April 28, 2006

Cautious Bullishness In The FKLI

Since the last update when I reiterated my long call on the FKLI, it has moved up quite a fair bit and the April contract is expected to settle around the region of 947. The market has shown some signs of lethargy, meaning that the bulls will need fresh impetus to continue marching forward. For those adventurous, advocate rolling half of your position over to the May contract. For those who are conservative, wait for a correction to go in on the long side. Next month should see some exciting moves ahead of the World Cup in June. The current trend is still biased to the upside, although there might be an initial shake off to correct slight overbought situation.

Anticipate The Worst And Practise A Possible Response

Under what conditions would you like to trade if you had your druthers? You would probably want to trade in a strong bull market, be way ahead so that a loss wouldn't hurt at all, and have a foolproof trading plan. In addition, you would want to have a mental edge. You should be in a good mood, alert, and ready to take action. We can't always trade under such ideal conditions, however. If you are a professional trader, for example, you may need to take advantage of ideal market conditions, even though you had to stay up with a sick child all night. We may need to trade when we aren't at our best, but failure is not a certainty. You come out unscathed if you plan your trade well enough, anticipate adverse events that may thwart your trading plan, and practice a response to deal with the setback gracefully.

When planning a trade, it is essential to specify conditions where you will exit the trade. If you trade by the seat of your pants, you won't be able to react decisively when you are not in an optimal mental state. Planning a trade can make all the difference. After you have outlined a trading plan, you should consider the worst-case scenario. If you are caught off guard, you'll panic. But if you anticipate the worst, and have a plan for coping with it, you will be able to respond gracefully.

Our expectations often control our emotions. When our expectations don't match what actually happens in our lives, we react impulsively. But it is possible to maintain control. If you are caught off-guard, an unexpected setback will throw you off. If you anticipate all possible adverse events, however, you'll stay calmer and you will be ready to take decisive, disciplined action to remedy the situation.

One of the best ways to anticipate and cope with unexpected events is through mental rehearsal. Mental rehearsal consists of pretending an adverse event is occurring while in a safe, quiet place, such as after hours, when no capital is on the line. It's much like making a videotape of a trading scenario and replaying it in your head. For example, close your eyes and imagine executing your trade. Observe the thoughts that go through your mind. Imagine trying to stay objective and unemotional. Next, imagine the worst-case scenario: the price goes down and reaches the point where you planned to exit and take a loss. Imagine how it feels to lose. What thoughts are going through your mind? Depending on your experience, you may tend to feel anxious and afraid, but ideally, you should remain calm, and ready to exit the trade effortlessly. The key to using visualization is to mentally experience a variety of scenarios. Run through the ideal scenario and the dreaded scenario. By replaying the events in your head at your own speed and under your own terms, you can learn to control your emotions, and respond decisively according to your trading plan. When you first replay the movie, you may feel anxiety and apprehension. Your breathing may be heavy and difficult. When this happens, you can "pause" the "video" and practice relaxation exercises. Take deep breaths and relax your muscles. By replacing anxiety with feelings of peace and relaxation, previously stress-inducing events will lose their potency. Through practice, you will soon be able to replay the movie without stopping and without feeling any sense of anxiety or uneasiness. With enough practice, you will be able to respond gracefully and decisively according to your trading plan.

Don't get caught off-guard. Carefully consider what might go wrong. Practice what you might do after hours, so that even when you are not in a peak performance mindset, you will trade according to your trading plan as if you are completely in control.

April 26, 2006

YNH Property

YNH Property is quite attractively priced at P/E of 5.2 and Dividend Yield of 8.8%.

2nd Quarter 06 Strategy

The Dream Theme.

April 25, 2006

Infrastructure/Construction Sector

Infrastructure/Construction Sector is still driven by Government Directives.

Plantation Sector

OSK Research has upgraded the Plantation Sector to Overweight.

