Sunday, 23 February 2020

THEY SAY GOT GOVERNMENT STIMULUS? HERE ARE THE STOCKS TO WATCH !

"Saya kena sabar..." Source

We have not been able to find a coronavirus cure for people yet. But for disrupted economies? The cure - seemingly - is to spend, spend, and spend some more.

On 27 February 2020, the Government is expected to announce a fiscal stimulus package. It's the same thing that a happy marriage requires: stable fiscals and some stimulus from time to time. 

There are estimates that put this package at at RM8 billion on the low end, and RM15 billion on the high side. You should know what this whole thing is about : combating disruptions caused by the coronavirus outbreak. 

Hotels have slashed prices after 95,000 bookings canceled. People are in danger of losing jobs. Nobody's flying. Former and future Prime Ministers are evidently in distress. The solution is at hand. 

Our package may not be as well endowed as those of Singapore's or China's, but let's hope the market thinks it's big enough. 

Because if it does... ! Some stocks stand a chance of rallying. And as observers of stocks, we have a list of those that are most likely to benefit from this stimulus.  

Similar to out Budget 2020 Watchlist, we'll use our patented three-star grading system again.

* - "Can watch lah if bored"
** - "Can get the heart rate up abit only"
*** - "Uncle says you need to watch this"

AIRASIA***
AAX **
AIRPORT***
BRAHIMS**
AEON*
BJFOOD**
BONIA*
GENM***
GENTING**
OWG**
PARLO**
GETS*
KTB*
WARISAN*


This plan is intended to help businesses that are directly affected by the outbreak, especially the retail, tourism, and aviation sectors, says our MITI Deputy Minister. 

Our current assumptions:

1) No direct aid for manufacturers (at least in the first round), as the impact of the coronavirus on the supply chain (for anyone that has China exposure) has yet to be quantified. We do foresee this to be a problem, but the impact will be assessed later.

2) The focus of this rescue plan is on the services industry, hence we are not highlighting any construction or infrastructure plays. You know them already; you don't need us to tell you to loom at EKOVEST and the gang. There will be newsflow on mega projects and such, but that's a different story.

3) We think Bank Negara will cut rates in March due to current exceptional circumstances. This has ramifications on all sorts of things, but we won't mention the affected names here, so as not to muddle the main angle.


More details on the stocks mentioned below.



AVIATION

AIRASIA, AAX - Main (or only) aviation proxies on Bursa Malaysia. There is clear intent to get people to fly again. Domestic routes, deep discounts, special packages... there are many ways to encourage it. Some concrete tourism initiatives (backed by Government funding, most importantly) will help achieve this.

AIRPORT - The first, possibly biggest, direct beneficiary of any stimulus measures related to the tourism industry. It's Visit Malaysia 2020 and you gotta get visitors to come somehow.

BRAHIMS - Airline catering business. Cheap entry price for the stock, which has seen some up-and-down turbulence lately.




RETAIL

AEON - Direct mall proxy, to benefit from recovery in consumption sentiment, possibly through a stimulus measure or two.

BJFOOD - Direct F&B proxy, with concentration of key brands and franchises in tourist heavy locations. Tourists flock to Starbucks for safety; it's just human nature.

BONIA - Direct retail proxy. It's been hit hard by the virus already; any measures to encourage tourists to visit Malaysia would reinvigorate sales.



LEISURE  & HOSPITALITY

GENM & GENTING - Suffering from cancellation of all tour bookings from China this month, as well as Singapore's entry ban for Chinese visitors and foreigners with recent travel history to China.
GENM and GENTING could really do with some major moves to get visitor inflows from other countries.
 
OWG - Proxy for Genting (F&B operations) and Penang tourism (The TOP in Komtar).

PARLO - Tour and tourist services company. It's in penny stock territory, hence any positive tourism policy announcements may be enough to move the needle for these guys.
 


TRANSPORTATION

GETS & KTB - Bus companies as public transportation proxy. They are not very profitable, but they do attract multitudes of budget conscious travellers.

WARISAN - Under the radar and often ignored car rental and holiday tours company.

