Global QE Unlimited : last tango in pennies ? - GMG , Midas ( with Outlook for week ahead updated 23 sept at bottom of post )

Ever since  I urged  "Buy, buy, buy before QE3 announcement "  3 posts ago (  "Ezion rally on ECB bond buying & QE3 hopes" -  click here to see last comment in that comments section  ) & 2 posts ago ( click here for : "front running & fading QE3... " ) , thanks to a stronger than expected QE3 announcement a few days later , most stock operators were caught by surprise by the aggressiveness of  Bernanke which then led to a big gap up in the STi  the very next morning after Bernanke announced QE3 unlimited .

A fierce rally ensued for many second  liners & pennies . Many pennies that suffered many bad reputations in their past lives and left for dead for years suddenly woke up from their long slumber , rose from the SGX graveyard like zombies to seduce  the public once more  with new hastily fabricated growth stories  ( eg.   Oceanus, GMG, Raffles education, otto marine etc etc the list is endless  ) . 

As a result, most of our predictions  made in our recent posts before QE3 -click here were realized in less than 4 trading days post QE3  ie. price targets were hit or exceeded and now undergoing some reactions .  Heavy supply at many reactions seem well absorbed for selected secondliners & pennies ..while blue chips were off recent highs &  quite reluctant to participate or strike new heights.

It is perhaps time to provide further updates in the outlook towards Nov 6  & review the fate of predictions made in recent posts( by comparing predictions in annotated old charts from old posts and latest updated chart side by side  - click on the stock names in orange below to see old posts carrying the predictions )  . We divide the predictions into  :

(i)  predictions that took 1-2 days to hit target & reacted south  ( Ezion@1.27   , Oil @98, Dyna-mac at 54c  )   

(ii)  predictions that took 3-4  days to hit target & reacted south ( Midas@42, Yoma @ 44) 

(iii)  predictions that missed target  so far ( Genting SP missed by 2c , tigerair has not take-off the runway at all  )  ..

(iv) predictions that were happily over-exceeded in swing targets thanks to a stronger than expected QE3 package ( STi  ,  Gold ) or  take-overs ( Sakari, F&N )  

(v) predictions of bottoming of stocks    : bottoming of Wilmar at $3 , the fierce rally of commodity stocks ( noble, olam, sakari  ) ,  oil stocks ( Dyna-mac bounce at 48  ) and  bottoming of Genting SP ,  after they all hit significant  swing reaction bottoms.

Outlook for next few weeks : 

As the STi approaches  3109 - 3133 , there will be a reaction south . Due to QE3 unlimited , it may be a weak reaction well absorbed  but many blue chips seem reluctant to participate in this QE3 rally so far,  leaving the dance floor  to second liners & pennies. So  some pennies may take a chance to rally before that ....or they  may not , to dance their last tango in a hurry , hopefully completed before the music stops for everyone... 

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Below Outlook Updated 23 sept 2012  : 

Difficult week  ahead to predict :  Global Equity Indices look tired requiring a pause for recharging  amidst  window dressing for selected stocks that have done really well 

The BlueChip STi index, HSi & Dow look tired and may fall slightly beginning of week or go sideways to do some recharging while window dressing may appear towards end of next week to prop up selected stocks that have done really well ... as there are  many permutations of possibilities in space and time  , it is rather difficult to predict for the week ahead, but just for kicks, I will try some low-confidence calls here   , not for you to follow ,caveat emptor  .

 

Last burst of fire for tomorrow fomc? : Yoma

Front-running & fading QE3 announcement on 13 Sept : Ezion , Midas , Genting SP, STi

Post DNC, with Obamaism all the rage, with Romney & tea party all but toast, an Obama victory all but certain coupled with a clean sweep of the house on Nov 6 thus paving way for a half trillion dollar fiscal stimulus boost after that , so the skies looking bright  to Nov 6 .. albeit with occasional dark clouds along the way..so caveat emptor .. 

 & with bad employment data from last friday plus  a sagging europe & a hard-landing china , that gives Bernanke a free hand  to push his favorite drug -  QE3 at coming fomc on Thurs 13 sept  , to inflate Obama  to a new high, to reflate the world economy  and not least to deflate Romney.