Self-Statements To Combat Envy

Yesterday, Jack went over to his best friend Tom's house to look at his new Porsche Turbo. Jack has wanted a Porsche since he was a teenager but could never afford one. Four years ago he taught Tom how to trade. Tom's been doing great ever since. Each year he has made greater and greater profits, even during bear markets. Jack can't help but envy Tom's success, yet at the same time, he berates himself for failing to do as well. He thinks, "What am I doing wrong? I taught this guy how to trade. How can he be doing so much better than I am? It just isn't fair. I should just give up." Have you ever felt like Jack? You look at your friends and can't believe how much better they are doing. Soon, you're so upset that you can't face another trading day. You may make a solid $200 on a trade, but think, "I'll never reach my financial goals at this rate." When you are so consumed with envy that you're beating yourself up for failing to meet your performance standards, it's time to take action. Rather than wallow in self-pity, it's vital to combat envy and regain your optimistic mental edge.

The reactions to certain events can seem to come out of nowhere We can be happy and content one minute, and suddenly disappointed when faced with a setback. It can happen quickly, instantly without thinking. It's important to get back on track when this happens, however. Although it may seem that our emotions happen automatically, they don't. We quickly think things through, and it's our thoughts that lie behind our emotions. For example, when we are envious of what others have, and feel disappointed with our lives, it is all because we believe that we should succeed. We believe that we should be doing as well as others. We believe that it is our right to do well. We feel entitled and shafted by life when we discover that we are not living up to our expectations. It's natural to feel this way. In today's culture, the virtues of ambition and success are touted with almost every commercial, every movie, and page after page of print ads. If you work hard, you deserve wealth, fame, and respect.

It would be nice if life always worked that way, but it does not. In the trading realm especially, sometimes our hard work pays off, but many times it does not. When you feel envy, or disappointment, it's useful to pull out a list of sayings that changes your perspective and restores your enthusiasm and mental edge. What are some of these statements? Consider some of our favorites: "Run your own race. Don't let your net worth determine your self-worth. Focus on the process, not the prize." We've written columns on each of these slogans. In summary, "run your own race," refers to the idea that comparisons to others are unproductive. Everyone has his or her own resources and talents. Some people start out ahead in ways that you are unaware of, so if they do better than you, there is no reason to think that you are doing poorly; they are merely doing better than you because they have more resources. You don't have to compete with others. All you have to do is run your own race. And no matter how well you do, you always have inherent self-worth. Don't let your profits, or performance, determine how you feel about yourself. Look inward for validation. Appreciate the talents you have and appreciate what you can do. Finally, it's useful to focus on the inherent intellectual rewards trading has to offer. When you focus on profits, you put pressure on yourself to do well, and when you put too much pressure on yourself, you tend to choke under the strain. Stay modest, accept your limitations, and enjoy yourself. If you can remember these truths when you feel envious of others, disappointed, and beaten, you'll regain your mental edge, and make the profits you're seeking.

April 23, 2006

Plantation - A Hedge Against Rising Inflation

The Plantation sector index broke out of its consolidation on rising crude oil prices, which touched $75 last Friday. Higher crude oil prices have increased the viability of biodiesel plans, which in turn will increase the profitability of the plantation companies. My favourite picks in this sector are Asiatic, Golden Hope and H&L.

April 22, 2006

Football World Cup 2006

Mingle work with play, football with economics....

Oil In Uncharted Territory

How high can it go? It's anybody's guess, really. Setting a target of $80, $100, $200 or just $76 is pretty meaningless. Only time will tell....It will be interesting to look back and see where it actually tops...

April 20, 2006

Hang Seng Shows How It Is Done

Hang Seng broke out of trading range some days ago with bullish gapping price action. Will Bursa Malaysia follow its footstep? Almost certain this time....Note : There is no certainty in the market.

April 19, 2006

Winning Traders Are Flexible

How flexible are you in your everyday life? When you are in a new city, do you worry about getting lost or do you just go your own way and assume that somehow and someway you'll eventually get back to your hotel? Do you get upset when you are told you are wrong, or do you welcome criticism or an opposing opinion? The ability to be open and flexible often makes the difference between winning and losing in the trading business.

