Thai Beverage Performs Kumo Break, Heads Towards Kumo Shadows

Shares of Singapore-listed Thai Beverage tumbled more than 5% in trading on 15th August, after the beer brewer reported a 2% drop in second quarter net profit. But the bull run was long over in May 2013 as shortists entered the room.

We apply Ichimoku Analysis on the daily chart below:

Chart from Bloomberg

After a strong run up from January to April, we saw prices dip into the Kumo support for the first time, but were well cushioned by the thick cloud. Prices then bounced up into May, followed by a bearish Tenkan Sen (greenline)/ Kijun Sen (red line) cross, before heading towards the Kumo once again in June this year.

Note in the red circle how thin the Kumo support was, and probability of a Kumo break is inversely proportional to the thickness of the Kumo. In early June we see the successful Kumo break to the downside, circled in Red.

With prices below the Kumo, the Kumo will serve as resistance. We see prices testing this resistance in July, but failed to pierce upwards. The bears clearly dominated once Chikou Span (black lagging line) also broke the Kumo support.

The thick cloud behind prices are called Kumo shadows, and the flat portions of the Kumo shadow serve as target prices. With bears running past the yellow target, they will be heading towards the orange line at about 42 cents.

Any hope for the bulls?

As the movement downward was fast and furious, we should see prices consolidating soon. This happens when the red Kijun Sen line turns into a horizontal line, representing the 26 period equilibrium. Right now however, it is pointing down, but it should flatten once the market begins to consolidate, and draws prices up to the Kijun Sen line.

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How to trade Copper AUDUSD on MT4?

For those of you who have read our strategy entitled “Using Copper To Trade Aussie Dollars“, and are wondering how to execute this trade on your MT4 platform, this article is for you.

We needed to compare Copper Futures price action and execute trades on AUDUSD. So we live chatted with our friends at Forex.com:

Tommy: It is based on an underlying futures contract. The current underlying futures contract is based off of March futures.
gho: and we are trading the CFD correct?
gho: how frequently is price data updated?
Tommy: The price data is real time.
Tommy: You are trading a CFD based on underlying futures.
Tommy: We receive roughly 3 rates per second.
gho: what if we switch to daily charts
gho: it will be once a day
gho: do u know what time?
Tommy: Each new candle starts at 22:00 GMT.
Tommy: If you are holding the position at the time of expiry, you will be closed at the prevailing market rate at the time of expiry.
Tommy: Then, you would be able to manually enter a new position in the next contract month at your discretion if you wish.

So Forex.com provides live prices for copper CFDs based on the underlying copper futures. We compared this with Bloomberg using the function HG1 Comdity – the copper charts on Forex.com’s MT4 displayed similar chart patterns with the copper futures chart on Bloomberg.

There you go, Forex.com will be a convenient MT4 indicator platform for this strategy.

 

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How to hedge on MT4 or close half your position?

As we were researching trading strategies and programming them for MT4 indicator, we came across 2 common trading scenarios:

Trading Scenario 1: If we are trading an expert advisor, it enters trades based on forex trading signals. Depending on your strategy, you may have to hold both long and short positions on the same pair concurrently – this is known as hedging on MT4. Make sure your broker allows this if not your strategy will not execute as planned.

Trading Scenario 2: One common exit strategy for forex trading is to take profit along the way by closing part of our position, for example closing off half of the existing position to realize half the profits first. Again, make sure your broker allows this, because not all of them do.

To make sure our MT4 platform caters to the above, we initiated live chats with OANDA first, followed by Forex.com. It is very clear which broker we will use for trade execution. Hopefully this serves as an up to date review for all of you forex traders.

LIVE CHAT WITH OANDA:

Huiling: Thank you for choosing OANDA. How may I help you?
gho: on mt4, lets say im long 10,000, and I would like to take profit by closing half my position. how do i do that?
Huiling: please hold
Huiling: as MT4 platform does not allow hedging, you will need to place an opposite trade in our fxtrade platform
gho: meaning i will have 2 positions open
Huiling: no, as OANDA does not allow hedging within the same account, your existing position will either be reduced or net off due to the opposite trade place
Huiling: for instance, you have a BUY 1000, and you place a SELL 500
Huiling: it will leave you with a BUY 500
gho: yup
gho: that seems to be the solution to my initial question
gho: so im confused
gho: so to confirm
gho: i simply have to place a sell order for 5000
gho: is this correct?
Huiling: yes if you would like to leave with a BUY 5000
Huiling: however MT4 platform will not allow you to do so
Huiling: hence please login to your fxtrade platform
gho: so on oanda mt4
gho: if i have 10,000 long
gho: i am unable to short 5000
gho: i have to close the position
gho: and enter a new one
Huiling: yes