With China landing hard with 18th party congress in Oct , we see big fiscal stimulus programs in the works - plans " for  25 rail projects & construction of 2000 kilometers of highways in the country."    plus more stimulus announcements to follow ..though some would argue most of the stimulus money would end up in pockets of corrupt officials which would then be siphoned out of the country & into casinos overseas for washing ... so yummmy yummmy Genting SP,  here we come ... give us a special table & special room.. no cctv please because we are all chinese , disciples from ocean eleven - we can headfake your cameras at every turn - so nobody reports any profits nor pays any  taxes   .. after a good wash,  let's give each other a high five ..which  leaves nothing for your stock price .

In Europe,  the hole is getting deeper by the day with no resolution in sight.  But the near term happy event is the German constitutional court ruling on the 500bn euro ESM bailout fund which is expected to pass on wed without hiccup ( cross fingers )  which will then lead to Spain asking for a bailout .. 

On thurs night we may get a temporary burst of euphoria in the Dow with announcement of QE3 which may be followed by a gap up in the STi on Friday morning into which we can start taking some profits off the table in a reactionary move... 

 of course since this QE3 announcement is highly anticipated & everyone's front-running it   (  with gold racing to a 1750 peak , DX to a 70.80 bottom ) , so we may not  have a gap up..  while some may even consider selling  before thurs 5pm before Bernanke speaks ... 

 So what's the QE3 playbook ?  here are some suggestions following  discussions in last post on 6 sept  ( click here to see comments section esp the last comment  )  but of course  caveat emptor , Bernanke may just keep mum again then we have a gap down which however is highly unlikely given Bernanke would not want to disappoint market expectations  this time round ( given the considerations of the first 2 paras of this post ) unlike Jackson Hole :

Relative Strength in post Jackson Hole decline : Ezion rally on ECB bond buying program & QE3 hopes ( .. with updates in comments section ..)

In my last post on 29 aug ( click here : " Jitters landing into Jackson Hole" ) ,  I had a bout of jitters over the outcome of  Bernanke's impending speech at Jackson Hole & accordingly dumped 3/4 of my portfolio over a few days up to & including that day ( genting sp, ezion  , sakari  etc ).

The very next day , the STi gap down from its small 10 pt slide the previous 6 days ( as predicted by the 22 aug post- click here )   into a precipitous 60 pt plunge over another 6 days which hit a  intermediate reaction  level today ( see below chart which speaks a thousand words )  .

As the Sti plunged , most second liners plunged as well , notably Genting SP  plunged to 1.31 ( from high of 1.395 )  and Dyna-mac down to 48c( down from high of 54c)    both of which hit their reaction levels today & bounced.

While most stocks plunged in the last 6 days , I noticed some second liner stocks held up quite well , in particular Ezion .   

Ever since  I sold 3/4 of my Ezion at 1.08 in my last post ,to my surprise ,  it had not corrected much , never gone below my  1.04 reaction level in my earlier chart posted on 22 aug( click here)  in which i first saw an opportunity to buy Ezion , hoping for a rally to 1.15 but failed to break out of 1.09 twice... thanks to market jitters over  impending outcome of  jackson hole on 31 aug  or ecb meeting today.

...  until today 1654 hrs when it crossed 1.09 for the first time after 2 failed attempts in recent days  , with furious buying that started at  15:28:53 when some one whacked 1,000 shares at 1.07  with Shanghai up  0.7% and on a rising hsi   & a strong DAX --  headsup indications  from big boys who somehow knew that tonight's ECB's bond buying program and US ADP jobs report will be good or expecting a good fomc next week after Bill Clinton's rousing speech last nite at Democratic national convention.

As Ezion prices rose on furious buying , I managed to collect 500 lots at avg price of  1.09   .. it closed at day high of 1.11

at moment of this writing , the dow is up >200 pts,  I hope this will give Ezion enough momentum tomorrow morning or next few days  to hit 1.15-1.16 for a dump . 

Jitters landing into Jackson Hole ? - reeling in profits first - Dyna-mac , Ezion , Genting SP

In my previous post dated 22 Aug  " click here : Stealth rally to Jackson Hole on 30 aug ? " , I picked 2 groups of second liner stocks for a 'stealth' rally to Bernanke's speech at Jackson Hole on 31 aug  : Oil and commodity  second liner stocks. 

In particular, I picked second liner  oil stock  Ezion and second liner commodity stock  Sakari.

