Choppy flight

Good morning,

I have been receiving a well respected analyst group’s research paper every morning that predicts the Hong Kong index prices using purely technical chartings and out of curiosity I kept a record of their performance. I am glad that I did not follow the recommendations as the accuracy of its predictions is less than 20% for the last 6 months. Trading stock is like flying a plane. The pilot navigates the plane from take off to landing using information from data instruments in the cockpit. As long as the instruments are calibrated correctly and the pilots are well trained to understand the information and use them to fly, the plane will be flown smoothly. At times there will be unexpected turbulence but the plane will overcome such obstacles. If the pilots ignore the instrument readings and fly based on his emotions and past experience, likely the flight will be rough or the plane may even crash. In stock trading, having the methods the collect information and understanding these vital information is important to make winning trades consistently. Along the road of trading, calibrations are required to fine-tune these processes of information gathering and interpreting. Sometime we can face headwinds, turbulence and bumpy situations, but as long as the information is right and well-timed, the trading path will be smooth. Before a pilot can fly, he has to attend and finish a rigorous training program, including flying a flight simulator. So is a new stock trader. He should be attending a good course in finance and trading methods and use his understandings to trade a simulated demo account. Just as a pilot needs to prepare thoroughly before his flight, a stock trader should also do his homework and prepares as much before trading the markets.

US markets started the week as forecasted by KUTE yesterday, with DJIA ending the session with only a 0.01% gain after a choppy trading session. With the lack of market moving headlines, the day’s trading direction is largely determined by Bernanke’s comments and US dollars. Market breath was mixed with both the bulls and bears roughly even.

For the stocks selected by KUTE for the week, NE gained 1.8% to close at $40.67, ICUI advanced 0.34% to close at $35.14, HP was up 1.03% to close at $37.18 and DOX closed $28.29, up 0.25%.

My market order for DOX of $28.20 was hit and I am now 1 position long for this stock. My currently 2 position on NOV remains, and this stock lost 0.12% to close at $42.23.

Have a great day ahead!

Francies Cheng
BBus MAppliedFinance

New KUTE selection for the week

Dear Friends,

Someone posted an interesting question to me last week. He said he has been reading my blog and am impressed with my trading records. He wondered if the trades I made were real because the blogs only show previous day’s trades and he suspected that I only write trades that were making money. So now you understand why I posted my previous week’s trading records last Saturday. Having seen my records, he sent me another email asking me why I should be teaching others. He suggested that I should manage money using my KUTE systems instead, and mentioned that he will be the first to invest with me if I do. Perhaps I should consider that. I have more than 15 students willing to listen to my seminar for my KUTE selection method from my last advertisement. I am really considering returning their cheques and cancel my seminar, and plan to offer my discretionary CFD trading to clients using my KUTE system. I may just gather the few who has already sent me cheques to share with them how I trade using KUTE over a cup of coffee to reward them for the faith they have in me. So if you are reading this blog and are willing to trust me to trade your account, do drop me an email. (smile)

So what’s ahead for the stocks this week after finishing last week higher? It will be interesting to see if USD will continue its Friday advancement. USD has rose higher after the positive employment report and the question is whether it will continue to strengthen for the rest of the year. If it continues to strengthen, commodity prices will decline and it can be tricky for the stock markets. The market will also be tested by weekly jobless claims, retail sales and international trade reports. For the technical, Cycle trend is indicating range trading and would probably end the week flat. With the candlestick weekly formation showing a white spinning top indicating indecision between bulls and bears, the strategy will again be buying at dip and sell at target limits.

The stocks selected by KUTE screener this week are; NOV, HP (Helmerich & Payne, not the HP computer we all know), ICUI, DOX and NE.

Helmerich & Payne, Inc. (HP) is engaged in contract drilling of oil and gas wells for others. The contract drilling business is composed of three business segments: U.S. land drilling, offshore drilling and international land drilling. The company’s operating income has declined but still remains positive. Cash flow from operation has increased and is positive for the last three years. However, I am not comfortable with the negative free cash flow for the last three years. With cycle trend indicating a flat range and candlestick showing black spinning top, I will stay out of this stock for this week.

Noble Corporation (NE) is an offshore drilling contractor for the oil and gas industry. The Company performs contract drilling services with its fleet of 63 mobile offshore drilling units located worldwide. I like the company’s operating income, the operating and free cash flows, which are positive and increasing for the last 3 years. The Cycle Trend indication shows no immediate downside risk and the candlestick formation for the week is bearish. However there was a homing pigeon formation prior to last week’s bearish candle, there is a possibility that the stock will advance this week. With daily candle formation indication a new homing pigeon, this will be the stock I will consider to buy and sell immediately once the target is achieved.

