Share Synthesis

This will be a page where i will be modifying weekly to update several values like stop trail, relative ratios, ATR as discussed in previous post.

Google as of  01/05/2009
Stock Price  : US$393.69
Quantity bought: 17 shares
Price Paid : US$370.69
Total Cost  (inclusive brokerage) : $9596.09
Brokerage Fee : $42.77
1R(Downside) = US$762(? of equity)

Highest Price since I entered the trade : US$403.75
ATR(50 day) : 13.925
Stop Trail : 399.82 - (3* 14.805) = 361.975

Fundamental relative valuation as of 01/05/2009

- Based on the chart, it seems there are lesser interest on put options indicating optimism on stock. Might sell in strength later on.

Short Interest (3 months)














- Steep decrease in short interest thus indicating optimism as well.

Buy/Sell/Hold recommendations by analyst

BUY/SELL/HOLD RATINGS
FOR GOOG

Strong Buy	17
Buy	3
Hold	1
Sell	0
Strong Sell	0

- Gauge sentiment and potential buying demand. Currently very bullish thus it might be top heavy leading to heavy sell off. Need to take caution in this. 

This will be a page where i will be modifying weekly to update several values like stop trail, estimated value, ATR as discussed in previous post.

Tat Hong as of 23/04/2009

Stock Price  : $0.80

1st Transaction (06/04/2009)
Quantity bought: 14 Lots
Price Paid : $0.695
Total Cost  (inclusive brokerage) : $9763.59
Brokerage Fee : $33.59
1R(Downside) = $664 (2.6% of equity)

Highest Price since I entered the trade : $0.875
ATR(50 day) : 0.032
Stop Trail : 0.875- (3*0.03)  =  0.78 

2nd Transaction (13/04/2009)
Quantity bought: 14 Lots
Price paid : $0.760
Total cost (inclusive brokerage) :10676.72
Brokerage Fee : $36.72
1R(Downside) = $1387(5% of equity)

Highest Price since I entered the trade : $0.875
ATR(50 day) : 0.032
Stop Trail : 0.875- (3* 0.032)  =  0.78

Profit/Loss =  $1347.85

My stop loss was hit and as such, I have cleared my positions. I have realized this system has quite a few drawbacks like getting whipsawed. Will post more on my thoughts in the upcoming post. 


Last updated on 23 April 2009

Reproduced with permission from http://melynn-lynch.blogspot.com  

I will do a weekly review on the stock to re adjust the stop trail point and as of now, it will be at 0.596. The above adx and stop trail are just used as an example to give myself an idea. The actual atr used to derive the stop trail  will be based on the day I purchased the stock...

4. Scenarios

Bull
If Tat Hong surges 20% within a day, will I sell off or cling on to hit.. Answer is that I will stick to my above stop trail. If such a case happen, I assume that there might be a wide divergence between the intrinsic value and current price therefore a tighter a stop trail will be imposed.. Let's say Tat Hong surges to 0.80 and 50D ATR is at 0.028, I will set my stop at (0.80- (3*0.028)) = 0.71. Assuming Tat Hong surge more than 30% more than my estimated value, i will probably sell off my holdings..

Bear
If stock plunges to my preset stop trail, I will try to be disciplined enough to sell off my holdings .

I will attempt to blend a combination of both fundamental analysis and technical analysis to decide on the entry and position sizing for the stock Tat Hong (Listed on Singapore).

1. Entry Point

Fundamentals
Based on the earlier fundamental analysis I have done, I have derived an intrinsic value of 0.61 by analyzing the past few years financial results of Tat Hong and also the present economic conditions . Model might not be accurate as a majority of the inputs(i.e growth rate, discount rate) requires judgments and can't be quantify. Based on relative valuation like P/E, P/S, I have derived an estimated value of  approximately 0.50... 

I will proceed to the second step only if the fundamental is intact or there's some potential growth which I can foresee. For details, refer to my earlier post.

Technicals
I dont intend to use technicals to predict price but instead I hope to understand more on the market psychology by analyzing the momentum.. In order to avoid short term trends and noise, I decided to set a longer time horizon for the indicators used. Some indicators which I will use are like Moving Average, ADX and ATR..

Moving Average : Used a total 3 mv line (14d,25d and long term 200d)... This is still in experiment phase therefore numbers might not be ideal. Note that up to this point, the short period mv line crossed the longer period one which symbolizes a bullish trend..  Curently the price is trading above both lines and slightly below the 200d one therefore if the price breaks the 200d, it will be a big bullish indicator.

ADX : Currently at 16 which indicates a weak trend.. Strong trend if its above 40. When adx begins to strengthen from below 20 and moves above 20, it is a sign that the trading range is ending and a trend is developing.

Based on the above 2 factors, I think this stock may be gaining momentum, consolidating and an uptrend might soon prevail.. 
















There seems to be a divergence between my intrinsic value and the overall trend.. My fundamental technical analysis tells me to buy the stock between the range of 0.61 meanwhile technical analysis is telling me this stock might be going uptrend soon. Is this variance due to the different time horizon used or  is it due to my overly pessimistic analysis? Will the stock reinforce itself, ignoring my expectation and surge or will it self correct and plunge instead?  Deducting my estimated value from the current , its approximately $0.055 difference.. Its a 9% variance so assuming I am to buy now , this 9% variance can help me determine my position which I am discussing next.

2. Position Sizing .

I will attempt to use the ATR method which I posted earlier to determine my position... I will be using a 50d ATR to estimate the volatile and it is currently at 0.028. Below are the steps I need to take to derive the position.

- Determine the amount of money in account
Assuming I have $25 000

- Determine the amount to risk
Note that there is a 9% variance between my estimated value and the curent price ..  Following is a table which I am using to set the risk.

OverValued (Estimated > Current)
<10% variance = 3% risk
>10 % and <20% variance = 2% risk
> 20% and <25% variance = 1% risk
>30 % = wont invest.

UnderValued(Estimated
<10% variance = 3.5% risk
>10 % and <20% variance = 4% risk
> 20% and <25% variance = 4.5% risk
>30 % = 5% risk

I will set a 3% risk in this case.

- Find out the ATR

Multiply ATR by 2(static)
0.028 * 2 = 0.056

- Derive the position by taking amount to risk divide by the above sum

750 / 0.056 =13,392shares
                        ~~ 14 lots.

I will continue my exit point and hypothesis of a good case and worst case scenario in my next post.