Higher Yields Needed, Higher Valuation Market Goes

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Saw this on Facebook feed and it just made it all clear once again that the bull had just started. If you remember previously we said that the interest rate would continue to go higher before market really crashes this proper evidence to prove our point.

Junk bond traders channeling money to stock is just a good example of pushing stock valuations higher and in return, the cost of debt would eventually rise. Companies using bond issue to finance their operations would need to raise the coupon yield to get investors of fixed income interested once again.

The overvalue market would then spark central banks to rise interest rates ensuring that money goes into savings rather than risky investments. Junk bonds would have to compete with risk free rates rising their yield higher. This goes on and on…

Never in history the market crashes with low interest rate. High interest rates are the killer of bulls.

Valuations?

Well I did not use the word cheap any more compared to 2016 where everything is really cheap that time. The rise this year had come to a halt for Malaysia but not for US or other Asian markets especially Hong Kong. Bull run is imminent in that sense.

Bear in mind that we stated the bull just started but we no longer deemed that the market is cheaply valued. But if you fear the bull now, you might feel left out forcing yourself to start buying stocks again but at higher levels. That’s really not worth it.

The best solution is to keep hold of good fundamental companies and try to avoid speculative trades with companies that has rubbish fundamentals.

Up till now, we are still bullish and need to prep towards 2018.

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CIMB on Bumi Armada Oct 2017

Well we still like Bumi Armada compared to other operators such as Sapura Energy. We think that the future prospect for Bumi Armada could be considered neutral but the current premium that it is trading is much cheaper than other operators.

But this report from CIMB gave us the heads up from this paragraph.

Bumi Armada Berhad (BAB) may need rights issue, on top of partial Olombendo stake sale

So I guess the weakness in terms of the stock price not moving with the increase in the price of crude comes with the reason of analyst anticipating a rights issue ahead. We would love to acquire after the stock goes Ex. Simple as that!

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CIMB Navigating Asia Pacific

Asia Pacific is so vital in China’s plan of One Belt One Road (OBOR) policy. Most of the major corporations in China had already kickstarted the OBOR craze positioning themselves for this wave to sweep them to new locations.

Chinese government is still under communist style economy which is a good thing when they initiated the OBOR policy. It will be done no matter what, simple as that!

Take a look the the latest Navigating Asia Pacific report by CIMB which encompasses how to strategize anticipating this policy.

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How did we Analyze the Karex Trade?

You might be asking yourself like what the hell is this OM Capital giving free technical tips to everyone in the market. Some might thought we recommend a stock and as soon as people started buying in, we sell it to the idiots who are buying it due to our recommendation.

Seriously if you lose money in this market, you gotta blame yourself for your lack of knowledge and understanding in this market.

We would like to advise all of you that if you want to be playing in this market, please do your homework and be more hardworking. Money that’s freely available in the market isn’t going to make its way into your pocket easily. If luck is on your side, then we are speechless to that.


So… How did we Analyze the Karex Trade?

Now it was just last week when we posted this on Facebook recommending Karex as a good but Super High Risk trade. For obvious reason this is a really the true situation of catching a falling knife.

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Fairly simple a double bottom was formed and if you are catching a falling knife, you shouldn’t catch it blindly. Look for a proper support and punch in your entry.

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Always remember this in trading, if you buy a stock and turns out it is a wrong entry, you need to cut. So to sum it up, buy low also must cut, buy high also must cut, might as well try my best to buy low. Rather than buying when the stock is on the way up, buy it when people are dumping mad. That is the first rule of sharp dumping stock!

In this case, we could either be buying at previous trough of at RM1.38 or the wicked touch two days ago at RM1.37. This is where we believe that the element of luck comes in. Sometime it works and sometime your plan fails. Do not chase if your plan fails.

Obviously a few days later the stock raise in price and again we posted another Take Profit note on our Facebook Page.

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The thing that made us believe that it is time to take profit is when the volume transacted was quite thin when the stock was rising. We believe that when volume isn’t present, it’s merely price action giving you a higher quotation rather than real demand coming in.

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What we realize is that the market was strong that day and it might just test the RM1.60 limit. We were prepared to sell since the gains were quick in merely 5 trading days or so. Remember that this is a falling knife stock, never hold too long until you are certain that there is a trend change.

Obviously it occurred to us that this was a bounce rather than a trend change.


To sum it up!

  1. Determine a point to buy and never readjust your buying point if it references previous support.
  2. Determine a suitable cut point, let it be loss tolerance or previous support breaks. Never readjust your cut loss limit as well!
  3. If the stock needs a lot of attention like this one, observe it every 3 to 4 or hours or so.
  4. Observe what buyers and sellers are trying to do
  5. Determine point of exit, let it be earning enough for one trade, stock going to fall again, just because you don’t feel like holding it anymore. Never avoid selling due to small profit. Small profit or not profit can become huge loss.

We hope by posting this we could help our followers gain some insight. The reason behind free investment recommendation and advice is because we are collecting awareness towards the development of our entity.

Thank You