Trading is a scary business. When your money is on the line, you naturally feel defensive. The more uncertain you are, the more rigid and defensive you become. It's a natural, biological response. When humans are threatened, it is often in their best interests to choose a specific course of action and stick with it. Imagine that you are changing lanes in rush hour traffic. If you commit to a lane change, it's essential to stick with your course of action. If you waver, you'll confuse other drivers and may end up causing an accident. When we are in potential danger, our mind focuses on executing a specific course of action; other alternatives are completely ignored. At times, this can be a good strategy when trading the markets. If you are executing a scalp trade, for example, you must commit to a specific course of action, get in and get out, and make a profit. It would do you little good to waver at a critical moment when you should take decisive action. That said, when it comes to longer term trading, it's vital to be open-minded and flexible.

When making long term trades, market conditions can change, and you may need to make midcourse corrections. You have to look at a trade from different angles and willingly explore every possibility. Many traders are stubborn, however. They have their money on the line, and they are afraid their trading strategy may not pan out. Unfortunately, their stubbornness restricts them from freely examining their options. Eventually, they end up losing money when they miss a critical market change.

How can you increase the odds of becoming flexible? First, don't imbue a trading plan with extreme psychological significance. A trade is just a trade. It reveals nothing about your intelligence, talent, or true inner-worth. It's merely a business transaction, so treat it as nothing more. Second, minimize risk. Again, when you feel that your well being is at risk, you feel threatened and defend your ego by acting inflexibly. If you limit the amount you risk on a trade, you will feel naturally relaxed, and thus, more open and flexible to possibilities. If you feel extreme stress, you might even want to close out a position and reevaluate it. If it is a longer term trade, you have the luxury of exiting and reevaluating your trading plan while feeling safe, and thus, relaxed. Third, you can ask a trusted friend or coach to play devil's advocate and help you see alternative perspectives.

Don't be afraid to admit that you may be wrong. The willingness to admit you are wrong gives you power and freedom. When you are willing to admit you are wrong, you won't be defensive, but you'll feel so free that you will trade creatively and profitably.

Telecommunications - Alive And Kicking

Neutral Call on Telecommunications Sector by OSK Research.

April 18, 2006

FKLI Up On Overnight Strength In The Dow

Be it a conincidence or whatever, the FKLI gapped up strongly on the back of a strong US market, just when FKLI needed an excuse to rebound. 930 was indeed the turnaround point as predicted. The overall tone of the market is bullish with regional markets posting strong gains as well. Stay long and stay close for further updates.

Money Management And The Big Picture

Sometimes traders run hot, but sometimes they run cold. The factors that influence this fluctuation in performance are varied. As a trader, you may have a bad day or week. Or market conditions may not be optimal for your style of trading. It's also possible that your method needs to be re-thought, and it may take time to make minor modifications until you discover the fix. Because your performance is never assured, you must prepare for a worst-case scenario. Many people don't like thinking about the potential downturns, but it is vital to force yourself to look at what you don’t want to see, and take precautions in order to survive the unthinkable. Many seasoned traders argue that money management is vital for success. Here is what some of them told us when we asked them what they thought about money management.

Mark said, "You can have a crummy trading strategy, but if you have good money management, you can make money. If you have poor money management, it doesn't matter how good the trading strategy is, you're going to lose in the end." Chris warns, "You must have a survivability element so that if you literally wished to select stocks by throwing darts at a board, you would continue to survive market to market."

When asked how he determined the size of his trades, Alex said, "I base it upon the equity in my account, first of all. Also, I look at the volatility of the stock and how much money I want to put at risk on any one position. I won't risk more than a couple percent on any position."

Mike also agrees that money management is important. "You've got to consider the commitment size of your capital. What percentage do I commit? In the beginning of the year, I'll risk maybe two and a half, three percent. I may have a slew of positions on, but I'll only risk two and a half to three percent. I also have a reserve amount. I have war stories, so I keep a reserve as protection."

