The Market and You is like the Sea and You

Your relation to the market is like you and the sea. The sea does not know of you existence. The sea has no interest in your welfare. With the right tools and skills, you can go out and make a living from the sea. You can study the behavior of the sea. With that knowledge, you can avoid the danger and survive. With the knowledge and skill you can find fishes and make a living from that. You can even become rich. However, there are dangers in the sea. The sea may drown you if you don't read the danger signs or when you take too much risk. For example, if you only have a small boat, you can only go fishing in extremely calm water. However, if you boat is bigger, you can afford to take a bigger risk and fish in more choppy water. With smaller boat, you can only fish along the coast where there might not be much of big fishes.

Trading is like that. You need to build your capital to be able to take a bigger risk. If you capital is small, you better off taking lower risk or you will be wipe out very fast. The market does not know your existence. It does not care if you exist. It does care if you make tonnes of money or if you go broke. It just kept moving on. You can cry over your loses or celebrate your winnings. It does not matter to the market. Traders come and go. Investors come and go. Market continues.

Fundamental Analysis for Stocks

There are people who are overly obsessed with fundamental analysis. They analyze everything and become paralyzed. For me, I only want to be a trader or private investor. I have small capital and not interested to own the company (as with Warren Buffett). My goal is to ride on the price movement. So, I only do superficial fundamental analysis. I look at basic numbers as in profit trends, margin trends, NAV, Liability vs Assets, EPS and cash flow statement. I will also look into the sector and general market conditions. I based my decision mainly on my technical analysis.

It is common to have bought into a company with good fundamentals and yet the stock price drop and stay depressed for a long time. If your aim is to own a company, that is OK. You don't sell it. It will eventually come around but may take 2-3 years especially very small cap stock.

Most people overlook on key aspect of Fundamental Analysis which is "unusual events". For example, if someone where to invest in a company in Indonesia that produces Palm Oil and has vast plantation in Sumatra. With all the favorable fundamentals, one would expect the company to increase profits every year. However, if an earth quake occurs and a tsunami wipe away half of their plantation, the company will be in trouble. The profit will be wipe out.

As a trader or investor, we can't be an expert in every field that we invest in. For those who want to rely heavily on fundamental analysis, they may want to choose to invest only in certain sectors where they can be expert in that sector.

Asia Market Trend - China SSE - Jan 2011

China Market is undergoing correction as can be seen from the chart. It is forming lower highs and lower lows and forming a tunnel sloping downwards with 50MA and 20MA pointing down.
This is not surprising as China is facing high inflation and the government has to do something to tame the inflation. More measures to slow bank lending and probably raising interest rates are possible.
It seems that the SSE will be ranging from 2300 to 3200 for the rest of the year.

Trade summary of Jan 2011

Here are the trades closed in Jan 2011 as of 21st Jan 2011.

06/12/2010  B  DelongH                20000  0.510  -  -
04/01/2011  S  DelongH                20000  -  0.570  1124.30
29/09/2009  B  China Sky              50000  0.250  -  -
13/01/2011  S  China Sky              50000  -  0.255  161.50
26/07/2010  B  UETF SSE50 China 100   5000  2.070  -  -
13/01/2011  S  UETF SSE50 China 100   5000  -  2.080  -22.71
02/11/2010  B  ComfortDelGro          5000  1.470  -  -
14/01/2011  S  ComfortDelGro          5000  -  1.630  738.60
01/12/2010  B  China Sky              50000  0.185  -  -
14/01/2011  S  China Sky              50000  -  0.250  3173.77
06/12/2010  B  China Sky              50000  0.200  -  -
17/01/2011  S  China Sky              50000  -  0.240  1922.91
                           TOTAL PROFIT (S$)          7098.37

These trades were initiated in December 2010. The results varies. However, it can be said that Jan 2011 has been a profitable month. The key is to keep the momentum moving.

SGX Trading New Price Surge 2010-01-15

Security Name                 CLOSE Vol_K         SMA5C Value_K         C-1 Vol-1-K         Chg% Change Symbol  
ERATAT LIFESTYLE LIMITED 0.2650 12433.0000 0.2540 3294.7446 0.2500 4090.0000 6.0000 0.0150 FO8 
HISAKA HOLDINGS LTD.         0.5100 24062.0000 0.4910 12271.6201 0.4800 3034.0000 6.2500 0.0300 FV2 
RENEWABLE ENERGY ASIA GRP LTD 0.2450 20367.0000 0.2260 4989.9150 0.2200 1996.0000 11.3636 0.0250 5DW 
SM SUMMIT HOLDINGS LTD         0.1950 26818.0000 0.1450 5229.5098 0.1350 0.0000 44.4444 0.0600 S43

Of these counters, SM Summit is suspicious even though it has shown capability of sustaining prices. Its volume tends to be extremely thin and subject to easy manipulation.
HISAKA seems promising but its PB ratio is extremely high.
Renewable Energy is hot with a lot of promises but its track record was doing justice.
Eratat seems to be more reliable except that it is an S-Chip. Too many scandals among S-Chips had dampened their credibility.
Another counter which is CNA also shown price and volume surge 2 days ago. However, this counter is too thinly traded.