Tuesday, 18 February 2020

HOW TO OVERCOME A LOSING STREAK IN TRADING !


This is a man who did not stick to his stop loss points. Source.


Late to a trade, only to buy at the peak?

You expected the market to zig, and it zagged instead?

Everything you do goes wrong, with your fifth-in-a-row losing trade?

We've all been there. Believe us. Nothing saps confidence and capital more than a losing streak.

We are not superstitious types (maybe just a little 'stitious'). Streaks are just consecutive occurrences of the same outcome. We can bore you with citing statistics and discuss the wonders of the Gaussian distribution table, but let's not do that.

Look, losing makes people emotional. We lose the capacity for logical thinking, bit by bit. If it gets bad enough, it makes us desperate.

Because we are losing something, we subsconciously feel like we have to regain everything, at all costs. This is the kind of asymmetry that lures people into making outright bets : how else would you describe feeling certain about winning 10 to 1 odds?

In trading, you're not just losing your capital. You can lose your mind if you're not careful!

HOW TO LOSE IT

Imagine this (very real) scenario : markets have just opened and you're down by RM10,000 immediately after your latest stock trade get impacted by a corporate announcement.

You bought Stock X at an average price of 55 sen. Now it's down to 48 sen; a 12% loss. And oh, you forgot to set your loss limits, or even trading parameters.

The reason you really got into this situation was because you've lost a total of RM10,000 in four previous trades. Now you've just made this one big, ballsy bet that you're sure will make up for all the losses.

Reckless? Sure, but the streak would have to end eventually right? And it's OK to make big wagers to win back that RM10,000 loss, right?

Well, the reality looks like RM10,000 in actual losses, and another RM10,000 in unrealised losses. Instead of getting to break even, you have just doubled your losses. To put it kindly: you just goofed big time.

So what do you do? Your options are :

1) Stay patient and wait for the position to turn around.

2) Trade other stocks like mad to make up for this RM20,000 loss.

3) Get out and just sell the position. Cry. Live another day.

We'll discuss the options shortly. But the answer may surprise you.


"If you really want to gamble, come here and support GENM shareholders in these trying times"


WHEN TRADES BECOME BETS

We've written before about how dangerous post-event justifications can be. Literally anything can suddenly be rationalised. It's not our own judgment that's faulty; it's the dumb market and criminal market manipulators that whacked your beautiful and totally righteous trading position.

It's not just the market that zagged instead of zigged; it's your own mind as well. And also your dignity, if you let it happen long enough.

When a rational trade turns into an irrational bet, the major change is in your mind. You panic. You try to explain things away.

Let us cut the bullshit and go straight to the point:

You're embarrassed. You're ashamed that you got things wrong. 

Losing so much money in such a short time makes you feel like an idiot. 

You instantly regret putting yourself in a position to lose this big.

All of us has been in this position. Those feelings are real, but you will get over them eventually. (Editor's Note: or in worse cases, you'll get burned for life and spend the rest of your days complaining about Malaysian politics on Twitter)

But in the context of trading, if you really want to be good enough to make life-changing amounts of money, you have to live by this maxim : don't waste time feeling sorry for yourself.

Take it from a group of moderately successful finance blogger-traders who know by experience. We've turned a RM10,000 loss into RM20,000 before.

The example above is a real-life example: it's us. It was quite easy to achieve: all we had to do was continue being in denial.

It took us a while to come to a new way of thinking. Then it took a while longer to apply that in our trading execution. We are still learning, and we always will be.

This also describes a two-day cycle after eating really spicy nasi lemak, 
 and the subsequent bathroom odyssey. Source.

We don't have overblown or complicated theories to offer here. Our insight is very simplistic:

You must detach your emotion from trading at all times. 
To do this, always plan your trades.

We are not robots, but save the feelings for later. 
When you're in trouble, take action first. 

It's quite simple lah - when your apartment is burning, do you sit around for 20 minutes moping and feeling sorry for yourself? Absolutely bloody not, right? You'd jump out of the window and break both legs if it saves your life.
So why would it be any different in trading? If you think the stakes are lower, then we wish you all the best in losing money for the rest of your trading days.

