Categories
STI

China Environment (5OU) : All the exit signs are in the chart

I am not vested in this counter.

But, I do want to use Ichimoku to do a case study on it.

For the purpose of the study, I will only focus on the movement for the last 2 months. (<< It gets worse if you look at the chart from Sept 2009).

1. Assumptions.

– You have decided to take a position in China Environment around Dec 24 to Dec 31.

– Reason : It has bounced off 0.48 and the price seems to be heading higher.

– Entry Points. 2 possible entry points are highlighted in the in yellow and the blue arrow.

– The first one shows the price bouncing off 0.48 and has cut the Tenkan sen. An entry at this point is more speculative and the timeframe is much more shorter.

– The second one shows a bullish Tenkan sen – Kijun sen cross. Note that the price is below the kumo. Which suggest that it is still lacking strength and the bulls has not fully set in yet.

2. Having discuss about the entry points. The more important one is the exit. An exit allows you to take profit or cut your loss short.

– From the chart, we can see at least 4 areas where we can get out.

– The first area in highlighted in red with red arrow shows the price going below the Tenkan sen. That will be the best place to get out. If you enter in the first yellow area, you will have make  a profit and be able to keep it. If you enter after the Tenkan sen – Kijun sen confirmation, you may have break even, and this stock at that moment do not offer any possible upside as it seems to hit resistance from the kumo.

– The second area is interesting. The first 2 days in that area shows the price going below the Kijun sen. Another sign that it is not doing well. But, as the day inch by, we have  a bearish cross, the price falls far enough to break support at 0.48 . With this in the mind, the question is ,”Why do you still want to hold on to it?”

– The third area is just an extension of the second with the price pausing for a short while.

– The fourth and last area offers the last chance to get out. Not only did the price gaps down, it actually hovers there before the final plunge. Again, the question is, “Why do you want to hold?”

In my opinion, we can see that there are many opportunities to exit. Going in is always easy. Getting out is the challenge. Because we are always hampered by our emotions.

Now, let’s take a look at the chart with a longer timeframe (going back to Sept 2009).

– we can see that it gap up in Sept 2009.

– after which it never goes back to its high.

– at every turning point, it goes lower (forming a series of lower high).

– the last rally that we see fails to break through its previous high around 0.60 and face kumo resistance. It turn when it hits that.

– after which, it just tumbles down.