Share Synthesis

That said, the +DI hit the 40 mark, which signifies its strength in uptrend while the –DI is nearing the 20 mark. This gives clear indication that it has strong uptrend (if you can put aside the fact that this indicator is not indicative)

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  

This is the ratio of total put open interest to total call open interest among options with less than 3 months until expiration. Currently the level is quite high thus it indicates pessimism.


2. Short Interest

















The short interest has been decreasing consistently over the past few months which indicates optimism


3. Buy/Sell/Hold

BUY/SELL/HOLD RATINGS
FOR GOOG

Strong Buy	16
Buy	3
Hold	1
Sell	0
Strong Sell	0

Based on the above, it seems analysts are quite optimistic on Google so the question becomes , is there enough sideline buying demand to support the stock , or is it top heavy.



After reviewing the 3 indicators, I noticed they are sometimes contradicting each another therefore I think  this is only at best used to derive a rough gauge of the investor sentiment. I don't think I will put much emphasize on these.

All the above images are retrieved from http://www.schaeffersresearch.com



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

The recent market rally has let many people wondering if the economy is recovering? 

According to an article I read online , it mentioned  two out of four conditions need to be met for an economic recover to begin and for the moment , only the fourth condition is partly fulfilled, with timid signs of recovery in China emerging.

i) House prices need to stabilize
ii) Banks must start lending again
iii) Consumers must start spending again
iv) Rest of the world must pick up

Reasons why I think economy has not bottomed out yet.

1) Inventories of house for sale remain high and house prices continue to tumble. The Case-Shiller Home Price Index dropped in January by 19% from a year ago, following an 18.6% year-to-year decline in December.

2) Job losses have been accelerating in recent months

3) Unexpected drop in retail sales as reported on 14 April 2009

4) GM/Crysler bankruptcy repercussions have not even hit yet

5) Standard & Poor’s reports there was a record high in the first quarter for the number of companies cutting dividends (367) and a record low for the number raising them (83)

6) Lot of speculation about which corner of the economy is likely to implode next and start to write the next chapter in the current financial crisis. Credit card debt and commercial real estate are two of the most frequently cited potential culprits

Based on the above, I will still play the momentum game by trading short term and also take more precautions in risk management (i.e not taking excessively large positions and profit take when opportunity arises) or cut loss when my stop loss is hit.

The above info are consolidated from the website http://seekingalpha.com


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

There are 2 indicators which are often used to gauge the market sentiment . They are put/call ratios and VIX. Both are calculated based on US equities and Index options.

In most cases these indicators are used as contrarian tools: when market participants are most bullish, the likelihood of a downside reversal is greatest; when investors become overly bearish, a market rally may
be on the horizon.

PCR Ratio
Put/call ratios provide us with an excellent window into what investors are doing. When speculation in calls gets too excessive, the put/call ratio will be low. When investors are bearish and speculation in puts gets excessive, the put/call ratio will be high.

It might be more accurate to use equity-only put/call ratio as professional money mangers might use index options to hedge portfolio of stocks.

VIX
VIX is a measure of the level of implied volatility - not historical or statistical volatility - of a wide range of options based on the S&P 500

When the VIX (which is related to the S&P500) is under 20, there is excessive complacency, and over 30 is excessive fear.  But just as the Nasdaq is more volatile than the S&P500, the VXN is also more volatile, so anything under 25 is excessive complacency, and over 35 is excessive fear which usually happens when we are close to a bottom.

The importance of these 2 indicators cant be discounted as non economic factors are increasingly becoming important elements and they are best used in conjunction with other indicators. I might consider to use this as one of the factor to determine my entry/exit point (i.e wont buy if its overly bullish) but this might contradict with momentum style so I guess an optimal balance in mixing the strategy can only be achieved through real time experiment.

Free tools to gauge the sentiment can be found at schaeffersresearch.com .


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

The decision to enter a position in Wilmar has been quite paradoxical. I have said that in the short term, the macro situation is overbought and there will be some sort of correction. However, I also mentioned that the mid-term situation looks quite optimistic and in my opinion, stocks seem to have bottomed out. Regardless, the reason I bought Wilmar has nothing to do with opinions. I will break down the analysis into different parts.