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things every retail investor/trader should know

Good point. See, expensive raw materials translate into higher selling price. The margin of refining is not affected much by the ups and downs of CO in the longer term. It is the demand that drives up the revenue.

Temporary ups and downs do affect the short term margin though.

Livermore      ( Date: 13-Aug-2008 17:59) Posted: SPC analysis is not quite right. Crude oil rose from 2002 to 2007. Last year was a record year in profit for SPC. If crude oil price affects profit for SPC with rise in crude oil price, how did 2007 become a record year for SPC? Do you think oil refineries make much money if crude oil is at US$20 since crude oil price is very low ?  elfinchilde      ( Date: 13-Aug-2008 16:15) Posted: my thought is guessing. doesn't quite matter though, because what is commonly believed is what will turn sentiment.   like SPC. by right it's a major refinery. ie, they buy crude oil to refine it, and then sell it. So by right, oil px up, SPC down; oil px down, SPC up. But in local investors' minds, SPC = Crude Oil play. Hence, Oil up => SPC up, Oil down => SPC down. there's market "logic" for you.

 

FA-wise, true profit = SPC's refining margin = sales price for their petrochemical output - crude oil price.

Recent collapse of oil price, coupled with XD, coupled with all the stories abt demand destruction is driving the stock price down.

It all depends on perception of SPC's future value.

 

Just think of industries who need to buy feedstock and sell products and you'll know why SPC is falling.  

 

SPC analysis is not quite right. Crude oil rose from 2002 to 2007. Last year was a record year in profit for SPC. If crude oil price affects profit for SPC with rise in crude oil price, how did 2007 become a record year for SPC? Do you think oil refineries make much money if crude oil is at US$20 since crude oil price is very low ? 

elfinchilde      ( Date: 13-Aug-2008 16:15) Posted: my thought is guessing. doesn't quite matter though, because what is commonly believed is what will turn sentiment.   like SPC. by right it's a major refinery. ie, they buy crude oil to refine it, and then sell it. So by right, oil px up, SPC down; oil px down, SPC up. But in local investors' minds, SPC = Crude Oil play. Hence, Oil up => SPC up, Oil down => SPC down. there's market "logic" for you.

 

Hahaha... absolutely agree with Elfin there... :)

Don't argue with the customers... just give them what they want (to believe) !!!...

(as a corollary... don't try and change the world)...

 

my thought is guessing.

doesn't quite matter though, because what is commonly believed is what will turn sentiment.  

like SPC. by right it's a major refinery. ie, they buy crude oil to refine it, and then sell it. So by right, oil px up, SPC down; oil px down, SPC up. But in local investors' minds, SPC = Crude Oil play.

Hence, Oil up => SPC up, Oil down => SPC down.

there's market "logic" for you.

 

Anyone know how much of CPO is used as alternative fuel to CO ?

If say, 10% of CPO is used as alternative (or a mixture) to CO, then the effect of CO is not that strong. But it say 30% of CPO is used as alternative to CO, then the effect is great ?

The question how much is the actual correlation between CPO and CO? Or is it people are just simply guessing that CPO is easily used to replace part of CO ? 

 

edit:

forgot timeline.

I give the CPOs til monday latest to end their current uptrend.

Contra T+3 logic. Classic trap.

 

practical application lesson for today.

same issue of tandem counters/sectorial plays. Probability of a rampup being a real rebound, or a trap: One way of telling.

Crude oil affects the CPO plays, theirs is a proportionate relationship. ie, px of crude oil (or SPC--which is another story) goes up, CPO plays should go up. Crude down, CPO down.

But what do we have currently?

Crude down, CPO plays up. (CPO plays here: Wilmar, Indoagri, GAr, Firstres). As well as news/analysts release that CPO is going to go up.

Think logically. Does it make sense? CPOs go up because price of crude is rising, hence, people switch to alternative fuel. but if crude price is down, why will people look for alternatives? Esp when oil has fallen from 147 per barrel to now, abt 113.

So the logical conclusion: because they are breaking their normal relationship, it is a false rally in the CPOs. 

Ie, if you're in the CPOs, it should be a fast scalp, nothing more.

And this is a forward prediction. So lets see if right or wrong.

