Generally, it is very difficult for an untrained person to buy a stock when the stock price is rising, because of fear, the fear of a reversal after a rally. Therefore, most investors could only watch the stock climbs while could not take any action, feeling regret. However, when the same stock price starts falling, these investors would start buying, for the same stock is now at a discounted price, only to realize that after they have bought these stocks, the price of these stocks could go even lower. This is a normal cycle for a loser, which is envy and fear when price is rising, because they could not buy it; and regret and fear during the downtrend, because they had bought it too early.
Under normal circumstances, there are patterns and characteristics of an uptrend, which are Higher low and New high, and Lower high and new low for a downtrend. However, not many stock price have the above patterns. As for those stocks which have patterns, a trained investors would take advantage of these characteristics.
It is our human nature to prefer to buy things cheap. Despite knowing that the stock is riding on an uptrend, most untrained investors would still prefer to buy them at a lower price, which is unlikely, for during an uptrend, price usually ended higher.
Therefore, one should map out the probability of stock trends and trade the trend with more science and less emotion. For example, try view an uptrend this way. During an uptrend, the number of days in which stock price closing higher than yesterdays are more than the numbers of days of falling. Therefore, one has a bigger chance in paying a higher price if he or she would like to buy in an uptrend. As long as he or she has planned their trading plan and trailing stop, the risk is still manageable. (Study Chart 1)
On the other hand, during a downtrend, the number of days in which price closing lower than yesterdays' price is greater than the numbers of gaining days. Therefore, it is much easier to enter into a downtrend with a lower price. And therefore, one should never feel good of being able to buy a stock at a lower price, it only means that you could have a higher chance in entering a downtrend, it does not mean that you are smarter. The worst thing could happen to an investor, is that after he or she has bought into a downtrend, and only realized that price could go even lower, and until a point, that they had to convinced themselves to be a 'long term investor'. But deep down, the only reason why they want to go for long term, is because they had lost money. (Study Chart 2).
Chart 1: Uptrend chart pattern.
Chart 2: Downtrend chart pattern.
[Axiata – 6888]: Testing Resistance.
Chart 3: Axiata – 6888 (23/02/2010 ~ 16/06/2010 )
As shown on chart 3, price of Axiata reboundedstrongly, breaking above the 14, 21, 31 Exponential Moving Average – EMA, thus the immediate technical outlook is on the positive side. As indicated by A, price of Axiata is set to test the RM3.95 ~ RM3.96 resistance.
The RM3.95 level is likely to be an important resistance for price of Axiata had tested this level a few times, and when ever price started falling at this level, there were investors losing money, thus forming a negative memory at this level, and these investors are likely to be a ready seller when price should return to this level.
Therefore, if price should test or attempt to break above this level, a strong volume is needed. Or else, without sufficient inflow of fresh capital, it is less likely to off set these ready seller's selling pressure. Immediate support for Axiata is at RM 3.77 while the next resistance is at RM4.20 Fibonacci.
| 4 Q Rolling PER | 12.83 times | Dividend Yield | 0% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2009 | 0 sen | 0% | 12.61% |
| 31/12/2008 | 0 sen | 0% | 4.39% |
Table 1: Axiata – 6888, yearly dividend, dividend yield, and net profit ratio.
Chart 4: OSK – 5053 (22/01/2010~15/06/2010)
As indicated by A, price of OSK has broken away from the T1 downtrend. However, it has not broken above the 14, 21, 31 EMA, thus no bullish signal yet.
Meanwhile, as indicated by B, volume for OSK is still low, as it implies low inflow of fresh capital, to offset the existing selling pressure. Technically, when price should break above any resistance, strong volume is needed.
Nevertheless, when price of OSK breaking away from the T1 line, and consolidating, the current situation is improving, even tough it has not formed an uptrend. Support for OSK is at RM 1.20 while the resistance is at RM 1.35 WinChart Automatic Fibonacci Retracement.
| 4 Q Rolling PER | 6.2 times | Dividend Yield | 5.86% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2009 | 7.5 sen | 6.1% | 13.73% |
| 31/12/2008 | 7.5 sen | 7.58% | 16.59% |
| 31/12/2007 | 20 sen | 8.62% | 21.38% |
| 31/12/2006 | 12.5 sen | 6.38% | 23.84% |
| 31/12/2005 | 7.5 sen | 7.85% | 13.52% |
Table 2: OSK – 5053, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
Before buying any stock, one should set up an trading plan, and know what's the original intention to buy. There is only one object for one to buy a stock, which is to expect the rise of the stock price. If this is true, why pick a stock which is still trending down? Therefore, one should not expect to buy stock cheap if he or she is expected the stock price to rise. Think again, for every one who attempt to buy stock cheap in a downtrend, did not each and every one them thought that it was the lowest day of the downtrend, when they decided to buy, but then, only realized that they are still too early. Please note that there is only “ONE LOWEST DAY” during the entire downtrend, and therefore, chances of getting the ONLY DAY is very slim.
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