Warrant Deception

Sometimes it amazes me to see the kind of money one can make or lose trading on warrants, be it the normal company issued warrants or call warrants ,
all it takes is the mother share to move  up with volume and before your very eyes the warrants will trade with such exuberance and velocity as if there is no tomorrow....

Granted everyone wants to make a quick kill and pocket some easy cash ,but the late entrants may be in for a nasty surprise if they fail to sense nor see the reversal in which case they will be left holding the baby ie in some cases the value can come to a big fat zero if held to maturity !

It would be prudent to at least check the following "basic ' facts before one ventures into warrants..

a) the period to maturity...the call warrants usually has a one year maturity ( which is short in share market terms )

b ) the conversion ratio....a 1: 1 (typical of normal warrant ) is obviously "better " than a 3: 1 (which is common in call warrants )

c ) conversion price ....can be tricky to a naive retailer who only considers the absolute trading price without taking into account the conversion price and conversion ratio...in fact in recent days you can easily spot warrants being bought up without apparent reference to either conversion price or ratio ...in some cases not  even the impending maturity period...do they expect the mother share to appreciate by another 30 % in the next one month ?

All said ,a little bit of homework before you invest may save you the heartache and headache (and hole in the pocket ) at a later date ...


Chris Choo

Entry Point...

As in the case of timing the exit point , the entry point poses equal challenges....

No matter how 'hot' a stock is ,if you don't get the right entry point( price ) you will either

not make profits or worse can actually end up with a loss instead. Many years of watching how

retailers invest or trade have reaffirmed this...." I will only buy in when a definite uptrend has been

established " This train of thought seems logical in the context of a healthy robust or outright bull

market where demand breeds on itself  ,becomes a self fulfilling prophecy and until the music stops

everyone goes home happy ! ...Regardless of the trading technique ie chart or fundementals etc, the

average investor normally loves the surging volume and price as the "trigger " point for entry and more

often than not would end up buyimg near the peak if not the peak price itself and watches with despair 

as the price inevitably recedes over time or collapses  within a blink of an eye....the more savvy would

probably escape this "sickening feeling"...

There is no iron clad method of preventing a bad entry point ( and consequently a bad trade ) but a few

basic pointers may include the following.....( assuming current market conditions )

a ) if a share has already moved up by one to two bids ,chances are the PDTs or the bulk purchaser ( day trader ) will probably unload the share for a quick profit ...

this action will naturally dampen sentiment and put an end to the uptrend unless a real basis for a push exist eg major contracts , super profits etc...

It may be better to skip the counter altogether than chance an entry at the higher end....and get caught...

 b ) Watch out for counters whose price seems to hold steady in a broad market weakness and depending on your

 risk appetite make an entry if volume continues to increase steadily over the day....could certain parties be collecting

 during market weakness and thus giving an air of steadiness to the share price ?

c ) If a disclosure before or during trading hours on a particular counter seems positive ( in your best judgement ) eg profits

above analysts' expectations ,then you may want to make a calculated entry risk..if the counter has yet to move up in a

meaningful way ,or better still not at all....

d) on the other side of the spectum ,a counter that has seen continuous price drop over a few sessions or within the same

trading day could provide a good entry point if there are no exceptional reasons for its drop  ( eg adverse financial condition ) other

 than profit taking or contra due date selling....

Last but not least it is always prudent to remember that what goes up must come down ( somewhat ) and with that in mind never hold on to a share forever ( except possibly a handful of super high yielding blues chips ) ...if u miss the first ride ,wait it out....

Note : 

Chris Choo will be giving a talk on Price Action Technique (PAT) on Saturday 15th December 2012.

Date : 15th December 2012

Time : 9:30 am - 1:00 pm

Venue :

Unit 809 Block A

Lift Lobby 3

Damansara Intan

No. 1, Jalan SS20/27

47400 Petaling Jaya

Fees :

RM 250

For further inquiries, please contact Julie (012-2009389) to reserve your seat. First come first serve basis.

Thanks.

Chris Choo

When.. Why... I should sell ?

Hello Readers.....

How was your weekend?

One question always I come across among traders is..... 

When do you sell ?

This seemingly simple question is NEVER simple in real life....

Again supposedly common sense will dictate that you should sell when the technical charts or whatever trading technique indicator you subscribe to tells you the highest point (price ) has been reached and you should take profits.

In practical real life situations it is indeed possible for most to make that decision and move on even though more often then not the selling price subsequently turns out not to be highest...the seller consoles himself by rationalising that one needs to be contented and accepting that the buyer of his shares "deserves " to also make some gains for taking over his shares at a higher price...

All is well and everyone goes home happy....AS LONG AS the share keeps going up ...

The nightmare begins when the bought shares start coming down.....

From my experience, most find the going gets tough when shares begin a downtrend especially when they have bought the share only minutes ago !...the minutes become days ..months ...years and decades ! The average investor trader has a built in psychology that one should only sell when there is profit. A logical thought that is taught to any child....but...since when did anyone said that this golden rule of business apply to the share market ?

The more appropriate rule may sound something like this...

- if  you are a mid to long term investor you will  have  done lots of homework to pick good quality stocks which provide  steady dividend yield plus capital growth in which case cost averaging may be the best way to bring down the effective cost of acquisition. Sell only when there is a change of asset quality due to whatever reason or on a personal level a need for cold hard cash!