Remember : action before emotion. Plan to act when you need to save yourself.

MAKING THE RIGHT CHOICE
 
Let's return to the potential options mentioned earlier. In each scenario, we'll show how they can turn from emotionally driven actions into intellectually driven ones.

1) Stay patient and wait for the position to turn around.

At first, you may think this is a totally rational thing. Maybe you've spent hours poring over charts and liquidity trends.

Maybe you've found that 9 times out of 10, Stock X ends up rebounding, but only after taking temporary losses of **gulp** 25%.

It definitely sound like the things a ballsy trader would do : "Just ride it out, bro. Take the losses and swallow it like a man".

Don't succumb to the toxic masculinity. Get rid of that thinking first. What you need now, and always, is not (just) guts, but a plan you can follow to the death.

What you want is not to let your losses run wild, but to draw a very clear boundary. It's OK to be patient, but determine an exact point where your patience must run out. Set stop loss points in terms of absolute value, and time.

Absolute value : when losses hit RMxxx , sell. We advocate to set very specific loss limits per trade, in every trade. We try to cap our own losses at 5% of capital invested, and we made sure not to let losses run into high four figures. (Editor's Note : find a level that works for you; these are our own)

Time : If the position does not recover by <Month/Day/Time/>, sell. No dilly dallying, no grandmother excuses. Sell means sell. Your (figurative) house is burning, remember?

What we want to highlight is this : having convictions are good, but there will come a time when you'll have to admit to being wrong. And there's nothing wrong with being wrong. Don't let shame be the enabler that grows your losses.

"Move fast. Break things" ~ Mark Zuckerberg. Source.

2) Trade other stocks like mad to make up for this RM20,000 loss.

You can probably see why this can be a slippery slope. It's actually more of a sheer cliff with a 100-foot drop: the probability of being dead is high.


This is yet another example of showing ballsiness, or throwing caution to the wind. By doing this, you have just committed the following mistakes:

a) Overconfidence in your own abilities

b) No planning in order to achieve a tangible goal

c) Opening yourself to an unlimited loss potential

Well, for (c), it's not really unlimited. You only stand to lose as much as 100% of your invested capital. Do you wanna put yourself in that position?

The solution to trading losses is not more trading. It's more on having the right plan to follow in reaction to different sets of possibilities. Again, this is where your stop losses - time, absolute value, percentage figure - come into play.


3) Get out and just sell the position. Cry. Live another day.

Having learned this lesson the hard way, nowadays we have a simple rule.

Let's say our loss limit was 5%. If it is hit, we automatically start exiting.While the exact, rock solid rule would be to sell the entirety of the position in one go, we allow ourselves to be human for a bit.

So when loss hits 5%, we'd sell off around 40% of the position.

When it hits 5.5%, sell off another 30%

When it hits 5.8%, sell off another 30%. Suddenly we'd realise that we had sold off everything.

Note that the percentage loss limits, and positions sold off, are just examples. You have to determine what works for you.

Just the act of partial selling is much easier to do than committing to sell all in one go. The mindset is different.

If you still had 100% of the position, you'd be tempted to roll the dice, even to take it to lower prices. You risk bigger losses this way.

But by selling of small portions, you're essentially forgiving yourself in real time, little by little. Even if you only decide to sell 10% of the position, you'd feel differently about the other 90%. Try it yourself.

Exiting losses can be painful at first, but it brings clarity later. There is much to look forward to in the future: new opportunities, bigger profits to target. 

Pain, then clarity. If that sounds familiar, it's because by taking losses, you were essentially in a grieving process. But it does get better.


Breathe. Calm down. Stretch. Source.

WHAT COMES AFTER SELLING? 

Big losses, losing streaks that don't seem to end, constant pain. What's the cure?

It is so simple you might not believe it. The solution is :

Get out. Do less. Get small.

Get out means : exit, and take a couple days off. If you had been in a serious losing streak, you're in pain. Mentally and physically. You'd lose your sharp thinking, you'd become superstitious, or you end up making decisions that are unguided by logical thinking.