 

thanks all for the many comments. :) will try to respond to all, apologies if i leave some out.

Baseer. creating the charts and uploading them takes me more time than making a buy/sell decision. :P

Nostradamus is right: sectorial plays are governed by macros. So id all the stocks in one sector, pay attention to the macro factor (eg, px of crude oil). This is essentially what i call tandem plays. Usually, there'll be a market leader, that'll move first. I call this stock the weather vane or lead indicator. When it moves, it's a signal that the other counters are likely to move. Watch out for laggards that don't conform tho, even if they're in the same sector.

Also, for tandem plays that may not seem so obvious at the start. Eg, SIA Engg. 70% of its biz is from SIA. So if crude oil goes up, what is SIA Engg's movement?

ten4one: agreed. Which is why my focus has always been on application. Theory alone is pointless. However, one does need to know some facts first tho. As Mark Twain said, "Get the facts right first. Distort them later."

ipunter: low vol falls are usually consequent leakage of the initial fall on high vol. I can't think of a single stock that has fallen ONLY on low vol, and never rebounded. Perhaps you may like to share an example? :) yuppers, agreed on the other point: never fall in love with a stock. Which is linked to the other idea: differentiate between a stock and its company. Just because you 'love' the company, doesn't mean its stock price will reward you. Similarly, just because a company is doing well/badly, doesn't mean its stock price is proportionate.

waverly: Essentially, if you see large lots moving one way, don't try to pre-empt the bottom and go in the other way. Let them finish selling first. Eg, cosco at 2.97 was "cheap". But blatantly, sell lots overweighed buys. Again at 2.78, again at 2.43. If you'd went in cos you think it's "cheap" (even when from BUSD you can see it's major sell for the large lots traded), that's going against the BBs. or put it in dollar value: you have, say, 100,000. A single BB has 1.5mil. Who's going to win?

It pays to know our place as small fries, and to play as small fries, and not BBs.

Question 2 has to remain sealed on open forums.

3) BUSD patterns: buy up sell down patterns. The in depth data per day which shows no: of lots bought/sold at each exact px and min. You need this raw data to track BB patterns. From this, if you're good enough, you can even id which house is playing what counter. Altho, if you ask me, less impt to know the identity of the BB, more impt to know which way the counter is going. Sometimes, too much info can kill decision making.

4) Avoid going against the BB. Use counterparty only ifyou're kay-poh enough to want to know more. hehe.   The tags are different, basically.  

Note: the most impt of everything is the tactics of the BB, because they are what forms the technicals. BBs don't need or care to know about FA or TA, because well, they set the TA!   But as small fries, that's why TA is all the more impt for survival.

Finally, i know what and how the BBs operate, but i will not, however, 'sell' them out. Not the locals, at least. The foreigners, i say they're fair game.

 

Hi Elfin,

Tks for the great post. It is very useful to novice like me and I have been trying to understand dynamics between bb and the mkt. I have a few basic questions to ask and it wld be great if you can help me further understand your post *paiseh*

1. What do you mean by never go against the bb? Ie if they sell we shd not buy and if they buy we should not short sell?

2. I can understand bb tyring to shore up a counter esp if they are vested. but how else do they operate.

3. What is BUSD patterns?

4. Each bb has a ticker tag. If the broker is able to tell me which broker is buying selling how do i use the infromation? Eg my broker says broker X is buying. However, how wld i know if these trades are part of their bb strategy or for their small fry retail clients

tks

Let's face it: the singapore market is a small place. As such, it is manipulated, for want of a better word (tho strictly speaking, it's just mathematical: they have more money, of course when they move, the market moves). The BBs will always be in the front: foreigners: ML, MS, Citi, GS, UBS, Macq, being common names, as well as local BBs, who are from the broker houses. If you can read BUSD patterns well enough, you can even identify precisely what house is playing what counter.

Each BB has a ticker tag. So all brokers know who's buying/selling whatever. If your broker tells you he doesn't know, well, it's time to change brokers. There is a distinction between a small fry, and a BB.

Let's just say there are some names you should never go against.

So when you buy, ask your broker:

1) Who is the counterparty.