ICU Medical, Inc (ICUI) is engaged in the development, manufacture and sale of disposable medical connection systems for use in vascular therapy applications. The Company’s devices are designed to protect patients from catheter-related bloodstream infections and healthcare workers from exposure to infectious diseases through accidental needle sticks. It is also engaged in the production of custom intravenous (I.V.) systems, critical care medical devices, including catheters, angiography kits and cardiac monitoring systems. This is one of the stocks that are recommended by many analysts. The company’s operating income is consistently positive and both the operating and free cash flows are good. For the technical, the daily cycle trend chart is indicating a strong uptrend. However the weekly chart is indicating downside potential. The candlestick formations for both daily and weekly indicate a good chance for upside gain. This will be the stock that I will also be monitoring to buy.

Amdocs (DOX) is the market leader in customer experience systems innovation, enabling world-leading service providers to deliver an integrated, innovative and intentional customer experience(TM) at every point of service. Amdocs provides solutions that deliver customer experience excellence, combining the software, services and expertise to help its customers execute their strategies and achieve service, operational and financial excellence. A global company with revenue of $2.86 billion in fiscal 2009, Amdocs has approximately 17,000 employees and serves customers in more than 60 countries around the world. I like the company’s operating income and cash flows. They are consistent and positive for the last 3 years. As for the technical, cycle trend is bullish and the weekly candlestick formation is a white Marubozu. However its daily candle is a bearish candlestick, so it will be good to wait for the stock to decline before buying.

So my decisions for the week are: Wait for confirmation to buy NE; buy ICUI and; wait for DOX to dip to buy.

As for NOV, both the cycle trend and candlestick weekly formation are bullish and with the 2 positions I am holding, I am expecting to enjoy more profits for the week.

Have a great trading week!

Francies Cheng
BBus MAppliedFinance

Evaluation for the week...NOV was down but I made profits from trading this stock

Good morning,

It’s Saturday again. Time flies, isn’t it? It’s time again to evaluate KUTE’s performance for the week. It was forecasted that DJIA will be trading within a broad range with the possibility of closing the week lower. DJIA closed the previous week at 10309.92 and gained 0.8% to close at 10,388.90. The range for the week is from 10,238.05 to 10,537.63.
With the expected volatility, the recommended trading strategy for the week was to buy at dip and sell at target. Let’s see how the KUTE selected stocks performed;
NOV closed at $43.30 last Friday and the recommendation was to buy this stock. It closed at $42.28 last night. The stock’s high for the week was $44.42 and its low was $41.73. I followed the broad strategy and took profits again last night when 3 of my 4 positions hit the limits. Another position was bought when it hit my market order at $42.24, so I have 2 open positions for this stock.
FRX last Friday close was $30.56 and it ended this week at $31.20. These are the trades I made for the week extracted from my IG Markets accounts;

If this screen shot looks blur (I am an IT idiot), try to click on the image to open in another window, otherwise the trades summary are as follows:

Bought FRX at $30.53, sold at $31.62;

Bought NOV at $43.13 and $42.49, sold at $44.10 and $44.15;

Bought NOV at $43.30, $43.69, $42.80, $42.99, sold at $43.81, $43.97 and $44.24 last night

Bought NOV last night at $42.24.

As for the other stocks, GIB was $12.40 last Friday and closed at $12.59 last night. SIM was $7.77 and ended the week at $8.69.

I can now restfor the next 48 hours before I start screening for the new stocks to buy with the KUTE systems. See you next Monday morning (Singapore Time) for the new recommendations.

Have a great week ahead!

Francies Cheng

BBus MAppliedFinance

Honest truth...

Good morning,

Once again the force of market proves my belief right that no one can beat the market consistently. Perhaps I should say that I cannot beat the market consistently. Last night was the first night that I am totally in the red for all my positions that I am still holding, though overall I am still profitable for the week. The ISM report didn’t help my positions. Also, too much is read into Obama’s speech and traders are worried about Friday’s unemployment report. Together with the White House hinting that this figure may tick higher, the markets declined into the sea of reds and stayed there for the rest of the session.

This is the time that KUTE’s selection criteria and money management principle helps. The stocks selected by the system are all fundamentally sound companies and as always mentioned in this blog, it is the companies that I am analyzing, not the pattern of price movements. Surely news can affect prices, but if nothing changes the companies’ fundamentals, I should not worry. Also, the money allocated to active trading is only 50% of the amount I deposited with the broker; I still have ample room for the selected stocks’ price to decline before recovering into positive territory. By then I will shout to the market again that I have made money in the US markets. (smile) The honest truth is I am out of the money today.

NOV lost 2.37% to close at $42.82 last night. I bought a position at $42.99 and another at $42.80. Together with the 2 position I bought the previous night, I am now holding 4 positions in the stock. Currently this is the only stock I am holding. FRX closed 1.05% lower at $31.23, SIM gained 6.13% to close at $8.49 and CGI lost 1.12% to close at $12.39.

It’s Friday and time to drink tonight. Why worry? I have my positions’ limit placed and even if these positions’ value continue to decline, they will surely re-bounce along with the economy’s recovery.

Have a good day.

