Saturday, February 11, 2012

Lesson on Price Action

It doesn't come everyday that prices are so telling that it wants to tell us a story behind the stock.

I have pulled out an example of a recent spike in price of CapitaMallsAsia. If we trace it back to 7 Feb, we notice that the stock first staged a breakout above a major resistance level. Bullish. Then on 8 Feb, a huge white candlestick appeared together with a newer high in day volume. Bullish.
The candlestick on 8 Feb was duly supported by news from Kim Eng that states CapitaMalls Asia as buy with a target price of $1.92. Then guess what? On 10 Feb after market close, CapitaMalls Asia announced a 8.1% increase in FY 2011 PATMI.

Screenshot obtained from Capitamalls Asia website.

Prices ARE telling.

If you believe in what prices are trying to say, you can make money. Of course, we do not need to go into additional details such as short term volatility and variance in price movements due to irrational investors given the stock price did take a breather on 9 and 10 Feb, presumably due to profit taking and the Greek issues respectively. But just look at how price actions paint a good enough picture for us home traders/investors without having to go through financial statements, analysis economic risks, etc etc to arrive at a healthy decision that Capitamalls Asia is doing well and it will continue to do well.


Anonymous said...

Hi, I enjoy reading your analysis. Could you let me know what tools you use to detect breakouts like these? Do you use metastock or something else? Thanks.

healthytrader said...

Hi there, I mainly use the ChartNexus software as obtainable for free from Of course, for additional data and features, one will ahve to pay to obtain them but at an affordable rate. Where not possible, I will turn to iOCBC charting since it is my brokerage platform.
Thanks and happy reading :)

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