LIVE CHAT WITH FOREX.COM

Dennis: Hello gho, and welcome to FOREX.com UK. May I have your User ID (Account Number) or email address to better assist you?
gho: on mt4, lets say im long 10,000, and I would like to take profit by closing half my position. how do i do that?
gho: i simply have to place a sell order for 5000 is this correct?
Dennis: One moment please.
Dennis: To partially close a position, double click on it, select the volume (10000 = 0.1) to 0.5 and click close position.
Dennis: If you place an opposing order, you will see another position – short 5000.
gho: i was told mt4 does not allow that?
gho: oh
gho: so do not place an opposing order
gho: but rather
gho: CLOSE half of it
Dennis: Yes.
Dennis: Hedging is allowed on UK MetaTrader 4 accounts, so you can be long a short at the same time.

We were not only confused by the OANDA live rep’s explanation, but disappointed with OANDA’s execution capabilities. On the other hand, Forex.com’s answer was straight to the point, and their MT4 platform allows hedging as well as profit taking – exactly what we need for the 2 trading scenarios above.

So make sure you check that your broker allows you the above 2 functions if they are part of your forex trading strategy.

And yes, we have chosen to be introducing brokers for Forex.com.

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Investor’s Risk Taking Mood Reaches New High

The Fisher-Gartman Risk Index consists of a mix of long and short asset allocations whose overall value is expected to rise when the outlook on the securities markets and broader economy is positive and to decrease when such outlook is negative.

The current Fisher-Gartman Risk Index is above it’s one standard deviation (for the past 1 year) amid the rally in risk assets. A healthy correction in prices of risk assets seems to be in the pipeline should the Risk Index mean revert.

Plotting the same Risk Index over a longer period of time, it is evident that we are certainly not near any stages of euphoria typically seen at the end of a bull rally. 

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Singapore Dollar Likely to Depreciate Against USD

The Singapore Dollar has experienced a strong 6% gain in less than a year against the USD since June 2012. Prices have bounced along the red diagonal trend line, and the bullish trade was well above the kumo the whole time.

In November 2012 we saw a break below the red trend line, followed by a kumo break to the downside in January 2013. Prices have been consolidating in the green rectangle since September 2012 and we see the future kumo clouds thin and twisting. The base of the green rectangle also coincides with the kumo shadow support and we saw prices bounce off this level at around 0.81.

The down trend will likely resume if we see a break below the green rectangle. Chikou (Lagging) Span (the faint gray line) is currently hovering inside the kumo cloud. Once Chikou Span breaks below the kumo, it will be further confirmation of a bearish move ahead.

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Posted in FX, Random Thoughts | 1 Comment

Short Term Weakness For KLCC Property Holdings

As of the close of 21 Jan 2013 we observed an outside bar formed (outlined in green rectangle) in KLCC Property Holdings.

While we see bullish momentum in KLCC, especially for the past week, sentiment reversed for the day. Price opened at new highs at 6.60. The bullish sentiment did not hold and price dropped dramatically, closing lower than where it opened. The trading range of the day encompassed the trading range of the past few days.

This price pattern is usually followed by some short term weakness (3-5 days). Short positions initiated can have a stop loss at the previous high @6.60

The pullback seen technically is largely due to fears over election risks.

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RHB Capital Might See Further Gains On Break Above 8

 Above is weekly chart of RHB Capital Bhd.

Price has recently broken above the Kumo (blue shaded region), an area of resistance, on a closing basis. The same week’s high price stops short of breaking above the 38.2% retracement level indicated by the green horizontal line.

During March 2012, price tested the same 38.2% retracement level and failed to break above it. A break above the 38.2% retracement level on a closing basis in coming weeks would suggest further bullish momentum.

Current trend is bullish as seen by the higher highs (circled in red) and higher lows (circled in green) with a breakout above 8.00 a boost to probabilities of further gains.