Although the specifics of money management can differ across traders, many suggest limiting the amount of capital you risk on a given trade. Many traders simply suggest limiting one's risk to 1-3%, but there are no hard and fast rules regarding this percentage. But however you do it, limiting risk helps you survive changing market conditions or trading strategies that don't pan out. So follow the advice of seasoned traders: Manage risk. In the big picture, you'll end up more profitable if you do.

April 16, 2006

Oil Closing In On $70

The previous high was $70.85 on Aug 30 2005, a day after Hurricane Katrina swept onshore and damaged oil platforms and refineries along the Gulf of Mexico.

Technical Ratings

Technical Ratings by Kenanga Research.


MAS going ticketless.

OYL On Takeover Talk

Air conditioning product maker OYL Industries Bhd was sharply higher on renewed takeover talk. OYL rose 0.54 rgt or 12.44 pct to 4.88 on volume of 9.31 mln shares. Speculation is rife that Quek (the major shareholder of OYL) will sell out to Toshiba of Japan. Key resistance is at the 4.90 level.

April 15, 2006

Realistic Goals Realistic Profits

Earl just quit his job. He's going to trade full time. But his wife is skeptical. "How are we going to survive? We need to have $100,000 a year to maintain our standard of living," she argues. Earl replies confidently, "I have it all worked out. I will make $400 a day, and that's how we will have $100,000 a year." Where's the flaw in his thinking? Setting a high performance goal based on a specific objective per day puts too much pressure on him to perform. Sure, Earl may make $400 on some days, but can he realistically achieve his $400 a day, $100K a year objective. What if the markets don't move at all on a given day? What if the markets are quiet ahead of an important economic or earnings announcement (such as an interest rate hike, which seems inevitable these days)? It is not a good idea to believe that you can trade every day or every week. Sometimes market conditions are not ideal. On some days it is better to stay out of the markets completely, rather than fail at trading the low probability setups available on a given trading day.

Even if one has the skills to make $400 a day, when opportunities are available, it may not be a good idea to conceptualize your goals in this way. Consider the consequences of requiring yourself to meet a $400 a day objective. What happens if the first two days of the week yielded only a $300 profit? By mid-week, there's strong psychological pressure to make up the money you have not made. How might you react? You may overtrade and end up taking poor setups, which may lead to losses rather than gains. The added stress can make matters worse. As your stress level elevates, you will potentially enter a never-ending cycle of frustration, losses, and further disappointment.

Setting more appropriate goals will relieve frustration. It's useful to have a rough idea of how much money you want to make on a given day, but setting a specific dollar amount that you must achieve on any given day will often throw you off track. Psychologists have found that pushing yourself to achieve an unrealistic goal rarely works. Giving yourself some leeway relieves pressure and helps you keep your spirits up. And when your spirits are up, you are more likely to trade freely and creatively. You may not make a specific dollar amount every single day, but over time, your good days will make up for your bad days, and overall, you will reach your objectives. Seasoned professionals suggest taking it one day at a time. They know that on any given day, opportunities may be limited. They know that it is vital to patiently wait for the opportunities to come to them. They don't impose their will on the market. They understand that forcing the markets to respond to their expectations is not a blueprint for success. They know that all that really matters is performance across a series of trades. Many traders can lose 60% of the time, four days a week, but on that fifth day, a huge winner offsets nominal losses accrued across a series of trades.

Setting goals is vital for achieving success, but goals are useful only when set correctly. It is necessary to set goals that match your skill level. Shooting for goals that are beyond your skills will frustrate and stifle you, but realistic goals will motivate you to strive for higher levels of performance. So don't despair, you may not profit on every single day, but over the long run, if you persist and trade with a positive attitude, you will trade like a winner.

April 14, 2006

Bursa's Meteoric Rise

...and fall?