Boxers don't jump straight into the ring the day after they get their ass kicked. They follow a recovery process.

But getting out was the easy part. The next step is to make good use of that newfound clarity.

A lot of losing streaks end with the trader blowing up the majority of their capital. It's because they do not know how to scale, and when to do less. Overtrading is an easy problem to detect, even though people tend to realise it after they have traded dumb positions 20 times, not during.

What we like to do is create self-imposed filters. We try to detect stupidity during the act being committed.

So we track everything : number of trades, number of stocks, total costs, win-loss ratio, et cetera. At the end of every day, we'd review our trades and look for signs of flawed thinking, or in other words, dumb decisions. Then we reflect and we try to improve the next day. 

Doing less means risking less capital. Instead of trading 1000 lots, try 200 lots. Smaller profits, but smaller potential losses also. If you usually trade once a day, try trading twice a week. Give yourself some time to recharge your batteries. The market will always be there; no need to rush back into it. Don't be an addict, because the market is not a high to chase after.

In time, with a series of smaller but consistent profits, you'd have extricated yourself from a rut. Your mindset is now different. With greater clarity, eventually you'll be ready to get into trading in large sizes again.

We'd rather be wrong early and often, rather than later when we'd have lost everything. It's not just in trading; life is a lot like this too.

Thursday, 6 February 2020

ANNOUNCEMENT : CHANGES TO THE TELEGRAM SERVICE AND FEE STRUCTURE

Dear Reader,

Beginning 1 February 2020, we have made some changes to the VIP Telegram Group service and fee structure.

1) We have removed the two-year subscription offering, which is now replaced with an offer for lifetime membership (contact us for more details on this).

2) All new subscriptions now have a maximum duration of one year. After the period ends, current subscribers have the option of convert to lifetime membership, another one-year extension (at significantly higher pricing than the initial one-year subscription price), or to conclude their subscription. Alternatively, our free Telegram Channel remains accessible free of charge.

3) Our existing subscribers will continue to enjoy their subscriptions with no change to their stated duration and structure.

Please note our Terms of Conditions.



We now have three different Telegram Channels/Group. Their basic descriptions are as follows:

1) Pelham Blue Trading Channel (free) : market commentary, sharing of interesting market developments, and market-moving news as well as other important information. We will also share trading reviews and round-ups.

2) Pelham Blue - Market Calls (VIP access) : our daily personal (and some say, valuable) watchlist of stocks/warrants, real time market calls (as the name suggests), our trading activity and trade parameters (entry price, stop loss, target profit),  also in real time, our actions and reactions, our P&L, and exclusive market research and insights.

3) Pelham Blue VIP Group (VIP access) : discussion group for VIP members. This is where we interact with members and provide coaching, advisory, and tutorials on everything related to the markets.


Note from the Editor-In-Chief of The Pelham Blue Fund

For those who have been with us for a while, as long-time readers or paid subscribers, I am sure you know what makes us different from other market blogs or Telegram channels out there.

WE TRADE WHAT WE RECOMMEND. WITH YOU.

Our results are transparent; our successes and failures are clear to see. We don't simply say "gogogo EKOVEST" early in the day, only for it to drop 10% at market close, and not be accountable for it.

Our arguments are always facts based and intellectually driven; we simply can't afford to be reckless or emotion-driven in trading. Our capital, source of income, dignity, and reputation are on the line every single day.

Our commitment is always to provide the best advice to the fullest extent of our abilities. This is our promise to you.

10-20% YIELDS IN ONE DAY. 5- FIGURE INTRADAY PROFITS. AND MORE.

You've seen our hit rate and our calls. We have demonstrated the ability to execute these trades, consistently, and successfully.

Our record is excellent, in terms of both percentage yields and absolute profit amounts (our blog showcases such trades, some of which yielded RM10,000 in gains on an intraday basis). We show proof of our gains.

We are thankful for your support and kind comments since we initiated the blog and Telegram service. It is a two-way process; we have learnt a lot from you as well.

