Sell in May and go away

I do not like to forecast......because I am often wrong.  My way of trading is to follow where trends may take me.

There is a pattern that is just to obvious too ignore.  See the STI chart below:

For the past 3 years, if you have shorted on the 1st of May and sold anytime in June, you have made a bundle. See the arrows.  The start of the arrows is on 1st May.

The STI price for past 3 years formed tripletop-like consolidation patterns in Mar to April time period.  Upon breaking the neckline, fierce downtrend ensued.

Now lets take a look at each of the swing low to see when we can take profit of the shorts.

• For 2010, it is 25th May
• For 2011, it is 17th June
• For 2012, it is 4th  June

There does not seem to be any pattern here that we can take advantage of.  We can only take reference that the downtrend lasted for about 1 month to 1.5 months, upon which we must be ready to take profit.

Now if most people are aware of this May Syndrome, 2 things are likely to happen.

1. The sell off may take place in April, as people fight to get in to short first.
2. The opposite may happen.  There may be a breakout failure to the downside.  The price may go up instead.

Play out the different possible scenarios that may happen to your portfolio.  Have a plan ready to react to each outcome.  Because, if you have no plan, the emotions will get to you when the price start moving, and you are setting yourself up for failure.

Rules based trading - Taking profit on Ezion

Ezion hit my profit target of 50% yesterday.  I longed on 3rd Dec 2012.  See the Entry on my blog.

Based on rules, I sold this morning at $2.18.  I did feel the emotions of greed whispering to me to hold on further.  Managed to brushed off the temptations and focus on obeying rules.
Admittedly, it was helped by Ezion forming a shooting star yesterday on the daily chart.  In addition, the price is now at the top of 2 channels.
Will I be buying Ezion again?  Yes, I may.  It is still a fundamentally sound company, and rising in momentum.  Again, if ever I trade Ezion again, my job is to ensure that the entry will be based on rules.

Real Estate Relative Strength Analysis

Real Estate is a red hot topic in Singapore.  Many people have diverse opinion whether the government intervention in Jan 2013 will finally cool the industry, or will there be a further cooling measures if this segment continue to defy common sense.

Real Estate sector is very broad.  Note that I still quite heavily vested, both in reits as well as ordinary stocks.  I wanted to know if I was vested in the right segment, and if necessary, to switch my horses.

First I manually created indices from the real estate stocks available in Singapore.  Then I use traditional TA based on moving averages and MACD oscillator determine the relative strength of each segment of the real estate sector.

I shall start with the weak to the strongest.

As expected, the Singapore Residential segment is one of the weakess.  The strongest are the Commercial and Hotel segments.

I believe in getting rid of losers and investing in the strongest.  I will need to switch my horses.

China

SG, Residential

Asia

HK

Industrial

Retail

Hotel

Commercial

A look at the Construction Sector

I have been wanting to invest in Construction companies in Singapore.  Somehow, I missed the earlier boat.   All over the Singapore, including the public roads, there seem all kinds of construction and civil engineering works.  Morever, according to our government, there seems to be no end to improving our Singapore.
Below is attached is an index of 24 Contruction Stocks that I created.

It is consolidating now at the 55 SMA.
After studying the charts and fundamentals of the list of 24 stocks, I eyeing at the following 3 stocks:
1) KSH Holdings
2) Lum Chang
3) Low Keng Huat

Preparing to long China ETF

Since my last post on 21 Feb, both the China ETF and Shanghai Stock Exchange has retraced to its 61.8 fibo level.  If this week closes with a nice white candle, the idea is to look for opportunities to long next week.

Note that this is a counter-trend trade, and against the downward momentum.  The main reason to support this trade is the sexy story that with a new man in charge the strongest economy in the world, the downward spiral of SSE has ended.

No Short Cuts

The comment below is not to shame anyone but to express my feelings:
I received an email from a vectorvest user that made me very sad. The person subsribed to vectorvest about a month ago, started trading real money with it, and promptly lost a sum of money via cutting loss within contra period.
For anyone who wants to stand any chance of not losing money in the long run, the following is non-negotiable. With software tool or no software tool, anyone who is successful in the long run is doing the following, or something similar:

1. Follow timing signals. Most important rule.
2. Write down your trading plan. Fail to plan, plan to fail.
3. Define and follow money management rules....example : risk only 1% of your trading equity for each trade. Better to be rich slowly than poor fast.
4. Review past trades. do not make same mistakes again
5. Backtest, or/and forwardtest for a time period. Determine your probability of each trade, maximum drawdown, expected or average profit per trade, maximum loss, minimum loss
6. Adapt trading plan to changing market conditions when necessary
7. If buying, search for strong stocks. Least important rule.

There is no short cuts.

STI's ominous Shooting Star

The daily chart of the STI certainly looks bearish in the short term.  On Monday, there was a ominous shooting star. See the circled red color.  The pattern seems to be developing into a triple top, also a bearish formation.

What do I make of these developments?  I have chosen to let the market do what it does.  I will still stick to my trading plan.  I have not taken profits for my long position.