Some research houses have been issuing Sell recommendation on the stock on the basis of overvaluation. I believe Bursa will go much higher after a period of consolidation. Accumulate on weakness.

April 13, 2006

Tanjong Offshore

Tanjung Offshore target RM2.53. Do not expect fast gains from this stock.

FTSE-Bursa Malaysia Index

Components can be found here.


OSK Research downgraded AirAsia to Neutral with a target price of RM2.05. The uptrend is intact, though it might trade lower and consolidate at the RM1.75 to RM1.80 level for a while before moving up.

P.I.E. Industrial Berhad

Kenanga Research has a Buy call on P.I.E. Industrial Berhad with a target price of RM3.28. Volume is thin, though.

A Windfall Is Not the House's Money

Trading profits usually don't come in a steady stream. Sometimes you run hot and sometimes you run cold. If you ask seasoned professionals about their profits, they will often tell you that a few big wins made their year. The way you view your wins dictates how you approach them. If you expect your wins to come in a steady stream, you may tend to view a big, unexpected win as a windfall. And when people view money as a windfall, they tend to view it as fun money, money that can be spent on a whim. It's like winning big at a casino. When you don't expect to win, you figure that you can take risky gambles. After all, it's the house's money, isn't it? On the contrary, however you make wins, hard-won or unexpected, you should view profits as significant investment capital that should be managed prudently.

A series of studies by Dr. Hal Arkes and colleagues at Ohio University illustrates how people tend to spend windfalls more freely. In one study, participants considered money that was won unexpectedly in a radio contest versus money that was earned by working overtime on weekends. When money was won unexpectedly, it was spent more freely. In a second study, participants were randomly assigned to expect a payment or were unexpectedly given a windfall. They were given a $5 payment right before attending a basketball game and their spending was monitored at the game. People who expected the $5 spent 38 cents on average while people who received an unexpected windfall spent 90 cents on average. In a similar experiment, participants were given $3 in quarters and asked to place a bet on a roll of dice. Participants who anticipated the payment bet $1 on average while participants who received an unexpected windfall bet $2 on average.

These studies show that when people receive windfalls they are willing to spend them more freely. It's as if they take the attitude, "easy come, easy go." This approach to money can also be applied to trading profits. Some profits tend to come easier than others. Sometimes one must patiently wait for the right market opportunity to present itself, and patiently wait to sell at the right time. Such profits take time and effort to accumulate. In other cases, profits may be easier to come by. For example, a media analyst may unexpectedly talk up a stock and the price may rise unexpectedly, or a product announcement may lead to increased buying by the masses, resulting in an unexpected profit. These unexpected windfalls may be treated as easy money and risked more freely. But profits are profits. It is vital to treat profits equally, regardless of how easy they were accumulated. When trading the markets, how well you do across a series of trades is tantamount. You may not profit consistently, but sporadically. It's essential that you carefully manage your capital. Don't feel that you can take bigger risks with capital that was easy to come by. Capital is capital, and if you manage it prudently, you will survive minor changes in market conditions and increase your overall profits.

Don't Go There

There are some lines that you just don't want to cross. It can be the little things as well as the big ones. Have you ever eaten inexpensive caviar from the grocery store? It tastes great until you eat the real stuff from Russia. Your Toyota Camry may be a nice ride, but drive an S-Class Mercedes for a week, and then tell me what you think. Crossing lines happens in personal finances too. At first you may want to avoid interest payments and follow a general rule of not carrying credit card debt, but you may decide to carry it for a month, and then it can become two months, and three...Soon, you get used to paying the interest and you justify it. It becomes commonplace and familiar. In the trading realm, there are lines that you may not want to cross but you have to. Learning to take risks is one of them.