So far thanks to sheer good luck , Sakari hit the jackpot,  gap up to 1.90 after bouncing off a reaction at 1.41 on a takeover offer  ,  while Ezion today looks like struggling to break past 1.09  after bouncing off a reaction at 1.04  but then came crashing down to breakeven at 1.06 ..    

Meanwhile  as foretold in last post, Nymex crude  topped out exactly at USD98 as predicted  &  then headed south for a correction  despite Hurricane Isaac which seems to be much tamer than Katrina.  

Kepcorp has already broken down on the very next day right after my last post  ( oops - so i missed that breakdown- sorry ) ..& looks like heading for 11 bounce  then  maybe 10.85

Now that my Jackson Hole stealth rally expiry date is 30 aug  which is tomorrow , and I am not too optimistic about Bernanke's speech at Jackson hole ,  today I thought it appropriate  to bail out  from about 3/4  of recent purchase , to reel in  some profits  as a matter of caution to relieve my sudden bout of jitters. 

One stock that I have missed out to include on my watchlist but recently caught my notice    is oil &gas marine engineering services stock Dyna-mac which had surged like a rocket since  its breakout on 17aug and had hit my short-term target price of 54c this morning. 

The Dow jones news wire this morning reported that Temasek-linked Fullerton Fund  Mgt had bought a stake of 3,880,000 shares   in Dyna-mac on 17 aug.

 I have no clue as to their agenda in this buying exercise  but I think the short-term swing force could have petered out on Dyna-mac for the current swing ( giving the stock rally some pause or sometime for reaction  )  even if there is a takeover by proxy underway from Kepcorp ( who already owns 250,000,000 shares or 27.77% bought in mar 2011 at 35c during IPO  ) which  is a possibility given Kepcorp's many newly awarded contracts of late  requiring subcontracting out to Dyna-mac  ( which apparently possesses some niche expertise, currently operates its yards at full capacity & trades at a nice PEG & does work for Kepcorp's competitors as well ) but maybe unlikely because of  other issues too complicated to discuss here but  anyway I will take at least half profits off the table now if I own any of the shares which unfortunately I don't ....

of course I could be wrong about the profit taking part in light of potential upmoves in future, so take my words with many pinches of salt 

 but I will watch this stock carefully over next few days . and give it a premium seat in  my watchlist.
 

as for genting sp, I am out half  at 1.385 last week , and today out  on another quarter at 1.365 .. thanks to the butterflies in my stomach as my  jackson hole dateline approaches  .

Again, of course I could be wrong in raking in profits now only to regret later in any unexpected upmove ,  but for me , one bird in hand is worth many more  in the bush..  anyway I still got some left ( about 1/4 original qty) , still  lurking in the bush to hedge my bets .. but I will not lose sleep over them  riding into Jackson hole over the weekend, having locked-in most of the profits of recent purchases.. 

Stealth rally to Jackson Hole on 30 Aug ? : Genting SP, Ezion , Sakari , Tiger air

As the markets worldwide await with bated breath Bernanke's speech on 31 aug at Jackson Hole  ,  the markets' line of least resistance is up .. though volume is weak on the way up.. so we are skating on thin ice here . 

 the market  weakness over next 2-3 days looks like a good opportunity to enter cheap for a quick punt for selected second liners that had been beaten down bad the past 1-2 years .

Once Bernanke lands into the hole and opens his  gap , my bet is that he is likely to disappoint the markets  since no  matter what nice things he has to say will be considered  'discounted' whatever that term means - anyway that is my hypothesis & it may be wrong & maybe Bernanke has something really shockingly nice to say after a sumptuous banquet in his honour & a drink or two .. like " show me a 5%  plunge in Dow or if Mitt Romney threatens to sack me again  and I'll  press my panic QE button " or maybe the markets will pre-empt Bernanke and drop even before he packs his suitcase to depart for Jackson Hole .... so caveat emptor.

Many blue chips in STi have already hit a plateau since 2-3 weeks ago( click  here to see comments section in that post 2 weeks ago)  , notably the banks : DBS at 15, OCBC at 9.65 & some property stocks eg. capland 3.16 , GLP  - 2.45 , F&N at 8.66  etc etc  and they are  just marking  time in sideways fashion up there... all waiting for the Bernanke to talk it up or talk it down - more likely down ...

In fact the STi appears to have already broken down  , raring  to go for a small , slow correction   ..though the fall may be so gradual that one  may not notice it ..thanks to Jackson Hole so I wouldn't be touching any bluechip for now..  

