Crisis Stock: Noble Group vs Iceberg (壮士断腕、可悲可泣)

Ein55 Newsletter No 057 - image - cut arm

Poor Noble Group (SGX: N21), just about to recover, Iceberg is back with new report. Similar to Ezra and Cosco, it is a crisis stock with declining business and stock price.

It is not suitable to apply conventional method to analyze Noblle Group. Technically it is like a new company now, most of the good assets are sold to save the company by paying the debt. It may not have the same power to recover to the past glory.

Since it is a trader stock, fundamental will be relatively not so critical as in a bullish market, even weak fundamental stock could rise many times under speculation. It is more suitable for short term trading, using short term TA signals. 23 cents support was broken downward, combining with Iceberg (negative PA), tough on Noble. It is still above the intermediate support of 20 cents.  There is no need to guess for trading, prices with support and resistance will show us the probability.

NAV (Net Asset Value) criteria may not be suitable for Noble Group as it becomes asset light business, the asset quality is also a question mark. Good assets are properties and cash, many company have these quality assets, some with discounted share price.

Iceberg may be shorting all the way on Noble to low optimism with profits. If Iceberg is profit driven, similar to hedge fund, they could change to long position to “accept” Noble now, so that they could profit from recovery of Noble. Since Iceberg is still consistent in their negative views, it deserves some respect as they have principles. At low optimism, even for lousy business, very little profit potential to short a stock. With recovery of commodity market, Noble could have survived the greatest business crisis.

In ancient time, a warrior could cut off own arm to save one life when bitten by poisonous snake. Noble has cut his arm of core asset to save from 2 “snakes” with multiple bites from Iceberg and Muddy Water, starving in a cold winter (commodity crisis).  It deserves a chance to recover.

壮士断腕、可悲可泣。

 

Poker Game vs Investing

Ein55 Newsletter No 056 - image - poker game

There are many similarities between Poker Game and Investing. In fact, we could have more special edges or unfair advantage in investing but most people do not know.

1) Technical Analysis (TA) – Reward / Risk, Following Trend

For both poker and investing, we bid or invest more when the reward/risk is higher.  If we play Black Jack (total = 21 points), if you have 12 points, likely you will take the risk to add 1 more card because your chance (a card with 9 or less points, so that not exceeding 21 points) is high. Similarly, for trading or investing, eg. when stock price is near to the support, we would start to enter as the reward (upside) is more than the risk (downside).

Similarly, when a poker player has smooth win (good trend in winning), eg. facing a weak opponent, may add more position to maximize the gains.  This is similar to a trader who follows the market trend which is an edge.

https://en.wikipedia.org/wiki/Blackjack

 

2) Personal Analysis (PA) – Manage your emotions

A good poker player is calm, even holding lousy cards, will show confidence, so that opponents could not tell.  There is a poker game Bluff, the player could have lousy cards but pretend to have perfect cards. Opponent who challenges the truth could suffer as sometimes the player will purposely tell the truth. Similarly, a good investor will use the market greed and fear as a weapon, doing differently from the majority.

https://en.wikipedia.org/wiki/Bluff_(poker)

 

3) Fundamental Analysis (FA)

This is the main difference between Poker game and Investing.   Poker is a pure probability game, therefore TA & PA are the main edges. For investing, we could be selective to only consider strong business as they are more likely to grow in share price.

 

4) Optimism Strategies = FA + TA +PA (integration of all into strategies)

Strategies formation is important, integrating all the critical factors. Each poker player and trader / investor has own unique strategy, aligning to own personality, based on learning from positive experiences.  The strategies could change when the opponents (market) may be different, could be weaker (bear market) or stronger (bull market) opponents, which one would adjust the strategies accordingly.

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So, knowing the similarities and differences of poker game and investing (stock, property, etc), we understand that we could have the special edges or unfair advantage like Casino (more than 51% winning rate) if we know how to position Optimism + FA + TA + PA, aligning with own unique personality.

What is Investment?

Ein55 Newsletter No 055 - image - Investment

Investment is to take calculated risk, using special edges (eg. Optimism + FA + TA + PA) to give unfair advantages in winning rate over time, aligning to own personality with independent thinking.

Investment is NOT to copy and paste the methods with stock tips, news and rumours, following herd mentality with hope strategy.

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No one could know what will happen tomorrow. Guessing or hoping is not a reliable strategy for investment. Instead, we should know ourselves first, our unique personality which comprises of many aspects, eg. control of greed and fear, stress management, risk tolerance level, profit target, financial condition, holding power, resources available, etc.