- if you are speculating and merely a intraday /short term trader ,you should never lose that all important trading perspective ie; you bought in the hope of making quick gains ...chances are the share has poor fundamentals or the buying price is already been chased up prior to your purchase. Both these elements should be at the back of your mind all the time...a quick exit at minimal profit or loss is the order of the day....no two ways about it ....bite the bullet early than be sorry if the trade goes against you...selling at your purchase price or even a bid or two lower may save you the pain of holding massive paper losses which equate real losses...

Trading and investing are 2 distinct animals ( pretty sure you're fully aware of this)

By the way, I will be the speaker on the following topic PROFITABLE INTRADAY & SHORT TERM TRADING METHODOLOGY, at Jupiter Securities Sdn Bhd ..

Date : Dec 15 ,2012 ( Saturday ) Time : 9.30 am to 1 pm

Address : 

Unit 809 BLK A
Lift Lobby 3
Damansara Intan (Next to Tropicana City Mall)
NO 1, Jalan SS20/27
47400 Petaling Jaya

Fees :
RM 250 per pax.

Please contact Julie (012-2009389) for further inquiries.

Thank you

Chris Choo

LAZY SUNDAY READING PLEASURE

Good evening ....

A good friend of mine once asked me this simple but very pertinent question

Is there a one size fits all style of trading or investing in the stock market ? Interesting question considering that we all know that there are countless methods ranging from the software based "scientifically" packaged to the rule of thumb guess work style adopted by many. 

That said I would like to add my 2 sen worth as follows....

Instead of deciding on any one style it may be better to categorise stocks according to their historical movement trends  and only then decide on the best method to apply....A practical but realistic approach may be as follows...

 Heavy weights ( blue chips ) : These are fund managers favourite haunts and hence the the fundamental analysis based method may be most suitable. Changes in performance  ( profits /div yields ) will affect the share price. So it is only logical one should pay close attention to such data and analyst writeups...

 Growth stocks : These "aspiring " counters are plentiful and are the favourites of middle level investors, mainly individuals who love a good story line and will lap up well researched reports. As the mix between mid term players and short term opportunists are quite balanced here ,the best suited method could include a combination of technical analysis, fundamental analysis and other momentum based techniques...

 Lower liners ( speculative ) : These are the volume kings and form the main stay of top 20s day in day out. Being mainly retail based and where price movement not necessarily driven by fundamentals nor corporate developments, momentum or trend based trading methods are most suitable. Imagine trying to apply fundamental analysis on a PE 100 stock and trying to "justify " its share price climb...You either join the band wagon or sit out the bulk of the trading action everyday in a bear and quiet market as is the case now....

In short it may make sense to know the type of trader or investor you are before you worry too much of the trading methodology..

Happy weekend & wish all will have a great profitable week ahead. Till then happy reading on lazy sunday.

Thank you

Chris Choo

chrischoo007@gmail.com 

MARKET TALK - PRICE ACTION TECHNIQUE

Hello Readers, 
I will be the speaker on the following topic at

Jupiter Securities Sdn Bhd ..

 Topic : Profitable Intraday and Short term trading

 Date : Dec 15th ,2012 ( Saturday )

 Time : 9.30 am to 1 pm

 Address : Level 9 , Menara Olympia ,Jln Raja Chulan 50250 Kuala Lumpur

 Do contact Customer service if you want to know more. 

Thank you

Chris Choo

chrischoo007@gmail.com

KLSE - My Opinion

Hi readers,

If you are a trader and you are facing a falling market and for various reasons you are still holding on to some speculative stocks ( did not sell earlier for various reasons ) what do you do ? The urge to sell off everything can be intense and real. 

But it be wise to sit back and perhaps consider the following....

- Are the stocks really heading into oblivion with no chance of recovery in a market reversal..ie a potential PN 17 company ?

- Do you have at least middle term holding capacity ?

- Is the fall in the broad market overdone and is due for a technical rebound ?

- Do you foresee an impending market meltdown locally or overseas in the near term ?

If your answer to the first and fourth question is a NO and a YES to the second and third question there is indeed no reason to panic in which case the better course of action would be to consider cost averaging or at the very least sell only when the technical rebound loses momentum.

Thank you for reading

Chris Choo

please email me if you have any queries. chrischoo007@gmail.com

KLCI....MONDAY DEC 03rd, 2012

Hi readers,

Stating the obvious....

There are some investors /traders who take a very microscopic view of the share market...trying to second guess or worse out with the market. As it will not take a genius to know that the quieter the market is the lower the chances of selecting a high performance stock...No matter how good or fundamental a stock is ,if there are few buyers.  How does one expect the share to go up meaningfully ? At best it may move one or two bids up but anything more would require a herculean effort. 

Conversely should it fall later the inverse would be true..with few buyers the fall can be exaggerated , possibly even more than the initial rise...that is why sometimes it may be better to let an opportunity go by than to catch a  subsequent falling knife ! Instead try looking for hidden gems within the broad market by identifying "real" collection patterns. 

The collection price might serve as a base price for a rally at a later date...

 Have a good day.

Thank you

Chris Choo

email me if you have any queries at chrischoo007@gmail.com