...  which may leave us some breathing room for second liners to play catchup in stealth fashion  , under the cover of a slow declining or flat STi  before the music stops .. and the music for big caps has been playing like a broken record for past 2-3 weeks ..  

As  Nymex sweet crude races to a short-term peak of  USD98 pb  ,   oil stocks will benefit .. like Kepcorp and Ezion.

Kepcorp has already broken the recent swing high of 11.30 and is edging up   for  higher grounds  while Ezion looks like waiting to hit 1.15   close to its all time high after a reaction at 1.04 first ( see chart below) .

One group of laggards that has been beaten down to less than half price  in past 1.5 years ,  hit solid rock bottom last 1-2 months and are now playing catchup and fiercely broken out of their basing are the commodity stocks eg.  noble,  olam , sakari   etc but these stocks are quite whippy like futures & they move too fast for some people.. .anyway they are now undergoing reactions after their recent fierce breakouts ..but sakari stands out as a buy  ( see below chart ) 

order book of  sakari wrt trades on 24 aug appended 27 aug ( date of PTT takeover announcement at 1.90  ) :

Fresh significant tops & bottoms were formed last  1-2 weeks :   it appears  F&N has hit a  swing top ( 8.66  )    while  Wilmar  has hit the bottom( $3 ) . 

Then there are miscellaneous assortment of laggards  which had lost about half their peak value from 1.5 years ago  like tiger air ( though high price of oil could be a concern  here )  & my recent favorite - genting sp ( click here to see last post  -- genting  sp: trust the chart not the news )   

orderbook of 22 aug trades appended on 23aug  :

Genting SP - trust the chart not the news : Q2 results misses bigtime but hits a swing level as predicted & bounced ..

On last Friday 5pm, Genting SP did not fail to disappoint again when it released its Q2 results   - a 32% drop in net profit to a paltry S$165.5m which grossly misses consensus . 

Then knowing the results were somewhat bad and below consensus  , I determined on friday nite a reaction level ( 1.23) for the expected gap down on Monday open expecting a small rebound from there. and did a screen capture which i intended to post over the weekend & act upon on Monday.( see below chart ) ..

 this coincided with my longer time frame bullishness with genting   at 1.23 which was the main motivation for my post on genting 2 weeks ago..expecting a breakout of some kind ( to 1.38 , then react down  then possibly 1.43 before we see a bigger reaction down )   though i did not see the second half  of  the  double bottom coming then  .

Anyway  , then curious over how the market viewed the Genting Q2 results over the weekend , I immediately browsed through a few online stock forums and was horrified to find a very negative reaction to the Q2 results - with some forumers expecting an open below $1.00 .. with some proffering all kinds of 'fundamental' reasons why Genting is toast  :  
(i) removal of VP of high stakes gambling due to kick-back charges 'implying' loss of  future  VIP business
(ii) competition from upcoming regional casinos in the pipeline
(iii) earnings hardly justify half its stock price
(iv) slowdown in china & SG govt crackdown on overgambling by locals
(v) ongoing investigations by US govt into money laundering & bribery activities at LVS casinos
 etc etc 

affected by all these negative 'views', i chickened out and decided not to post my prediction of a reaction at 1.23 ( as  per below chart )  over the weekend but rather to  sit back and watch.   

However on Monday , Genting open gap down exactly at the reaction level ( missing by 0.5c)    ..and bounced from there. 

even when it bounced a little on monday to close at 1.245 ( see chart below )  , I was afraid to enter given the horrific projections of genting's future business  in the forums still fresh in my mind ,what more with lots of fresh downgrades from analysts on monday.. ( with morgan stanley & jp morgan downgrading tgt price to 1.05-1.10 and proclaiming genting has yet to find a bottom )  so I was afraid  it might break through the floor of 1.23..  . 

On tues, genting stabilized which made me realise my folly in getting suckered by the newsflow & fresh analyst downgrades  ..that gave me some confidence in my original  prediction and  some courage to enter ( albeit entering late  ) when it was trading at about 1.25/1.26 ..with some 200 wrts at 6.1c  &  then pyramid up with another 200 wrts  at 6.3c near an intermediate reaction point of 1.285    

Today genting  after reacting down from 1.28 in the morning , at about  14:02 hrs surged  past my old $1.285 barrier  to hit my old  genting high  (  where I last sold 2/3 on a failed breakout 2 post ago  ) at 1.335,  at which point  i got rid of all my wrts at day high  at avg price of  7.3c 

 now i will wait  patiently for the next swing point to enter..  but I would be mindful not  to be suckered into a long , protracted accumulation process.