Even if one only masters one weapon, it could give special edge, although it is limited. Eg:

Investor – using FA (Fundamental Analysis) weapon to find strong business
Trader – using TA (Technical Analysis) weapon to ride the trend of prices.

One should bridge between FA & TA:
FA + TA = FATA (发达)

Ideally, we could add 2 more weapons of Optimism + PA (Personal Analysis) to form a personalized strategy for any investment: stock, property, bond, commodity, forex, etc.

10 Strategies of Buy Low Sell High in Stocks

Ein55 Newsletter No 051 - image - buy low sell high

There are many strategies of entry & exit for stocks, all are possible to make money but must be aligned with our unique personalities. Here are some methods which Ein55 Graduates have mastered:

 

(Swing Trading / Market Cycle Investing)

1) Buy Low Sell High (short term: weeks)

2) Buy Low Sell High (medium term: months)

3) Buy Low Sell High (long term: years)

 
(Position Trading / Growth Investing)

4) Buy Fair Price & Hold to Sell Higher (short term)

5) Buy Fair Price & Hold to Sell Higher (medium term)

6) Buy Fair Price & Hold to Sell Higher (long term)

7) Buy Fair Price & Hold permanently

 

(Momentum Trading)

8) Buy High Sell Higher (short term)

 
(Shorting)

9) Short High Recover Low (short term to mid term)

 

(Value Investing / Dividend Investing)

10) Buy Low & Hold (short term, mid term, long term, permanently)

 

There are many other different combinations of strategies which Ein55 Graduates have learned (eg. integrating stocks with forex, properties, commodity, bonds, macroeconomy, Level 1-4). At the end, you just need to master 1 strategy, you could make money in stocks.

There are many trading / investing schools which will focus in 1 or 2 strategies above. We need to know ourselves first before knowing the right choice of investment and strategies to apply.

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I like this new term: “wrong term investment”, mismatch of personality and strategies. There are many people who fail simply because wrong choice of term, eg:

– a long term investor who learns short term forex trading

– a short term trader who learns undervalued property stocks

 

The saddest thing is to enter as a short term trader, when wrong, does not know how to cut loss, ending up as a long term investor, holding on to junk stock for life or until the company goes bankrupt. We should choose to be a long term investor, not being forced by the market to be a long term investor.

 

There are also a few more unique styles applied by some Ein55 Graduates:

1) long term trader = buy & sell like a trader every few years

2) short term investor = buy fundamental stocks for short term

3) long term CFD investor = buy CFD for long term dividend investing

 

In fact, investing and trading can be fun, we are investment coaches, designing the right and unique strategy for ourselves.

 

Dr Tee: Successful Trading & Investing with FTP Analysis in Optimism Strategies

Ein55 Newsletter No 037 - image - Taiji

First things first, what kind of investor would you describe yourself as? Conventionally, we classify investors into two groups—long-term and short-term.

Long-term investors also tend to identify as value investors, who typically base their decisions on Fundamental Analysis (FA). In other words, they are not so into day-to-day trading, or watching stock charts closely as stock prices go up and down. Instead, they prefer to read company reports and seek stocks which they believe are trading for less than their intrinsic values.

Short-term investors…well, it is still debatable whether short-term trading can be called investing, but we know that it’s a much faster game with less waiting time, but more technicalities or Technical Analysis (TA) involved.

So, quick, choose one between the two, which type are you? It’s hard to stick completely to one choice, isn’t it?

Each side has its limitations!

I too would find it hard to just pick one and leave the other one out entirely, because I don’t believe that the two investing styles should be mutually exclusive.

In fact, each style comes with its own set of blind spots and shortcomings.

For instance, one could still lose money by buying a fundamentally-strong stock at a sky-high price.

In the case of short-term trading, it might easily turn into over trading, i.e. excessive buying and selling to increase the probability of successful trades. Such gambling behaviour, coupled with a lack of discipline, could cost investors heavy losses.

Therefore, I think it is advisable and even important to make use of both FA and TA, to enjoy the “best of both worlds”, and in other words, buying giant stocks at cheap prices and at the right time.

On top of that, the investor would also need to develop a kind of inner discipline. Thus, I would like to add another school of thought—personal analysis (PA) as well.

I have integrated 3 schools of thought: FA+TA+PA (FTP analysis) through the unique Optimism Strategies.

 

Ein55 Newsletter No 037 - image - FTP

More about FTP Analysis

People who are new to investment may ask the question, “So what is FA, TA, or PA? What can I expect to learn under each category?”

This is how I look at it.

When it comes to Fundamental Analysis (FA), it is more than just assessing a company’s business performance or intrinsic value (though that will be covered as well). We should also have an understanding of the macro economy (e.g. how countries/ economies are doing on the whole) as well as microeconomics concepts (e.g. demand and supply). I believe that the stock market and the economy are related like how the teeth are related to the lips—without the lips, the teeth will feel chilly.