In the movie "Rogue Trader," all Nick Leeson wanted to do at first was cover for one of his young staffers who made a mistake. He figured he could merely hide losses in a secret account, make up the losses, and no one would be the wiser. He succeeded. He made up the losses, and prevented his staffer from getting fired. However, he also learned to break the rules and get away with it. Eventually, he started believing he could mount losses, hide the fact from his superiors, and get away with it. Eventually, he didn't get away with it and ended up in jail. In your everyday trading life, and in your own way, you may end up breaking trading rules that appear to be no big deal initially, but later, you end up regretting them. For example, you may decide to abandon your trading plan, but rather than end up losing, you may end up winning. Although you may profit, it may be "unjustified" in that you acted on impulse but were rewarded for it by a win. What's the harm? In the back of your mind, you will think, "Abandoning my trading plan isn't so bad. Sometimes it pays off." You'll have difficult fighting the impulse to abandon your plan in the future.

Similarly, you may decide to abandon your risk limits by putting up 50% of your trading capital on a single trade. It can pay off, and big! But what happens to your ability to maintain discipline? Again, in the back of your mind, you may think, "It's all right to make a big trade occasionally. I'll survive." It may be useful to cross a line occasionally. It may not be a pleasant experience at first, but it is useful to experience a severe drawdown and recover. You will prove to yourself that you can take a hit and recover. It's better to face your fears than cower under the constant threat of losing money, and worrying about whether you have the ability to recover. Knowing that you can recover will give you courage. Once you learn to take losses, you'll be able to trade more freely. That said, this bravery may come at a price: You may have to always look over your shoulder and wonder if you will be tempted to take an unnecessary risk because you know you can.

When taking unnecessary risks and allowing your discipline to waver becomes commonplace, you may have difficulty maintaining control. It's useful to be aware of this tendency. It can catch you off guard, and you should be ready to take preventative steps to stay under control. An important preventative step is to make a list of potential negative consequences for breaking a rule and pulling it out whenever you get the urge to falter. For example, make an actual list of the times you abandoned your risk limits and lost big. The list might include a severe drawdown that took two years for you to recoup your losses. Write down how you felt and how you regretted the action every day that you had to work to pay for your mistakes. When you remind yourself of the consequences of abandoning your risk limits, you will be able to stop yourself from taking actions you don't want to take. Discipline is hard to maintain. When we see the potential rewards of taking a risky action, we tend to get amnesia with regard to the potential negative effects. We suddenly feel excited, high, and at times, omnipotent. As good as it feels, though, these thoughts and feelings can be dangerous. When you feel like you are about to do something you may regret later, it's essential to stop and think, "Don't go there." Sometimes trading like a winner requires that you know when to regain control and prevent yourself from making a big mistake.

April 12, 2006

Outperformance Of STI

Anybody recognise this chart? It is the Singapore Straits Times Index (STI). The latest leg up from end last year is almost non-stop in a nice trending pattern. Whilst the local bourse has quite a nice run up, gaining 4.68% since beginning of the year, the STI has outperformed it, having chalked up a 8.83% gain from 2347.34 end last year to 2554.66 as at 11th April 06.

March Report Card

OSK Research

FKLI Futures Technical Reading

When it comes to trading, money changed hands when fear is being instilled into the weaker party. This morning's price action was a result of front runners running ahead of institutional orders. This provides excellent opportunity to go long. For those who have been long, stay long as the tide may be turning towards the long side. There might be a little shake out tomorrow when stops are run below 930. In any case, stay long. Stay close for further updates.

April 11, 2006

Plantation Sector Update

OSK Research maintains Neutral call on the Plantation sector.

Malaysia Market Strategy by UBS 30th March 2006

Support is seen at around 2.80 as AMMB retraces after recent run up.

Among the Top Buy Ideas by UBS Research are AMMB Holdings, Genting and IJM Corporation.
Download Here.

April 10, 2006

KLCI Is Poised To Challenge 950 Soon

KLCI is taking a breather and is expected to consolidate between 935 to 945 before staging a breakout towards 950 and beyond. At this juncture, technicals are pointing towards a rechallenge of the 950 resistance, at the very least. Stay close for further updates as more information becomes available.