Category: Technical Analysis

Bold Calls: Jan 2017

On By Chen Yu YanIn Equity, Fundamental Analysis, Futures, Policy, Retail, Sector, Technical Analysis, TradingLeave a comment

Dear Uninformed Readers,

Wow… what a year. I made two calls last year and both were pretty good. I admit that gold came a bit short but come on, what’s $20 between friends (I don’t actually have friends, that’s why I blog). So to sum up, gold was slightly underwhelming stopping just pass $1380/oz whereas bitcoin did exactly what I anticipated and flew right through the big $1000 mark (I know it collapsed based on selling pressure from mainland China but hey, I never said it wouldn’t come back down).

I am once again aiming to do some decent analysis this year as well so here we go.

For 2016, I called on currencies. This year I’m calling on equity. Actually, equity markets to be precise. Because I live in Australia, I am going to start with the ASX S&P200 index. It is currently trading around 5650 as I write (it’s a Friday and markets closed around 4 hours ago so yeah… it’s 5654.80 to be precise). I am looking out for the big 6000 mark. That’s where it all went wrong early 2015 and I think we’re gonna go tempt fate again by trying to smash that ceiling. My reason is fairly simple. With tightened controls around foreign investment (property in particular), property prices are going to stall. Those seeking returns will be driven to the equity market (I know there are those seeking yield but come on, who seeks yield phft…). The money will flow into the equity space which hopefully drives the market past that 6000 mark.

And because I like the Shanghai market, I’m gonna go with the Shanghai composite on the next prediction. Shanghai stalled at 3123.14 and I honestly don’t see it moving much this year. However, I just have a good feeling about the technical patterns. On the fundamental side, we have a similar situation as in Australia. P2P lending has gone way too big in China to yield anything generous these days. Real estate is a big joke in all the major cities as things are simply getting too expensive for people to invest. Hence I anticipate a near 20% increase to the 3500-3600 level. This also happens to be a resistance level (technically) from 2015 so my eggs are certainly all in one basket this year.

To sum up for 2017, equity UP! Property not so much (in Australia and China at least).

Yours sincerely,

The Uninformed Trader

Technical Analysis: Let’s get Irrational

On By Chen Yu YanIn Technical Analysis, TradingLeave a comment

Before we move on, you may wonder why I’m wondering why I’m continuing this at such an odd time. Or most likely, you didn’t think that but are now. Nevertheless, it is because I am very busy and apparently, it is too much to ask for me to do some decent research because there has been some issues accessing some sites for data that I wanted to pool. So now, you get a short version of what I intended to go through (and without charts because I want to satisfy my own rambling before all else).

Picking up from where we left off previously, price action dictates who makes and who loses money in the market. When you try to think about what drives the price action, you move into the realms of fundamental analysis. Technical analysis is all about the numbers.

The demand and supply of the market isn’t always rational. In fact, from my experiences, it rarely is. Human emotions kick in and affect traders who then buy and sell in a blinded frenzy. I dare say that this contributes greatly to the noise element in the market. In fact, it’s better when the market is irrational. A bunch of logical thinkers gathered together would provide as much progress as a philosophy session. My particular ‘style’ of technical analysis involves me deducing any information asymmetry within the market and act upon it before the market has time to digest everything. Err… fancy way of saying pick up on a movement before it has finished.

I’m gonna go into specifics into how I do it exactly but maybe brush up on Elliot Wave Theory if you’re not familiar with it because what I do is an extension to it. I’m keeping this one short because I suck and I have no time and life is bad and saof;jg  13409237u5 rilkdfmngsv 9i43oj4t klj……

 

 

Bold Calls: Jan 2016

On By Chen Yu YanIn Bitcoin, Equity, Fundamental Analysis, Futures, Policy, Technical Analysis, TradingLeave a comment

In private, I’ve made some bold calls. This affects my trading and I see it as a way for me to exercise my ability to predict long term movements based on an unique style of analysis. I won’t bore you with specifics as that isn’t the point of this entry.

In 2015, over a ramen lunch with close friends, I made a bold call to say that the US equity market will fall 30% from the peak, the Aussie will fall 40%, and China 50%. This was around June 2015. So far, China is looking to have almost hit my target as it is almost touching that magical 2600 mark. Honestly, being a massive Chinese hedge fund, the Australian markets is gonna tank a little as well. I guess we’ll see some results by mid year. The US markets are probably the most difficult to predict. I believe it will be heavily affected by who gets elected for presidency this year.

