Review of trades this week (5-9 May 2008)

1) COSCO Entry price	3.11
30 day ATR	0.22
1.5X ATR30	0.33
Cut loss stop on 1.5ATR30	2.78
Recommended cut loss	0.355
Loss on recommended cut loss	-701.7552702
Target price	3.92
Profit on target price	1570.163065
Reward/risk ratio	2.237479548

COSCO hit my trailing stop of 3.29.

Sold COSCO 3.29
Profit = $300

2) First Resources (bought 17 April 2008))

Long
Entry price 1.03
30 day ATR 0.09
1.5X ATR30 0.135
Cut loss stop on 1.5ATR30 0.895
Recommended cut loss 0.885
Loss on recommended cut loss -1517.878899

Target price 1.38
Profit on target price 3414.575381

Reward/risk ratio 2.249570361

First resources as expected rose after oil prices made their rally. However I was a bit uneasy with this rise for a few reasons.

1) Oil prices have risen way too fast and too steeply ( a correction looks to be coming)
2) USD$ was supposed to drop after the Fed rate cut and hence lead to oil prices going up. USD$ has actually strengthened while oil rose. This leads me to believe the high oil prices are due to traders' actions and speculation on certain news driving prices beyond their true demand/supply chain value.
3) First Resources increase was not due to any share buy back. Which leads me to admit I was wrong in my assumption that First Resources wanted to increase their share price. Looks more likely they will be there to lend support to the stock price counter to the downside rather than supporting it on the upside.
4) Global focus is now on oil prices, food prices and inflation which will soon be tackled.

Hence I decided to set a profit protection level of 5.9% when the rally in First Resources reached above those levels. As a result I sold at 1.10 when they retreated slightly. On hindsight I could have added another 5% return if I had just waited for another hour for the crude palm oil futures to trade a bit more.

In any case I'm happy with the 5.9% return.

Sold on 8th May 2008 at 1.10
Profit $613

2) Singtel (Bought on 9th May 2008)

Long
Entry price	3.66
30 day ATR	0.09
1.5X ATR30	0.135
Cut loss stop on 1.5ATR30	3.525
Recommended cut loss	3.57
Loss on recommended cut loss	-231.2547714
Target price	3.89
Profit on target price	406.476691
Reward/risk ratio	1.757700775

Knowing that the market might be taking a downturn after hitting resistance levels, but not totally sure, I was looking at going into the defensive stock options.

Namely, Singtel, SPH and Starhub. These 3 stocks have been trading in distinct channels even during the Oct 2007 to March 2008 drop in the broader markets. Use of RSI to trade along with the levels within the channels looked to be a possible trading idea.

An analysis of the 3 stocks in terms of PE ratios and P/NAV ratio showed the following

SPH :
PER = 16.7
P/NAV = 3.48
PER x P/NAV = 58

Starhub:
PER = 16
P/NAV = 4
PER x P/NAV = 64

Singtel:
PER = 15.3
P/NAV = 2.875
PER x P/NAV = 44

Do note that Singtel's figures are not based on latest figures as they will be announcing results on 14 May 2008. However between the 3 stocks it looks like Singtel's valuations are still the most attractive.

Chart wise the support levels for Starhub were at 2.96 and 2.75, SPH at around 4.25 and for Singtel 3.60. Hence the price levels showed that Singtel was much closer to the support level. All 3 were in oversold RSI region.

Hence decision was made to queue for Singtel at 3.66 based on the ATR30 and market depth support levels.

I managed to get my limit order filled at 3.66 around 4pm.

However news about the Indonesian district court ruling plus a drop on wall street will cause the stock to fall further on Monday. It is possible that I may have to cut losses. A decision will have to be made whether to do that versus holding the defensive stock. I will have to research further on this over the weekend.

Bought Singtel 3.66
Last done price 3.71
Unrealised profit = $40


Total to date trade summary :

Up to date realized profit/loss = $2242 + $300 + $613 +$280 (dividend for COSCO) = $3435

Unrealized profit/loss = $40

Review of trades in week 28 April - 2 May 2008

I am left with 2 counters that I am actively trading at the moment.

