, going back to January prices somehow disregards all the good news and achievements (of our OFW's, of our call center agents, et al) from start of the year to now. It's like the pride-inducing GDP disclosures, investment upgrade never happened at all. And the rosy corporate earnings are negative instead. Should we be part of this group that disregard this solid data?

On the other side, we could also look at it this way: we could have been on a lower level today if not for those catalysts. And yes, we have to be at peace with the fact that our PSE is one of the most vulnerable to outside factors because 1) it is not that big enough yet and 2) we Filipinos who participate in equities are also not yet that many. Following foreign funds is still one of the most safest trading strategy until we find resolutions to the factors. If I use this, I should divest (or at least lessen) big position in MBT... that's something to ruminate about at the start of the week.

Bottom line, I envy those starting at 100% cash today. It's a good time to start. Or if you cut loss, it's a good time to start over again...

Market Skim Through: July 23

A good green day today after President Noynoy's SONA, although I'm not sure whether or not investors, more so foreign investors, were really glued in front of their television (or laptop or monitor or tablet, etc), taking notes of that one speech. And if that speech really moved us to click buy today.

In any case, TA, soared on the disclosure of property and cash dividend. Take note that this cash dividend is on top of the 0.04 from just a few weeks ago. And this property dividend is not at the level of a rumor any more, since it was also disclosed weeks ago. (More on TA on another post). 

This rise gave my portfolio a big boost, glad to see my paper loss drastically reduced, and recovering.  

MPI was also a good ave down move for me; was correct to anticipate that the market will interpret positively MVP's move to strengthen foothold on MER (by buying some from SMC's). 

#	Stock Code	Last	Change	%Change	Value
1	SEVN	120.0000	19.0000	18.81%	297,243
2	AB	23.9000	3.4000	16.59%	1,018,855
3	ALPHA	46.5000	6.5000	16.25%	11,768,785
4	PERC	7.0000	0.9000	14.75%	700
5	SPC	5.5800	0.6800	13.88%	5,580
6	TA	2.7200	0.3200	13.33%	218,118,710
7	ATN	1.2600	0.1000	8.62%	269,000
8	UPM	0.0130	0.0010	8.33%	356,200
9	BCB	9.3000	0.6000	6.90%	6,360
10	SPM	1.7600	0.1100	6.67%	8,440
11	AAA	3.2000	0.1900	6.31%	226,340
12	SLI	0.7100	0.0400	5.97%	1,186,610
13	MIC	5.9200	0.3200	5.71%	504,755
14	LCB	0.6200	0.0300	5.08%	13,816,770
15	SUN	0.6200	0.0300	5.08%	1,664,060
16	MRC	0.1050	0.0050	5.00%	112,000
17	BKD	1.0800	0.0500	4.85%	608,910
18	MPI	5.3900	0.2300	4.46%	329,076,012
19	ACE	1.2000	0.0500	4.35%	132,900
20	PIP	5.8600	0.2400	4.27%	10,894,446

MBT, however, have a lukewarm performance. But I still believe in this pick of the week.We gave this stock two weeks.

SECB, traded at a very high volume, but at a loss! Some funds are obviously unloading. I averaged down at what I thought as the bottom (reading from the chart), but it went down one peso further that bottom. It's too late to cut loss for me here. Will just continue to average down, and hope that the ex-date announcement of its impending 20% cash dividend will jumpstart this stock. I just hope there is no negative insider news that is already circulating elsewhere in the financial houses' grapevine.

ROCK, also continuously being a disappointment. Probably the only second liner property issue that is still not showing any strength! Better to just stay dormant, ROCK, as you did for many weeks, rather than shed more of your value.

VUL, will not be a buy for me until late this year when the Ramoses get their act together, and concoct a solid plan on how National Bookstore will be infused in the security. More on VUL on a later post.

#	Stock Code	Last	Change	%Change	Value
1	MJC	2.0100	-0.1900	-8.64%	16,350
2	CA	55.0000	-4.9000	-8.18%	2,849
3	GREEN	0.0150	-0.0010	-6.25%	1,835,800
4	SHNG	3.1000	-0.2000	-6.06%	151,900
5	I	2.7900	-0.1500	-5.10%	2,790
6	2GO	1.7000	-0.0900	-5.03%	42,500
7	ALHI	23.4000	-1.1000	-4.49%	530,910
8	CLOUD	6.6000	-0.3000	-4.35%	26,400
9	PCKH	11.5000	-0.5000	-4.17%	57,500
10	IMI	2.5000	-0.1000	-3.85%	285,310
11	ION	0.5200	-0.0200	-3.70%	8,820
12	VITA	0.8200	-0.0300	-3.53%	255,420
13	ROCK	2.1000	-0.0600	-2.78%	9,185,970
14	AR	0.0036	-0.0001	-2.70%	36,000
15	SECB	139.3000	-3.7000	-2.59%	513,118,838
16	ZHI	0.4200	-0.0100	-2.33%	1,828,950
17	GMAP	8.8000	-0.1900	-2.11%	52,800
18	VUL	1.4300	-0.0300	-2.05%	294,470
19	PAL	5.6400	-0.1100	-1.91%	1,236,635
20	LMG	2.6000	-0.0500	-1.89%	79,680