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By JL | June 28, 2007
I don’t own any Sino-Env shares, but PeHon’s strong recommendation finally caught my attention today when we discussed briefly about its recent chart forms. My interest was further stoked when my best friend told me on MSN he bought some on closing yesterday (26/6) because he thought it was cheap. I almost jumped on the wagon with him, but the cautious side of me opted out because of several previous trades that ended really bad because I didn’t do any proper analysis beforehand.
I got worried when PeHon sent me a chart and asked if I saw the same bearish signs. I opened up the chart and immediately saw a classic head and shoulders reversal pattern (bearish) like he said since the beginning of the year (it’s more obvious with a weekly chart), with a double top reversal pattern (bearish) embedded in it since end of May. It was this close to breaking the first support level at $3.10 yesterday. Near term MACD looked screwed with a negative divergence in full swing. First impression wasn’t a pleasant one. Ok, enough with the bad stuff.
Closer inspection however brought hope.
With today’s positive development, instead of a double top reversal, we might be sitting on a double bottom reversal (bullish) that has just begun. At this stage though, I’d say it’s 50-50. The good news is, the stock managed to trade with a respectable level of market depth today and keep its gains, closing at $3.26.
“Market depth in an upward move is ALWAYS a good sign, because it shows investors are in the mood to accumulate.”
I then pulled out the MACD and stretched it all the way back to the Feb/Mar correction period. It’s true when I said it’s in a negative divergence at the moment, but long-term wise, it is in a positive divergence, which is shown by the black line I’ve drawn on the MACD chart. And long-term MACD charts are always more accurate than short-term ones. Before I carry on, I would like to point out it’s a long-term positive divergence on the histogram, not MACD itself.
“MACD is an indicator of trend and momentum. The histogram is an indicator of the MACD itself. “
Without going too much into how it’s derived, let’s just say the histogram divergence is one of the three MACD buy signals that I use, the other two being the moving average crossover, and the centre line crossover. It’s not necessary for every signal to be in place, but that’s when the picture is the most accurate. Let’s get back to the topic.
“Simply, what this means is, there is strong evidence that this stock will move up eventually.”
I then pulled out the 50-day moving average chart with a 10% envelope. Unbelievable. It looked as if someone purposely plotted this to look picture perfect. Refer to the blue line on the price chart. That’s the 50d MA. The two flanks (blue dotted lines) are the 10% envelope. As if by magic, every time this stock suffered a sharp drop (refer to the red dotted rectangles), it stopped at the lower flank and reversed. And every time it rebounded, it would hit at least the 50d MA line. Within 3 trading days. It didn’t exactly hit the bottom flank this time round, but I’d say it’s close enough.
“And if it does what it always did, we will see a gap up on opening and stock price reaching $3.34 tomorrow or Friday.”
Now I wish I went in at $3.10. 
A note of caution though. This round of correction has just begun. STI has moved down 4% from the peak, but that was across a few trading days. We haven’t witnessed a drastic point drop on a single day yet, but it doesn’t mean it won’t happen.
“Fibonacci retracement at the 23.6% level was at 3484 points, which we touched briefly. If this gets broken, we might be heading for the next 38.2% level at 3388 points.”
A lot is riding on what gets reported in the US this week. US housing reports on Mon and Tue have confirmed lingering subprime problems there. Fed meetings today and tomorrow will indicate if they have spilled over to other sectors. Until a better picture is available, I would advise caution, even restraint. The next earnings season is about to begin. I’m predicting the string of good results to spark off the next bull run. But until then, trade with care.
Topics: Sino-Enviroment |
Comments
I then pulled out the MACD and stretched it all the way back to the Feb/Mar correction period. It’s true when I said it’s in a negative divergence at the moment, but long-term wise, it is in a positive divergence, which is shown by the black line I’ve drawn on the MACD chart. And long-term MACD charts are always more accurate than short-term ones. Before I carry on, I would like to point out it’s a long-term positive divergence on the histogram, not MACD itself.