Genting's action for the past few days reminded me  to trust the chart  much more than the newsflow  or any  'fundamental' arguments  i read  ..as news & 'fundamentals' are usually calibrated , orchestrated & released by the operator to sucker the public to buy or sell at precisely the wrong time. 

sorry readers - this genting discussion is  just an after-the-event record  for my own education , too late to be of any value as a prediction for your trading .. 

But there will be  plenty of  opportunities to  put my swing methodology  to post & test predictions in future posts -- so stay tuned .. but still  ..caveat emptor ...disclaimer applies.

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Genting SP - a little recipe for protecting profits after a breakout or dow surge

On Monday after the 200+ rally in the Dow last friday, Genting SP  surged to a day high of 1.34 .  I sold 2/3 of my Genting(  bought earlier at 1.29 -see last post ) soon after open at almost day high of 1.335 before it came crashing down. I'll explain my logic for my partial sale later, a risk management technique I used quite often in my trades.   

Yesterday  Genting continued its crash , it hit a strong support at 1.285 before bouncing to close at 1.305 but it  was still a weak close ... as a consequence , today it suffered another breakdown and came crashing down to 1.26 in yet another  big selldown 

It appears  Genting is quite susceptible to shakedowns, so  this stock may not be for the faint hearted.. 

Yesterday morning , a reader by name of Connie asked me in the comments section of the last post  about the status of the  Genting 'rally' as she was still holding on to her Genting shares , apparently disconcerted by the sell down as do, i believe,  some  other readers  as well  - still holding onto their genting shares .  

When I looked at the chart , the 'expected'  breakout did  occur on Monday morning but it closed badly which invalidated the breakout which then lead to a strong reaction south...

 But all the above is hindsight reasoning .. not of any use to a real trader seeking to protect his profits before & not after a reaction has occurred. 

   Question is how do we flexibly handle such situations  to ensure we keep most  of our profits & still retain some flexibility to ride further rallies , if any  ? .. 

  My replies  to Connie yesterday in  comments section of last post-(click here   or read below ) contains a little recipe,  not perfect but i find quite useful  in  my handling of such situations .. especially useful when coinciding with a short-term market  swing top  like Monday  .. hopefully you find it useful as well in future trades.  

for those who saw their paper profits turned to losses  after sticking faithfully to a fixed price  goal  without reacting to  dynamic market conditions , I can only offer my apologies for not advising earlier  & hope a precious lesson can be drawn from this experience. 

5 comments:( from last post ) 

Connie Kong said...

Hi Bill,
the price has retraced fr ytd high 1.34to 1.305 now, do you see further upside or it's time to book profit?

thxx
connie

7 August 2012 07:19 

Bill E said...

I believe many STi blue chips topped out( at least in short term) today or yesterday,eg. dbs ( 14.99), capland ( 3.16) and sgx( 6.85) all hit my short-term toppish targets , so I will be cautious , anyway yesterday I took 2/3 of my of profits on genting sp at 1.335 where I saw a reaction level at 1.335-1.34 , leaving the rest for a ride to National day .. my apologies I forgot to draw that level on the chart..

Regards
Bill

7 August 2012 09:59 

Connie Kong said...

thanks for the reply, Bill. I didt manage to sell at that point, genting nt looking too good now>.<

7 August 2012 10:33 

Bill E said...

In general if you have a good dow nite ( say up 200-300 pts) and the stock had already run up somewhat the previous day in anticipation, it is good policy to take at least some partial profits the very next morning ( and totally disregard for that moment what long term price target people tells you - one bird in hand is definitely worth more than two in the bush ) .. can always buy back after the reaction runs out of steam at a good support level .. of course that might incur some extra brokerage commissions which though a pain in the ar.. should not be allowed to affect one's self conditioning/ discipline in reacting to the market flow.. if comm is an issue find a cheaper broker ..

Genting looks strong at 1.285( see orange line) for now.

Regards,
Bill

7 August 2012 11:32 

Connie Kong said...

Thank you for your kind reply, I will bear this in mind:)

Happy & profitable trading Bill!

7 August 2012 11:50