Francies Cheng
BBus MAppliedFinance

FRX... limits hit and done

Good morning,

US private companies shed lesser jobs than the last reports indicating some stabilizing in the labor market but it is still larger than analysts’ estimates. Crude oil and related commodities had larger supplies and the Federal Reserve says the economy is getting stronger. The market had reacted to all these and closed flat but bulls beat bears by about 3 to 2 last night. My wife asked me while I was trading why do the stocks prices change whenever there’s news and reports. Perhaps there are many novice traders also asking the same question. It’s because of earnings. Companies (other than non-profit companies) exist to maximize wealth for their stakeholders. An efficiently run company maximizes its revenue with efficient usage of its assets and resources. It’s not easy and it’s a heavy course itself in Corporate Finance, but the bottom line is the company must make money at the expected returns of the stakeholders. Operating profit is one of the main factors and a company is valued by forecasting its operating profits for the future, determines its free cashflows and discounts this number back to present value with the expected rate of return. Company’s earnings are often highly correlated to the economy and industry factors and any news or reports can affect the forecasted earnings and therefore the value of the company can change today. Thus it is important to understand the company’s industry, business and financials before the stock is traded. It was often mentioned that good MBA graduates can be good investor s if they can apply their understanding in strategic management in analyzing the companies for stocks to buy.

My FRX was sold last night at limit price of $31.66, making some healthy returns for me. The counter closed 1.77% higher at $31.56. NOV lost 0.5% last night to close at $43.86. It went as low as $43.29 and I bought a new position at $43.69 and had another market order opened at $43.30 while I was sleeping.

SIM was down 1.72% to close at $8 and GIB gained 0.4% to close at $12.53.

Have a great day.

Francies Cheng
BBus MAppliedFinance

My prediction is so correct!! NOV NOV....

Good morning,

I remembered having coffee with the top economist in one of the stock broking house and we were talking about how accurate some analysts and gurus' market predictions are. He told me that anyone can be as accurate because none can pin point the exact day the predicted price move can happen. The trick is to announce the predicted change and wait for the change to happen. The rule is, if it does not happen, keep quiet and if it does, tell the whole world how good you are. He told me that he did the same because no one can remember all the wrong calls and one good prediction is enough to be exalted. This is also what I learned from my favorite lecturer in Options and Futures that over time good stocks should appreciate in value but the question of when it can fulfill its potential is unknown. The truth is no one really knows what can happen tomorrow, so all technical and fundamental analysis cannot help much. The best method is to look for good companies with good management, business and marketing plan and financially strong. Over time these companies should appreciate and grow and tell the whole worl your stock picks.
So it time for me to shout. In mu previous blogs, I had predicted that USD will continue to depreciate, Gold price will continue to soar, Dubai problem is the good for buying opportunity and the economy and companies earning reports will be good, and I am very correct. If only I had told the whole world!

So US market advanced again last night and I enjoyed it. My 2 positions for NOV were sold when it hit my limits at $44.35. NOV closed 2.46% higher at $44.08. The other stock I am holding, FRX gained 1.14% to close at $31.01. I am still holding and the position is still in the money. GIB closed 0.4% higher at $12.48 and SIM closed 3.43% higher at $8.14. I will be looking at NOV again tonight for buying signals.

Have a good day.

Francies Cheng
BBus MAppliedFinance

My wine bar is for sale?

Good morning,

I was at my bar last night when one of my partners told me that there is an offer to buy over the bar and the offer price was ridiculous. I was told that the buyer had visited the bar on numerous occasions over the past few weeks to observe the business flow and decided that his offer was good based on what he saw. This is interesting. I just wonder if he is interested to take-over the business or only the location. Didn’t he ask for our financials before he decide? Has not he research on the macros to know that we are the only wine bar in the whole vicinity and the authority will no longer issue any new alcohol license? Is he sure that our earnings will be good for the next 5 years and did he project the bar’s future earnings with all these considerations to discount back to today for the bar’s actual value?

Is not buying shares in the stock market the same? Successful stock traders do their homework to understand the macro economics, the industry the company operates in, the previous earnings and future expected earnings, the management and the company’s financial before they risk their money in the company’s share. They are interested in the company and not the share price. I sincerely hope that those who intend to trade the stock market to attend a short course on the fundamentals of stock trading before they get started.

So I was right about Dubai as mentioned in my last blog. The markets agreed with my prediction and US stocks ended little changed last night. Retailers were the main drag on the market on concerns over possible weak holiday sales. Banks led a late rebound in shares. The PMI report beats estimates and with the news coming out from Dubai that the debt in question is much smaller than previously been considered helped the market recovery. I am bullish for the ISM Index and pending home sales tonight and I believe I will ride on the shares I bought last night.

I bought NOV again last night at $43.13 and added another position at $42.49. The stock closed at $43.02, so on the average I am in the money. I am still holding on as the price did not hit my limits. I also bought a position in Forest Lab (FRX) at $30.53. It closes in the money at $30.66.

How did I trade when I was in my bar? That’s why I am beginning to love my 3GS iphone.

By the way the stock KUTE selected on Sunday, CGI Group, the symbol is GIB. I apologize for writing it as CGI on the blog. This counter closed 0.03% higher at $12.43. SIM gained 1.29% to close at $7.87.

Have a great day today.

Francies Cheng
BBus MAppliedFinance