1) First Resources (bought 17 April 2008))

Long
Entry price 1.03
30 day ATR 0.09
1.5X ATR30 0.135
Cut loss stop on 1.5ATR30 0.895
Recommended cut loss 0.885
Loss on recommended cut loss -1517.878899

Target price 1.38
Profit on target price 3414.575381

Reward/risk ratio 2.249570361

The Board of Directors of First Resources Limited ("the Company") are pleased to announce that at the Annual General Meeting (“AGM”) and Extraordinary General Meeting (“EGM”) of the Company held on 29 April 2008, all resolutions relating to matters set out in the Notices of the AGM and EGM were duly passed.

So the share buy back mandate resolution in the EGM was also passed. So far there have been no announcements from First Resources about any share buy back action. However I suspect that with this resolution in place the stock may have some support.

Many market watchers are talking about the rise in the USD$ and also the retreat in oil prices as well as commodities. Most are waiting to dump their commodity based investments.

Personally I do not see a crash in commodities going forward. A correction might be in place at the moment but as long as macroeconomic conditions remain the way they are with the US in a mild or no recession, China still growing at around 10% and no global widespread economic downturn, then the demand for commodities will remain high. A rising USD$ might slow the rate of increase for commodity prices but probably not cause a crash in prices.

Shorter term however I expect to see the USD$ to pullback along with the US stock markets. Oil will once again have another rally when that happens.

First Resources was never really a Technical Analysis play. My considerations for buying a commodity counter was based on fundamentals of economic outlook, supply and demand. I agree with Jim Rogers.

I did however choose to buy First Resources over GoldenAgri, and Indoagri based on the chart. Also the entry price was based on what I thought might be a breakout at that time.

My exit levels will also be based on the chart. But frankly from the macroeconomics I am quite confident I will make a good profit on this stock perhaps later this month.

The 25 day moving average has been flat for a while. The support appears to be at 0.96. A break below the 25 MA would put us looking at the 0.88 support level.

RSI is still in uptrend but looks like it may break below in the coming week. Hard to say at this stage. Interestingly I wonder when is First Resources announcing their 1Q 2008 results? That may be a catalyst for a move up as well.


If we look at the SMA/EMA crossover trend change indicator there is some suggestion that the trend might be changing for First Resources since the big selldown when they had the scandal court case.

Personally I still think First Resources is trading at a discount compared to its peers in the palm oil industry due to that sell off in the scandal.

Macquarie Research had a 32 page report on First Resources released on 25 April 2008 and it looks like First Resources is still a good business overall to invest in. Below is the summary of their recommendation :

Outperform with a target price of S$1.60 We initiate coverage of First Resources (FR SP, Mkt cap: US$1bn), a pure upstream palm oil play, with an Outperform rating. Our DCF-based target price is S$1.60 (using WACC of 13.1%), representing 58% potential upside. This implies a forward FY08E PER of 16x. The shares are trading at an attractive 10x FY08E PER and 8x FY09E, with Indo plantation plays at an average 9x FY09E PER, and a huge disparity compared with the Malaysian plantation plays’ average at 15x FY09E PER.

Last done closing price = $1
Unrealised loss = -$382

2) COSCO

Long
Entry price 2.84
30 day ATR 0.24
1.5X ATR30 0.36
Cut loss stop on 1.5ATR30 2.48
Recommended cut loss 2.78
Loss on recommended cut loss -159.8411916


Target price 3.2
Profit on target price 677.1813528


Reward/risk ratio 4.236588491

Sold on 28 April 2008
Profit = $929

I sold COSCO on Monday 28 April 2008 when it hit my trailing stop of 3.34. Realized a profit of $929.

COSCO was sold off in anticipation of bad earnings for 1Q 2008. It was hard for me to understand or believe that the earnings would be poor looking at Yangzijiang's good earnings that came out on the same day.

However COSCO was indeed sold off quite severely once again because I believe shortists got into the action.

I decided to take a punt however and bought COSCO back at 3.11 on 29 April 2008, the day before the 1Q 2008 earnings were to be released.

I have posted an entry on COSCO after the results were announced. At the moment my stop for COSCO is 3.29.

From the chart

The 25 and 50 day moving averages look like they might cross soon. This would be the first crossover since the last one in Dec 2007. If so the crossover necktie might form a solid support level for the stock. I suspect it may be the 3.40 level. For this to happen we need COSCO to move up above 3.40 in the coming week and have a strong close above 3.40.