My new bold call for 2016 is Gold (gold vs US to be precise). I am fairly bullish on gold and I expect an initial target of $1200/oz followed by a rally to $1400/oz (it is currently $1100 as I am writing this). This is based on increasing volatility, the distrust in the growing Chinese/other emerging economies, a beautiful technical bottom plus reversal patterns emerging.

My second call would be for bitcoins. As mentioned in my very first post here, the block chain technology is worth a lot of money. The ability to decentralize the settlement system alone is enough to save enough money to make Scrooge McDuck drool. This along with the fact that we’re half way to mining everything out means that suddenly there is a supply squeeze that can raise the prices faster than twitch chat raising dongers (a very specific reference so kudos if you got this one). My personal target is $1000/coin but I believe we have to wait for around the end of the year for that to come about.

To sum up, bitcoin and gold will be the best performing currencies in 2016 (I’m counting gold as a currency because it pretty much is) and your phone is ringing because I’m calling it!

Technical Analysis: In the Beginning, there was Price!

On By Chen Yu YanIn Technical Analysis, Trading1 Comment

Most people who know me in a professional environment would know that I am very technical heavy with my analysis. Not that I have anything against fundamental analysis, it’s simply the fact that I don’t enjoy spending an entire day looking at the accounting figures and growth potential etc. Technical analysis to me is, as Kanye would put it, harder, better, faster, stronger. So if you want to read charts, and you can’t wait much longer, stick with technical analysis, else you can’t get stronger… and this is why I should never write anything while listening to Youtube mixes. Back on topic now!

I suppose since I am going to spend multiple posts diving into the intricacies of TA, I should really start at the… err… start…

TA, from a academic perspective, describes the type of analysis used by market participants who tries to generate abnormal returns using only past information. The ‘blasphemous’ theories implies a complete lack of market efficiency (and thereby pissed off thousands of academics, or so I would like to think) and is pretty much the modern equivalent of witchcraft and alchemy. Many attempt to disprove it via the inclusion of taxation, backtesting different strategies and showing fairly conclusively that they don’t work over the long term, by tossing coins and then spinning in a circle and throwing a dart, by diving into a pool and picking out a random marble hidden at the bottom of every tile (but behind every prime numbered tile, there is a golden one. Also, the latter two may or may not have happened. I can’t prove that they haven’t so……). However, some swear by it and one of the most famous trader of all time, Jesse Lauriston Livermore, the great bear of Wall St, made it big using TA. So why is that? How can something disproved make so much money for some while bankrupting others?

I guess I’ll describe the general logic behind why some believe that TA works before I go into the specifics. The first trader, even if by random chance would buy something because the price went up a little. Soon after, a different participant would look at it and think “Hey, I just saw this, and this is crazy, but I like this stock, so I’ll buy some maybe”. The price would go up further because of additional demand from other technical traders. Finally, the traders who missed the run then looks at the chart and thinks “Hmm… I missed it, I missed it so bad, I missed it so so bad”.

I’m sorry, I’ll turn off the music.

My favourite analogy for TA (I read it on a research paper but I forgot which one… if any of you know where this analogy came from, please refer it to me as I’d like to cite it) is if you throw 10,000 people into a small city and ask them to meet up. You don’t tell them when and where but some may assume that around noon in front of the town hall on a Saturday would be a nice time. In fact, I dare say that more than one would think that. So some people gather, and then the rest looks in awe at a sudden gathering reminiscent of flash dancing. So they group up too. Who knows, maybe they’ll even be starred in a viral Youtube video! Wouldn’t that be neat? Then the crowd attracts others and suddenly it’s massive. This is essentially what will happen in the market. It’s all about the stock price (no, I’m not listening to ‘It’s all about the Bass’) which makes sense as its arguable the most important element for stocks. We quote price before anything else (though the only other thing that comes to mind would be volume) and base a lot of calculations off of it regardless of using TA or FA.

So why does that skewer of demand and supply dictate what traders do? Well, that’s where cognitive dissonance kicks in. That’s where greed and fear kicks in. That’s where the next post in my technical analysis series kicks in.