As for Technical Analysis (TA), ideally we want to buy low and sell high, but it is not that straightforward. In order to enter and exit markets at the right timings, we need to look into trade volumes, values, patterns, trends, etc. I will also be sharing key points that include: relative and absolute technical analysis, as well as bull and bear market interpretation.

Personal Analysis (PA) is essentially a study of 4P: Investor Psychology, Political Economy, Winning Probability and Personal Indicators. It might be the most overlooked part, though I feel that it can even be more important than FA and TA sometimes. Market forces may be uncontrollable and unpredictable, but we can overcome our own emotions and also form personalized investing strategies.

How do we connect these three schools of thought together then? Having been an investor for 20 years myself, I think it can be summed up in one sentence: Identify strong FA stocks, and buy/sell at a time aligned with TA indicators, as confirmed by PA.

The unique Optimism Strategy developed by Dr Tee provides a special advantage to know which investment (stock, forex, property, commodity, bond, etc) to buy safely, when to buy, when to sell, including option of long term holding.  So far over 10,000 audience have benefited from Dr Tee high quality free courses to the public.  Take action now to invest in your financial knowledge, starting your journey towards financial freedom.

 

How to Capture Falling Knife Safely for Stocks in Crisis?

Ein55 Newsletter No 035 - image - Falling Knife image

Every crisis is an opportunity.  We have learned to be greedy when others are fearful.  However, not everyone is mentally prepared to buy low and sell high following one’s personality.  When a business is in crisis, the stock price is like a falling knife, one could get hurt when enters too early, buy low and may get lower, emotionally affected with the endless falling prices.

For example, over the last 2 years of crude oil crisis, stock prices of global oil & gas stocks are significantly corrected. Singapore oil & gas stock index is at 9% optimism (see chart below), a very attractive price level over the last 10 years, upside is much higher than downside from a long term perspective.  However, whenever there is a technical rebound due to good news (eg. recovery of crude oil price), there could be another negative news who correct it down further (eg. Swiber plans to wind up the business recently).

Ein55 Newsletter No 035 - image - Falling Knife

 

Here are a few important considerations for us to safely capture the falling knife of a stock in crisis:

1) Fundamental Analysis

Some weaker stocks may not survive through the crisis. It is critical to always consider giant stocks with strong fundamentals.  Based on the survival of the fittest, after the winter is over, these strong stocks will grow stronger, especially there are less competitors with higher demand then.  For more conservative investors, one could wait patiently for signs of reversal in the business performance.

 

2) Technical Analysis

While long term view of a stock could be at attractive low price, the intermediate price trend usually is bearish for a stock or sector in crisis, eg. commodity, shipping, casino, etc.  It is important to follow the trend before entry, waiting for the falling knife to drop the floor first, before pick it up safely.  Confirmation of uptrend is required, aligning Level 1 (individual stock), Level 2 (sector / industry), Level 3 (country / region) and Level 4 (whole world).

 

3) Personal Analysis

One should know own’s personality before deciding whether short term trading or long term investing is a more suitable approach.  It is hard to force a trader to buy low and wait for several years to have tremendous capital gains.  At the same time, a true investor could grab an opportunity even with counter trend in prices, ignoring the daily market news, using strong holding power to reverse the trend eventually, buy low sell high.

 

Enter or Exit Stock Market with S&P500 at Historical High Now?

Ein55 Newsletter No 034 - image - S&P500

After breaking the triple top resistance of 2100, short term S&P500 becomes very bullish, setting new record high each day. Current US stock market is only suitable for short term trader to apply breakout strategy, buy high sell higher with trailing stop.

When S&P500 enters danger zone of >75% Optimism again, any future crisis could potentially become the next global financial crisis. Since global stock traders have not reached the euphoric stage yet, US stock market could remain bullish, sustainable if there are intermediate cooling measures, eg. news of US interest rate hike or another regional crisis, while the US economy is still growing.

Short term bullishness of S&P500 (another historical high at 2163), winning of Japan Prime Minister Abe (more QE is expected), lower fear factor (VIX is at low), have helped the global stock market to recover and achieve short term high. The trend is ideal for short to mid-term trading. Even Malaysia has lowered down the interest rate, this could be a gradual growing bull market.

For long term investors, it is important to learn to take profit at the right time, so that there is enough cash, which is king, to buy blue chip stocks at low price during the next global financial crisis.  For value investors, it is possible to hold the stocks without selling with condition that these are truly giant stocks, which the business can still be profitable even during economy recession.