There is an important mindset about buying low, or buying at new low, which one should never over-look. Think carefully, if you are buying, thinking that this is a cheap price, then why would the seller on the other side is selling cheap to you? What makes you think that you are right and he is wrong? Don't forget, when price is trending down, more people will be losing money when they are holding their shares, and therefore, the needs to 'break-even' is very strong, thus selling pressure is always stronger. Therefore, it is not easy for price to go up. Let's take a look at some new low counters.
Maxis – 6012: Marks historical new low.
Chart 1: Maxis – 6012 (11/19/2009 ~ 26/05/2010 )
As indicated by A, price of Maxis fell below the RM5.20 level, marking a historical new low since its IPO. Despite a rebound form RM 5.10, the trend is still weak for Maxis, as when the price breaks below RM 5.20, all investors who had bought this share after the IPO is losing money, thus the selling pressure or the will to break even is strong.
If price should rebound and return to above RM 5.20, it will reduce the selling pressure and there is a good chance that price would consolidate around RM 5.20 level. However, if after the rebound, price should remained resisted by the 14, 21, 31 EMA, the technical outlook shall remain weak.
| 4 Q Rolling PER | 18.75 times | Dividend Yield | 2.93% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2009 | 15仙 | 2.72% | 20.73% |
Table 1: Maxis – 6012, yearly dividend, dividend yield, and net profit ratio.
KNM – 7164: Testing important support.
Chart 2: KNM – 7164 (29/01/2010~26/05/2010)
As shown on the chart above, since breaking below RM 0.70 support on the 15th of april, price of KNM has been falling heavily, losing over RM 0.20 or 28%, until a rebound rebound at RM 0.50 level, which is the 76.4% Fibonacci Retracement line, then price consolidated at this level for around 1 month.
As indicated by A, during the consolidation at RM0.50, price is still trending weak, and if price should break below RM 0.50, it would be making a 14 months new low, thus more bearish outlook is expected. Technically, when price should break below RM 0.50, it would be a signal to cut loss, for more people will be losing money, and the selling pressure will get stronger. As long as price of KNM is still below the 14, 21, 31 EMA, the technical outlook shall remains weak.
| 4 Q Rolling PER | 16.78 times | Dividend Yield | 0% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 31/12/2009 | 0 sen | 0% | 9.37% |
| 31/12/2008 | 1.5 sen | 3.70% | 13.30% |
| 31/12/2007 | 4.0 sen | 1.27% | 9.37% |
| 31/12/2006 | 5.0 sen | 0.57% | 14.56% |
| 31/12/2005 | 5.0 sen | 1.40% | 11.97% |
Table 2: KNM – 7164, yearly dividend, dividend yield, and net profit ratio.
Review Last week's Case Study: Lionind – 4235: Mark 6 months new low.
Chart 3: Lionind – 4235 (09/12/2009~26/05/2010)
As shown on chart 3, price of Lionind remained below the T1 downtrend line, this shows that Lionind is still trending down. As indicated by A, price of Lionind broke below RM 1.51 support, making a 6 months new low, and therefore, the RM 1.51 level is now the 'psychological' breaking even level for most investors who are still holding their shares, and this is becoming a resistance level, thus selling pressure is expected to be strong.
As at 26/5/2010, price of Lionind rebounded, but this is only a technical rebound, not a reversal yet. This is because price of Lionind is trending below the 14, 21, 31 EMA. It is rather risky to try to catch a rebound, as catching a rebound is actually buying into a downtrend, unless for short term speculating, which requires experience and time to monitor. Therefore, this short term catching rebound trading is not suitable for conservative investors.
| 4 Q Rolling PER | 0 times | Dividend Yield | 0.73% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 30/06/2009 | 1 sen | 0.80% | -6.06% |
| 30/06/2008 | 1 sen | 0.38% | 12.43% |
| 30/06/2007 | 1 sen | 0.57% | 4.36% |
| 30/06/2006 | 0.5 sen | 0.52% | -0.29% |
| 30/06/2005 | 1 sen | 0.81% | 8.26% |
Table 3: Lionind – 4235, yearly dividend, dividend yield, and net profit ratio.
Conclusion:
In conclusion, other than picking the right stock and the right price, buying at the right direction is also an important factor for becoming a successful investor. If one should try to buy at the lowest price, he or she is most likely buying into a downtrend, and each day as price drop, there will be more regret buyers who now want to break even instead of making profit, thus the selling pressure is being accumulated. That is why, buying with the uptrend is more important than buying low. Provided one should apply a valid trailing stop as a trading plan, the risk of buying in an uptrend is much smaller than in a downtrend.
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