I am betting that this will happen and COSCO will move higher than that. However in line with overall markets I do see a pullback coming. And 3.40 may be a good entry point for this stock during that pullback.

There are several possible catalysts going ahead for this stock, in particular possible announcement of the 9 new vessels ordered by China COSCO Holdings Ltd (awaiting deposits) and an increase in stake in COSCO Shipyard Group Ltd from 51% currently to 80%.


Looking at the SMA/EMA trend change indicator, once again COSCO is attempting a trend change after the failed one in early April 2008. Will it be 2nd time lucky? We shall see.

Long (29 April 2008)
Entry price	3.11
30 day ATR	0.22
1.5X ATR30	0.33
Cut loss stop on 1.5ATR30	2.78
Recommended cut loss	0.355
Loss on recommended cut loss	-701.7552702
Target price	3.92
Profit on target price	1570.163065
Reward/risk ratio	2.237479548

Last done closing price = $3.37
Unrealised profit = $467


Total trade summary:

Up to date realized profit/loss = $1313 + $929 = $2242

Unrealized profit/loss = $467 - $382 = $85

Review of trades in week 21-25 April 2008

1) Fibrechem

Long
Entry price 0.805
30 day ATR 0.06
1.5X ATR30 0.09
Cut loss stop on 1.5ATR30 0.715
Recommended cut loss 0.705
Loss on recommended cut loss -1053.523309


Target price 0.95
Profit on target price 1387.792446

China reduced the stamp tax duty on stock market from 0.3% to 0.1% this week. SSE rallied 9.29% on Thursday.

Fibrechem went to a high of 0.86 on Thursday. I sensed that this might be a knee jerk reaction but was not sure if it could carry on to the next day. Hence I decided to set a stop limit at breakeven level. Personally I did not expect Fibrechem to retrace that much. But it did.

Hence sold Fibrechem at 0.815.

Profit/Loss = +$30

One might say that why not take profit when it was 0.86? On hindsight we are all geniuses. I'm trying to learn to let my profits run and limit my losses. So this is still a lesson in progress.

1) First Resources

Long
Entry price 1.03
30 day ATR 0.09
1.5X ATR30 0.135
Cut loss stop on 1.5ATR30 0.895
Recommended cut loss 0.885
Loss on recommended cut loss -1517.878899

Target price 1.38
Profit on target price 3414.575381

Reward/risk ratio 2.249570361

I said that First Resources would start to move up this week in view of the coming EGM to vote for the 10% share buy back mandate. First Resources had several big lots buy ups. But there was also selling later on.

Well 29 April 2008 is next Tuesday. So I'll just hang on. I believe this counter has very good potential.



Chart wise First Resources has been testing the downward trendline for the past 2 days but has been unable to close above it.

We'll see if the share buy back becomes the catalyst for a mean revert for this stock.

Last closing price 0.995
Paper loss = -$432

2) COSCO

Long
Entry price 2.84
30 day ATR 0.24
1.5X ATR30 0.36
Cut loss stop on 1.5ATR30 2.48
Recommended cut loss 2.78
Loss on recommended cut loss -159.8411916


Target price 3.2
Profit on target price 677.1813528


Reward/risk ratio 4.236588491

COSCO broke past my target price this week. And I let my profits run. So while letting profits run plan failed on Fibrechem, it succeeded for COSCO. My stop for COSCO on Friday was 3.34. It came close but not close enough.

China COSCO reported good earnings for FY2007 on 23 April and that gave COSCO Corp a boost here in Singapore.



COSCO had 2 bottoms around 2.80. If it closes above 3.92 it will confirm this as a double bottom. Current price of 3.40+ means we are still 20% away from confirming it. Means more upside at least till that psychological resistance.

50 day MA is not so much of a concern because it has already tested it twice.

RSI is not overbought range.

Plus COSCO has broken above the downward trendline from Nov 2007.

Fundamentals

1) CHINA COSCO did well and the shipping business is growing. JV with Indonesia on the Coal ships orders will likely go to COSCO Corp.

2) China shipping and shipyards as a whole are supported by Beijing and growing and aiming to overtake South Korea as world number one. Lots of room for expansion for COSCO.