2) Better yet, if you and your broker are on that good terms, especially if your counter has been suddenly shelled, just ask them directly: Who are the operators. Or to be polite, who is selling.

Sooner or later, you'll learn their names, who to avoid, and whose side to be on

 

i really appreciate the posts in this thread... it makes me understand  the market mechanisms better.  But think i need to digest it longer... brain a bit rusty...  thanks a lot.... :)

 

Totally agree with iPunter. Never love a stock, especially when we are trader.A friend of my i knew ..love SGX so much that either he is stuck or cut hugh losses.

I dont love any stocks..I analyse my charts and decide to long or short. When i hit my rules, I execute them.

TA is only part of trading game...equally if not more importantly is your emotion and psychology. 

Happy Trading 

 

The single most important thing take to heart is never to love a stock. And also never love it too much...

A stock is not a person. One should love a person dearly and hang on because of his/her good qualities.

But even a best stock can let you down...

 

Elfin... :) ... allow me to do a 'rebuttal'... hehehe...

To me, if a stock falls on low volume (relative or absolute) , it is just as bad...

A fall is a fall... look at it this way...

If a stock is strong, why didn't the bulls quickly snap them up when they are offered at a good price?

The answer, obviously, is that it may go even lower. 

Thus, falls on 'low volume' may go on and on... and that's bad!

And by the way, long falls usually take place on 'low' volume!

 

Frankly.....knowing is one thing, understanding what you know is another! Just my own views  Cheers!

 

Hi Elfinchilde, Thanks for the sharing. a V.Good Post.

 

Basically, you must know what's the theme for the day. For example if oil prices rise, then oil & gas, coal and palm oil stocks would rise. You need to know the stocks in the different sectors. If today is commodity stocks day, then the commodity stocks would rise together. Sometimes, this is not the case. The market leader in the sector may rise first. Then there's rotation to the second liners a few days later.

 

Elfinchilde : 

Four powerful points neatly laid out !


Thank you very much for the latest awesome Tutorial  ! In fact , this simple to read Tutorial 1 should capture the attention and interest of newbies to TA.

In additions to the basics of TA of price and volume , u have also highlighted how the shares of a particular company will affect the shares of other companies in the same industry and how to play them.


What my little brains thinks is that  your tutorials will be enhanced further if you also post charts to accompany the tutorials. A picture is worth a thousand words .

I personally know how tedious and waste of time it is to upload the charts to hosting websites and then paste it into SJ . But just a suggestion to enhance the tutorials.

Even if you don't upload and post charts , we understand .We know how rapidly u can type .. rather than waste ur precious time with uploading charts etc. But just a suggestion if you could spare the time .

Thank you !

:  )


(Admin , any short cuts/easier way to uploading of charts .. just strectching the free gift horse a bit ..hahaha ! )

 

short notes for the day:

a lot of people pay attention to price, but they neglect to watch volume.

Volume, more than price, is the one thing you should not neglect.

1) When a stock rises a lot on low volume (comparative to its daily vol and/or the vol of its drop), that's a warning signal that the rally is unsustainable. so if you're in, it should be a fast scalp and not a longterm hold.

2) Likewise, if a stock drops on low vol, it's a signal that it's only a temporary drop. ie, buy and not cut the counter.

This is especially so if you count only the large lots traded. So why cosco needs to be watched out for: on back of yesterday's rise of the STI, and a friday's chiong in the DJIA, the counter went down instead.

Related to that is the issue of tandem counters. ie, counters that are related. You must know if your counter is allied to another.

Eg,

Sembmar holds cosco, so when cosco goes down, sembmar will likewise go down. Bad sentiments tend to affect an entire sector, especially so if one holds stock of the other.

The difference:

Cosco is down on genuine bad news. Sembmar is down because of cosco.

Hence if you held both, what would you do?

Sell cosco, buy sembmar on a dip.

Which worked out:

The day of the cosco plunge, sembmar dipped to 368. it's a signal for a trading buy rather than a stop loss, since you know it's only temporary.

And yuppers, sembmar went back to 3.8 within a couple of days. It'll likely move higher, too. Back to the 402 level.

So that's how you id a fast scalp. and/or a shoring up opportunity if you happened to be holding it earlier (recognising the "buy on dip" philosophy, in an actual example).