We hope to create a community of smart and informed investors/traders in Malaysia. To this end, we will strive to provide more valuable information, better content, and better advice in the coming years.

Cheers.

Sunday, 2 February 2020

RM10,000 PROFITS IN AN HOUR : ICON OFFSHORE [TRADE OF THE WEEK # 31]



Outcome
Gross Profits : RM10,086
Return on Investment : 22%
Duration : One hour

We vividly remember an afternoon back in November 2019. Got a call from a friend about a very creative deal structure envisaged by  ICON Offshore Bhd.

The exercise was a share consolidation plus rights issue. We were used to one share subdivided into five parts, but fifty shares transformed into one?

We were out of our depth on this. (Editor's Note : give yourself one brownie point every time you catch an oil and gas/offshore industry pun in this post. We are nerdy like this)

The conversation was about how this deal works. There were many moving parts and confusing permutations. Our friend had trouble understanding it. And while we gamely attempted to explain the different permutations and outcomes of this deal, we had trouble understanding it too.

It's like we had drilled deeply into our minds and found nothing.

At the time, the outcome of our mental maths is:

Cash call + hard-to-understand restructuring plan = not very confident lah

ICON's shareholders back then probably shared this same sentiment. They had already unloaded the stock. It fell to an all time low, perhaps unfairly, as the market disregarded valuations and sold at all costs.

Huh?

You can read this article for a more thorough exploration of the situation.

As for us? We kind of filed that in the cabinet. Our minds drifted offshore. We forgot about it as we went on a short year-end holiday, trying to forget about the trading business.

That was last year. In January 2020, we snapped back to reality.

We were still on a post-holiday stupor, but this was a crude awakening. On 20 January, we saw this message on our trading platform: a kind reminder of the upcoming corporate exercises being undertaken. 


"Ah right, ICON, that peculiar thing.... let's see how it does on 22 January..."

ICON's daily price chart looks like this from November to 21 January, the day before the ex-date of the share consolidation exercise.



There was a spike in buying in early January, but it still fell from 6 sen to 3.5 afterwards. What happened next was a lot weirder than any of us had anticipated.


THE TRADE

We made this flippant observation on 22 January 2020, first thing in the morning. We didn't think much of the stock at first; it was just hovering near 20 sen.

Note the timestamp

Now, was the market confused? We did not have a clue; it was merely a theory. But for one reason or another - mainly it was due to how the stock was moving - we decided to trade ICON.

But we needed to trade this thing properly to survive. It's never easy when you have to shell out the capital necessary to commit to a high volatility trade. So we announced our parameters.

The actual yield turned out to be closer to 375% !!


The following five-minute chart shows our positioning in two trades that ultimately yielded RM10,000 in profits.

The general principles are very similar to our previous short term volatility trades; you can read up on this guide, or this one. In some ways, the price movement in the chart tells the whole story; being ready to mentally commit to this trade - we did highlight it at 9:22AM - also really helped.



This all happened very fast.



But turns out the trade still has some gas in it. So we committed again.

As a general rule, we commit smaller amounts for these kinds of 'second round' trades. We didn't do this out of ego or belief in continuing a hot streak. We had reason to believe the rally can keep going - mostly this is instinctual, but we certainly noticed the lack of time the stock spent on what was supposed to be the obvious support point of 30 sen. 

So we made the call.And five minutes later, we escaped.


It would have been neat if this had been the whole story. Little did we know at the time that this trade would turn out to be much more complicated and perplexing than we could ever have conceived.


THE PSYCHOLOGY

You'd have thought that making ten grand in an hour was crazy. But that was just the start!

As you can see, we got in at around 22 and exited at 27.5-28 sen. We got in again at 31 and then let go at 35.

ICON then went up to a peak of 95 sen in the next two days! Crazy, right?

"You blardy idiot; should've let it run all the way up eh?"

Well, our conservatism had clearly bitten us in the arse. However, that very same conservatism meant we got to keep our profits. And with these kinds of profits, we're happy to be the blardy idiots.