3) COSCO forays into shipbuilding and repair represents different market share compared to Kepcorp and Sembmarine. Plus China exposure also means the demand is better.

4) COSCO Corp VP Mr Ji stated in an interview dated 27 March 2008 that they were going to make a decision soon on whether to increase their stake in the shipyard from 51% to 80%. When will this decision be made known?

So looking at it, this stock has a lot of things going for it. Plus the drop in price 2 weeks ago represents the correction has been factored in already. If not for that drop how much would COSCO be priced at today?

We will see what happens on 30 April 2008 when China COSCO and COSCO Corp both release their 1Q 2008 results. Incidentally the USA FOMC Announcement will be on the same day. 1 May 2008 is a Public Holiday in Singapore though. So markets will be closed.

Last closing price 3.47
Paper profit = $1208

Up to date realized profit/loss = $1283 +$30 = $1313

Unrealized profit/loss = $776

Review of trades in week 14-18 April 2008

1) First Resources

Long
Entry price 1.03
30 day ATR 0.09
1.5X ATR30 0.135
Cut loss stop on 1.5ATR30 0.895
Recommended cut loss 0.885
Loss on recommended cut loss -1517.878899

Target price 1.38
Profit on target price 3414.575381

Reward/risk ratio 2.249570361

Oil has been hitting record highs. Commodity plays will be in focus over the coming weeks. I do not envision a drop in commodity prices in the near term at least until the FOMC announcement on 30 April 2008. Looking at the charts of Golden Agri, IndoAgri and Wilmar I compared them with First Resources and found that First Resources is likely to recover back to its mean price of around 1.30.

First Resources is having their AGM on 29 April 2008 and are having a resolution to have share buy back schemes during the EGM to be held also on 29 April 2008. I believe this will be the catalyst for a move up this week.



Hence decision was made to enter FR. It looked possible for a break out by TA on 17 April 2008. However it was not to be. In any case my cut loss is below the low of 0.89. TA wise it looks like First Resources will break out soon.

Entered 10 lots at 1.03
Last closing price 0.98
Paper loss = -$581

Trades from last week

1) Fibrechem

Stop loss of 0.705 was not triggered this week. Fibrechem is having their AGM on 29 April 2008. China stocks have been weak because of China's talk about cooling the economy and tackling inflation. It is a good point to note that while QDII was the talk of the town 2 weeks ago, China stocks are now avoided by and large.

Long
Entry price 0.805
30 day ATR 0.06
1.5X ATR30 0.09
Cut loss stop on 1.5ATR30 0.715
Recommended cut loss 0.705
Loss on recommended cut loss -1053.523309


Target price 0.95
Profit on target price 1387.792446


Reward/risk ratio 1.317286892

Last closing price 0.73

Paper loss = -$812

2) COSCO

COSCO recovered from it's lows early in the week to close above $3. It was close to my stop limit on Monday but it did not trigger thanks to correct use of the stop limit from last week's error on Ferrochina (lesson learnt!). Intend to hold this till the results announcement on 30 April 2008.

Long
Entry price 2.84
30 day ATR 0.24
1.5X ATR30 0.36
Cut loss stop on 1.5ATR30 2.48
Recommended cut loss 2.78
Loss on recommended cut loss -159.8411916


Target price 3.2
Profit on target price 677.1813528


Reward/risk ratio 4.236588491

Last closing price 3.02
Paper profit = $312

Up to date realized profit/loss = $1283

Unrealized profit/loss = -$1081

First Resources

First resources chart looks like a dead cat bounce pattern (DCB).

Statistically, 44% of the time DCB's occur in the middle third of the yearly price range which is hte case here.

Event declines on average are 31% but can go from 15-75%. For FR it is 25%. Price gaps are the norm.

Bounces usually take about 23 days. 22% of the time the bounce will be high enough to close the gap made during the event. Then after the peak of the bounce prices decline an average of 30% from the high of the bounce.

Most DCB will bottom 18% below the initial event decline low. This gives a possible bottom of 0.89 for FR if indeed this is a DCB.

However it is noted that for FR the event that caused the decline seems to have been resolved rather than due to just analyst calling for a buy on an "undervalued" stock etc.

I'll be watching this one.