Saturday, November 3, 2012

Why make trade call while stay bearish?

Some of you must be wondering what the heck am I doing --- making trading calls while stay bearish, right?

Did I miss the last 1 year bull run so badly that I need to make up at the last minute?

The answer is no. The reason is simple. Did anyone actually make money while staying in the market?

If you look at FBM-Small Cap, unless you manage to get in late of 2011 and get out early February, the gain is as good as doing nothing. This index was about to have a golden cross but then telco came in and halted the party.

I feel that we are at last leg of the bull run before we have a more significant correction(15-25%). Usually the last 3 months before the bull run ends, the correction is usually brief and a new high is make in a relatively short time. After 2 - 3 rounds, the market participants tend to get complacent and keep thinking correction equals to new high.

One more sign that I found in my studies, the perceived safest stocks will have the last run. As you can see that ICAP was making the new highs about the same time KLCI was making its way to peak. I don't have the data on hand now but I was remembering that the so called many little "buffetts" came out and drove the stock to all time high way above its NAV in late 2007. If the history were to repeat a 10% premium to RM 2.96 NAV will equal to $3.25. I was being conservative and just call for $ 3.00 as the target.

There is another stock that frustrate its long term shareholders enough. Even patience investors like iCap, real insider Cheng, EPF and whole lots pared down its holding. Guest what? It just had a breakout recently. That is what I called capitulation! After all these big investors had nothing to sell, the rally tends to be sharp just like what you have seen in Alam. The other stock that mirror Alam is Sealink.

Disclosure : I have icapital loaded below $ 2.25, Parkson at $ 4.70, Sealink at $ 0.38. I am going to hang on to it for another 2 - 3 months. I quit Alam around $ 0.65 and may consider to reenter if it can pull back between $0.65 ~ 0.68. Since it is such a short holding, that is the reason why I did not load it into Turtle Portfolio. You are welcome to join the ride. However if you are feeling I am promoting the stocks, just ignore these postings. See you in December.


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