We had some strong debates, within the team and with friends and acquaintances, about the potential upward trajectory of the stock. It ultimately led us to cease looking at ICON on the very first day of this price move. That meant we got out at a peak of 35, and missed out on potential multiples of that RM10,000 in profits.

Regrets much? Sure, yet this realisation was purely in hindsight. We traded regrets for peace of mind and a sizeable five-figure profit. For you see, there were incredible risks abound. It's like a small island that turned out to be the top of a gigantic underwater volcano. You don't mess with those.



The higher ICON's share price runs up, the more detached from reality investors' expectations become. In short, it's a micro marketmania. It helps that we have seen run ups like this before. We are totally unfazed by this move.

We also strongly considered the other side of the argument, which was to keep ICON's shares:

1) From a valuations perspective, this move from 20 sen to 90 sen is justifiable. The rights issue is perfectly priced. Convert the rights and get the extra exposure and free warrants.

2) ICON has strong fundamentals and is poised for a very strong recovery. It's a great company.

Our retort is simple: "So, were these your convictions on 21 January 2020, just before all this stuff exploded?". The reply is invariably the same : um, not really. No matter what you hear on investment forums or people suspiciously promoting the stock to you, the risks inherent in this trade is exactly the same.

We quickly sensed that a lot of the current arguments are basically faulty post-event justifications. This is where we start out with a preconceived bias (ICON shares must keep going up! to RM1.50 even!) and subsequently scramble to find any plausible, reasonable points to back up the bias (see (1) and (2)).

Let's say you have one person with the above thought. Multiply it by, let's say, 500 people. We think that's good enough for a few million lots bought into ICON, thus bringing the price up, and thus perpetuating this mania. In some message boards and forums, the message is the same : go buy, buy, buy. The FOMO was strong.

This is the main problem: when we are seduced by mania, we end up doing two things: we become married to those biases, and we suddenly become world-class risk takers.



THE RISK

There's a lot of arcane documents and academic research out there about risky behaviour. There have been quantitative and qualitative analyses over excessive risk taking, and why we occasionally do them. These acts are manifested in daily life, in spurts: high-speed driving, drug use, gun use, and also in daily stock trading.

Without boring you to death, let us simplify it in the context of this trade: the higher and faster ICON's stock moves, the riskier it becomes for your deployed capital. 

In a bull market, everybody becomes a genius. We would fail to disassociate the effort and the outcome. In fact, we correlate capital gains ("I tripled my money! Wohoo") with genius. It's just basic human error.

All sorts of things can happen after a stock has tripled within three days. The main concerns are either the stock drops back (30% fall, 50% fall, limit down, who knows?) or that the rug would be pulled under unsuspecting retail investors (let's say, a regulator comes in and takes action).

And the last part about market manias : we love the ups so much that we forget the downs. But the downs will eventually come.

THE COMEDOWN

On 24 January 2020 (Lunar New Year's Eve!), the regulator declared ICON as a designated counter due to excessive speculation. It did not mince its words; the designation was meant to be a red flag.

In our private chats, we articulated some concerns which are expressly not contra trader-related.

It goes back to one of our central beliefs : one of the least desirable things that can happen to a decent, upstanding, public listed company, is for the stocks to become a speculative tool. Public markets is an avenue for fundraising. Excess speculation can erode public trust. Why did you think the regulator came out with that announcement?

On 24 January 2020, the stock closed at 81.5 sen, having hit a peak of 95 sen earlier. The stock had more than quadrupled since we traded it just two days earlier.

All that's left to do is see what happens next.

When markets resumed trading on 28 January 2020, ICON hit its limit down price of 51.5 sen. Its tradeable rights, ICON-OR, hit limit down for two days running.


On 29 January 2020, ICON falls just as hard.


By 30 January 2020, well, let's stop here...


In other words, a complete collapse. We saw it from a mile away. So should you.

The lessons here are obvious:

1) Don't take risks you can't afford

2) Beware of dangerous biases and assumptions

3) Just because a stock quadrupled in price doesn't mean it's a good investment proposition

4) WHAT GOES UP CAN COME DOWN JUST AS EASILY

Popular Posts