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FBMKLCI

What constitutes an uptrend

Stock price does not move in a straight line. It moves in waves.

Conceptually as follows:

  1. If stock price moves like the grey line, there isn’t much we can deduce from.
  2. However in reality, price moves in waves like the following. Even in an uptrend, the stock will move up say 10 points, to reverse back 3 points before going back up 7 points etc
  3. For an uptrend to hold, the upmove will be longer than the downmove. (refer to the black line below)
  4. And vice versa for a downtrend.

The principles that we can deduce from:

  1. Buy in an uptrend
  2. Think in waves
  3. It is easier to spot a top than a bottom. (the reason is rather psychological and obvious- people tend to sell faster/ motivated to sell rather than to buy).
  4. On average, there will be more sellers than buyers. (the motivation to sell, i.e. the need to use money is always stronger, all things constant)

This is a line chart of a real stock. Can you eyeball how many waves (up and down) are there?

My answer as above. As you can see, the yellow lines (uplines) are consistently longer than the downlines (highlighted in blue)

So the stock is moving upwards. So at any point of the blue line, it represents a buying opportunity

Simple isnt it

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FBMKLCI

FBMKLCI

On 19 July, I projected FBMKLCI using a daily chart. I said it will push downwards, hitting 1640 as the first stop. 2 weeks later now, it hit that point. So an update is due

  1. 1640 is the mid of downward channel.
  2. It will consolidate here for a while before deciding on the next move
  3. For it to reverse the trend, it needs to go up 1670 and form a new base there
  4. Else it will push down towards 1580 (the low of the downward channel)
  5. As at now, #4 is more probable

Attached is a renko chart (semi tick chart*) with a 5 point reversal for FBMKLCI

A true tick data set will not have time element. The above is built from an end of day data

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FBMKLCI

Tick Chart vs Time Chart

The normal chart that we see is a time chart. Take for example a daily chart. Regardless of any buy and sell transaction, at the end of the day, there will be a record.

A tick chart on the other hand, only records something on the chart when there is a transaction. If there is no transaction (buy & sell activity), there will not be any record on the chart.

So a tick chart can be viewed as a compressed version of a time chart

Put another way, if there are 10 days of data, you will see 10 price bars on a time chart. On a tick chart, it will depend on how you set it. (for example, only record change if there is RM1 change)

Assume the above data – on a daily chart, you will see 10 data points. On a tick chart that is set to record any change of minimum RM1 (called reversal amount), then on Day 6 and Day 7, there won’t be any record (since the price is similar to Day 5’s). The last data point will be on Day 5 at RM12. The next data point will be on Day 8 at RM10. Ditto for Day 9 & Day 10.

The above tick chart is based on RM1 reversal amount. If you set the reversal amount to be RM2 (meaning, only record any change is there is an RM2 change), you wont see Day 2 data for example. Day 1 is RM10, Day 2 at RM11 only has RM1 change.

Categories
FBMKLCI

LTKM

  1. LTKM is an interesting case – it got a takeover offer at RM1.35/share (which represents ~20+% increase over last price)
  2. It has been on a downtrend since March 2015. If you have been holding this since then, you will be making a loss. Unless you enter after 2018
  3. Can you see from the chart that something is brewing? Yes, but not possible to know what it is
  4. The only clue is the furious buyback by insiders since 1 March 2018 until end of last month
  5. This kind of privatization is quite rare, so if you see similar set up then you should get your radar on. (the last privatization that i got on was Epic – sometimes this is pure luck)
  6. The best source is insider news
Categories
FBMKLCI

Penta

  1. Penta is a very interesting choice
  2. It has been on an uptrend
  3. Recently it broke out from the upchannel to form another smaller upchannel
  4. The low it will go to test- at around the RM3.20 area (highlighted yellow)
  5. The lowest it can go RM3.15 area (lower of the upchannel) – BET ON for next one month. Come claim RM10 if otherwise
  6. It can go as high as it will go.
  7. Set trailing stop loss accordingly
Categories
FBMKLCI

FBM KLCI

  1. FBM KLCI has been on a downtrend since April 2018 and this is confirmed by Sept 2018.
  2. Looking at the current chart with the trend channels i drew, i think it can go to as low as 1550. It will first touch 1640 (mid channel) for this to be true
  3. If it breaks above 1670 and can stay there, then it will form an uptrend (which needs to be confirmed later on)
  4. Let’s revisit this in 2-3 months’ time.

Why I’m doing this:

  1. Penning this down so that I can know the accuracy of my prediction
  2. For something to be useful, it must be predictable. So let’s see how far this can go
  3. Will be posting on individual stocks too in the future – so stay tuned