Do be reminded that we are looking at the weekly chart above and a closing basis is required to confirm the price action. Thus only the close of Fridays (or the last trade day of the week) is relevant in this case.

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Break Above 154 Critical For Chromatic India

The chart above is the weekly chart over 10 years for Chromatic India. A brief look back at how the stock traded. Following a classic double bottom formation during 2003-2004,  prices traded in an upward sloping channel. A breakout above this channel happened during the end of 2009. This move recorded a high at 46.95 before retracing exactly to the 61.8% Fibonacci retracement level at 20.25.

This is followed by the next leg up to reach 154.

We draw the Fibonacci levels for this last rally up. Yet again, the 61.8% retracement level served as a significant support level where prices formed a rounding bottom formation. Consider the psychology behind such a formation. The bulls and bear found a balance and slowly and steadily the bulls are starting to move prices higher.

As the bulls push it towards the last high recorded at 154, there would be significant resistance there. Traders and investors in this company do watch for the price action around this important level. Technical analysis reacts more than predict. A successful break above last high suggests higher probabilities of higher prices going forward. Failure to trade above keeps the stock in a sideways range.

As usual, multi time frame analysis would provide additional perspectives to the analysis. On the daily chart above, the stock is in a clear overall uptrend. Longs can be initiated on pull backs on the daily chart keeping the 154 resistance level in mind.

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Crude Palm Oil (CPO) Fundamental and Technical Analysis

UOB Kay Hian issued a plantation “underweight” for Malaysian CPO producers today. Sentiment is weak as we enter 2013, here’s why:

  • High inventory is adding onto high supply. Malaysia’s CPO inventory at record high of 2.53m tonnes or 1.4 months of production (vs average 1.2months for the past 10 years)
  • Weak global demand from the largest 3 importers China, India and Europe 
  • “Export tax wars” between Malaysia and Indonesia – buyers may delay purchases to take advantage of any arbitrage

So we have weak demand, strong supply and a buyer’s market causing over 40% drop in CPO prices in less than a year.

 CPO Chart analysis

The chart above plots the price action of CPO for the past year (price is the blue line). The great thing about Ichimoku analysis is you will never miss out on big trends and more importantly, you are kept in the trade as long as the strong trend is in play.

In May 2012 we saw price break below the Kumo (purple cloud) and prices have been on a downhill since then, not even testing the Kumo top resistance, until recently. We will be looking for a break above the Kumo top for any bullish activity. Once broken, we can look for a bullish move towards the black horizontal line, which is an extension of the Kumo shadow.

The future kumo extending into February is thin, suggesting weak support/resistance with a flat kumo top as price equilibrium. A very strong support will be the low of RM2,026.50. Resistance will be at the kumo shadow extension of RM2,550. CPO price will likely trade within this range for the first half of 2013.

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Posted in Australia Stocks, China Stocks, Commodities, Hong Kong Stocks, Ichimoku, India Stocks, Indonesia Stocks, Japan Stocks, Korea Stocks, Malaysia Stocks, New Zealand Stocks, Philippines Stocks, Random Thoughts, Singapore Stocks, Taiwan Stocks, Thailand Stocks, Vietnam Stocks | Tagged , , , | 1 Comment

PPB Group BHD To Face Downward Pressure After Short-Term Rally

Today we start our analysis from the bigger picture. Chart above is the weekly chart of PPB Group BHD over a period of 10 years. Clearly it has been trading within an upward sloping channel until 2009 when it entered into a rectangle formation or horizontal channel. After breaking below the rectangle formation it seems to be entering a downward sloping price action, recording lower lows and lower highs.

Taking a closer look at the same weekly chart, PPB Group has already made lower lows 4 candlesticks ago. The most recent high is at 13.90. This is a major level to watch. Prices failing to trade above 13.90 indicates lower highs and further confirms weakness in the stock.

Ichimoku analysis also shows that the stock is in a bear trend.

We then show the daily chart above. We observe that although the weekly charts (longer time frame) show weakness and bear trend, prices are rallying on the daily charts (shorter time frame). In fact it broke above the Kumo resistance region (blue shaded region).

To synthesize what we have observed, we expected prices to continue it’s short term rally and to face significant resistance at 13.90. Failure to trade above 13.90 indicates further weakness in the stock. If it trades above 13.90, the stock enters in neutral trend.

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