4july2008

Hong Kong dry-bulk shipping line company Maritime Capital Shipping has
decided not to proceed with an initial public offering (IPO) in the Singapore Stock Exchange due to weak sentiment for the Singapore stock market in recent weeks.

A report quoted the CEO of Maritime Capital Mr. Mark Harris saying “The performance of the global equity markets has deteriorated sharply in the last few days and equity markets have closed for IPOs, regardless of the underlying fundamentals of the company.” Mr. Harris did not say when or whether the company might reconsider listing plans.

After witnessing the “failure” of some of the recent IPOs in Singapore share market, most investors would find it hard to jump into another IPO. Most recent Singapore IPOs have tanked on day one of listing and are still trading below their respective IPO prices. The last count is that 15 of the 18 new companies whose shares are listed in the Singapore stock exchange this year are now trading below their offer prices.

After the recent sell off in the broad market, some recent IPOs are trading at 3-4 times FY08 earnings…….it’s no wonder new IPOs are finding hard convincing investors to subscribe to them at 4-5 times FY07 earnings.

If you are value investors, do some homework yourself on some of the recent IPOs where stock prices have fallen to 3-4times FY08 earnings. Monitor their 2Q08 results and track if these companies are on track to meet consensus estimates or the forecast FY08 earnings given during IPO. If they are on track, then the next question is WHEN is the right time to accumulate …….this is when Mr. Chart’s technical indicators and analysis come into play

Happy Hunting!

It’s been some time since i last updated this stock market blog. the main reason for my absence was that i saw no compelling reason to trade specific stocks in singapore stock market since i sensed the market sell down which started some months ago.

Anyway, the good news is that i am beginning to see some bottoming signals for a good rebound ahead :

1. Many individual stocks are showing positive MACD divergence - one of my favourite signals for potential stock market bottoming signal

2. Bollinger bands for many stocks are contracting - indicating a potential breakout

3. Many penny stocks are moving again - indicating return of retail players and “market makers”

4. Parabolic SAR and MACD for many stocks have crossed into positive zone

The one main trending indicator that is still negative is moving average lines which are still heading downwards - this means that medium term signals could be still down

But i am more willing to trade now since many other indicators have turned positive

Afterall, moving averages are usually lagging and i do not used it as a tool to time entry

Since moving averages are still negative, i would expect some volatility ahead so will have to trade with high alert and trade smaller volume…..and of course stick to cut loss rules looks like the rat may give u some cheeze after all…..maybe a small piece one to start the year off

Consider risk reward before entering trade :

Today i traded the hang seng call warrants (CW) because
the risk reward looked good…..hang seng has fallen almost 1000 points in one day while one of the cheaper CW has fallen from 30c to 4.5 within few days. So i decided to enter the trade at 4.5c as the risk reward looked good. If i am right and hang seng index rebounds, i stand to gain up to 5c or more. But if i am wrong, i was prepared to lose 1 to 2 cents only. With that in mind, i longed CW at 4.5c but unfortunately the early rebound was not sustainable and hang seng index fell 1500 points after lunch today…..so i decided to cut loss at 4c and live to fight another day. Also i do not wish to keep this CW since it will be expiring end of january 08……with time decay setting in soon the price may not move up at all since it is far below the strike price. Personally, I would suggest that one DO NOT keep warrants for more than two days especially if you are already in a losing position, should cut loss even faster.

With volatile markets like now, cutting loss is the most important thing i would say. Many stocks technical indicators have deteriorated lately and if one does not have cut loss trigger, then you are likely to end up owning many stocks for a much longer time frame than you initially thought. My usual cut loss trigger is 4 bids below buying price, on closing basis unless market is extremely bearish. Some of my friends would set 6 bids or use 8% as cut loss trigger. What ever you use, you must have your own cut loss trigger, especially if you are a trader……not like warren buffet who says that he prefers to keep stocks forever

cheers

rooney yong (email : contact@mojostock.com)

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