June 28th, 2007 at 11:00 am
Hi Pehon, congrats. Now you’ve got a TA expert (JL) on your blog to give you the TA balance to your wonderfull blog.
June 28th, 2007 at 11:08 am
Hi JL, it may seem trival in my next question but just to confirm: In your “comments” under the BreadTalk post, you have your Macd parameters as “(10, 22)”. Can I confirm that or should it be (22,10). Thanks
June 28th, 2007 at 11:29 am
Hey WL,
(10,22) = (fast, slow) = (short, long)
Be careful… don’t mix it up or you’ll have a completely different picture!
I usually use (8,17) or (10,22) to catch the early bird in divergence reversals, but still rely on (12,26) for final confirmation.
June 28th, 2007 at 11:35 am
Got it Thanks JL
July 2nd, 2007 at 11:05 am
The only significant support is at $3.22. If this is broken…. However, MACD positive divergence in place. MACD moving average crossover confirmation only if stock closes in positive territory today.
Market depth as of 11am.
Bid Bid Vol Ask Ask Vol
3.240 15 3.260 36
3.220 155 3.280 23
3.200 20 3.300 76
3.180 5 3.320 60
3.160 2 3.340 283
3.120 35 3.360 27
3.100 15 3.380 50
– — 3.400 79
– — 3.420 19
– — 3.480 10
– — 3.500 5
July 5th, 2007 at 9:54 pm
What an incredible day! $2.40! How I wish every day could be this exciting. Simply stupefying. Even more so when you consider the fact that all technical indicators turned positive only yesterday and indicated a BUY.
I hope some of you managed to catch it cheap. The company replied to SGX regarding the plunge and had this to say:
Full article here: http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_55115D2069C23D534825730F0036A131/$file/5_July_2007_clarification.pdf?openelement
Meaning it’s probably going to return to its previous trading level tomorrow. The 50 SMA price at around $3.28. Happy trading!
July 6th, 2007 at 1:12 pm
interesting. i didn’t see sino go to $2.4 yesterday. anyway, if itwas due to error trade, its probably a trade that did not exchange hands. as in no actual trade was performed at 2.4
July 7th, 2007 at 12:05 am
S-E continued to retreat today, despite opening up and pushing to $3.20 early on. I kept an eye on its progress the whole day, checking its market depth every time I switched over. It was hilarious. There was actually 1 bid waiting to buy at $0.010 and another queued at $0.005.
Based on the trading pattern today, I drew the conclusion that what happened yesterday was NOT a trading error, but a deliberate sell-off. Why? Because the same style was employed when it got sold down today, albeit at a slower pace. When I called up my broker (for another matter), he said “trading error” his ass. It was something sinister at work, and he warned me to bloody stay away until things settle down. :))
Oh well, the TA charts failed miserably on this one… contra players who don’t intend to hold, my advice is to stay alert and prepare to cut out if market depth thins out on Monday again.
July 10th, 2007 at 3:15 pm
The CEO came out and clarified again that
br />
It’s bullshit if you ask me.
Full article: http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_D06DA51244CA12D9482573140011BFBA/$file/10_July_2007_Clarification.pdf?openelement
Whatever the case, it is not helping the stock, which is free-falling even further. Kind of reminds me of Synear and Pine Agritech previously. CIMB-GK announced this morning they don’t see anything wrong with the company fundamentals and reiterated their target of $3.50.
Like PeHon said earlier this year during the Feb/Mar correction, at this price level, it’s a good time to BUY AND HOLD for longer terms.
My advice is not to contra this for the time being. Market depths were appearing out of nowhere for both buy and sell. Sharp V trading pattern expected when whoever is liquidating finishes his selling, and when speculators from last week clear their positions. Until then, TRADE WITH CARE. Cheers.
July 10th, 2007 at 5:24 pm
CEO finally went one step further and bought 2.5m shares at $2.8515. That’s gotta inject some confidence into this counter.
Without a doubt, it’s the best show in the stock market this week! How glad I am we still have 3 more days to go.