The Gold Sector

This coming Monday, 19 December will be the safest day to decide whether to take a long or short position in the gold sector. After the announcement of rate hike this December 14, we will see the market's response whether it is true that rate hike is bad for gold or not.

Not a few contrarian analysts claim that rate hike in an environment of depressed price for gold is good for the sector. They cite the last time the Fed increased rate in December 2015, which they claim became the mother of the gold bull that ran from January to July 2016. However, I could not avoid to think that with the increased rate, the Bank of Japan (BOJ) turned to negative rate, which probably is the real source of the change in the trend of the gold market. If BOJ will repeat such action, my doubt that this coming rate hike will be followed by a renewed run in the gold market will be removed.

As for technicals, yesterday XAUUSD registered a low of $1151.24 per ounce of gold. I see this as the end of the final corrective wave. However, as far as technical analysis is concern, we don't know yet either gold will resume its downtrend or will reverse its direction. If the downtrend is resumed, I have no doubts in mind that the $1000 support will be broken. On the other hand, if the trend reverses, it is better to simply sit down and wait as your "seed" grows until the end of the series of uptrend waves. I am more inclined to believe this latter direction considering that a Shariah law that will certainly affect the gold market will be publicly announced this 29th of December. However, since the manipulation of  western central banks is very strong in the gold market, we really don't know for sure what direction gold will take.

XAUUSD/DXY

Wave C-4 is complete. XAUUSD is now forming Wave C-5. Will the low today @ 1151.24 USD per ounce the final bottom? Or will the rate hike two to three days from now push gold further down?

As for $DXY, there are two more waves to go. Currently, if the 101.78 high will no longer be broken, then we already saw the end of Wave 5-3 of the USD index. After this, $DXY has one more rally left before the rate hike. Once Wave 5 is completed, normally it is followed by a 3-wave retracement. We expect that such retracement will be good both for gold and the $PSE. However, we just don't know the extent how price manipulation can distort this kind of price action.

The Current Status of My Journey

I started as a "funnymentalist". I encountered this term from traders who are dissapointed with the conventional way of trading stocks. I bought and sold shares of company stocks based on news, company disclosures, and brokers' analyses. Result? After a year of trading, my 200k capital became 102k, a 49% loss. They say it's part of learning and that's the tuition fee you have to pay. Being a scholar in most part of my student's life, I find such payment very expensive. And if that is really a tuition fee, how about those traders who have been in the stock market for decades and yet seems to have learned nothing and still paying such expensive fee?

I refuse to accept my loss as tuition fee. It was simply a loss for believing what the "experts" say. And so I decided to stop listening to the experts' "noise" and started my own journey in studying technical analysis. After almost a year of trading using simple indicators such as moving averages and fibonacci retracement matched with the channels I made, I regained my loss. Year to date, my port is now up 61.76%.

Now that I am still testing my recent learning about Elliott Wave Theory (EWT) - A big thanks to that mythical fanatic of EWT I stumbled in investagrams.com! - I am expecting to have more profitable trades in the next six months. I am now integrating my previous knowledge about technical analysis with the EWT.

June 2017 will be the submission of my next report card...

$ALT/$CAL

It seems to me that instead of 2.50, 2.35 is the end of Wave C. $ALT now has completed Wave 1 @ 2.89. Ideally, $ALT should move higher than the 2.90 high of Wave 1-3. However, if 2.89 is what the price movement tells us, we will accept it as such. What follows is a 3-wave retracement forming Wave 2. I expect it to be flat. I will be exiting @ Wave 3 high for I anticipate that the retracement will be stiff. Those who have strong stomach can simply sit down until the end of Wave 5.

As for $CAL, it appears to me that no clear low has been established yet and the 8 coming waves will show traders what decision to take.

$CAL now is in the last stage of Wave A @ 2.75. A 3-wave pull back will follow to establish that final bottom in preparation for the rally. I see at least 3 prices as candidates for final low: 2.60, 2.30 and 1.50 is the worst case scenario.

After the bottom has been established, I am expecting a bounce towards Wave C formation. Once Wave C is complete, that is the time to observe closely the movement of the stock. If it will resume its downtrend, that's the time to say "goodbye". But if $CAL will reverse its trend, that's the time to take a long position.

Note:

I just kept this analysis to myself for the past 2 days for I am still testing my knowledge of EWT. However, it is encouraging to see the relative accuracy of EWT analysis with what happened to $DD and also with what's happening to both $ALT and $CAL. This analysis is in no way a recommendation to buy these two stocks. 

Weekend Stocks' Analysis

1. $ALT - Operators failed to push the price down to their target level with huge volume. It opened @ 2.40 but buyers pushed the price up and closed @ 2.48. Having a morning star looks positive to me considering the negative press release yesterday. This candlestick could be a reversal sign. Though the volume is not as impressive as in typical reversals, it is actually double the size of the volumes during the five previous trading sessions. I think today's volume shows that majority of buyers are still cautious.

The stock closed with an encouraging bid of 91ksh @ 2.48. The 604ksh in the ask side appears to me more of a psychological wall to intimidate holders/buyers. Orders like this aim only @ one thing, to depress the price only to buy back later @ the floor.

Trading decision: simply sit down.

2. $CAL - It appears that the stock is bullish. However, based on the historical behavior of this stock, it could have one more run before it corrects.

Trading decision: wait for next entry.

3. $ APX - Traders lost interest in this stock. $DXY is soaring and $XAUUSD is falling. Gold broke the 1200 support and touched 1170 as the new low.

Trading decision: avoid.

4. $PX - All internal indicators (OHLC+Ave+Vol+Value) are red. Price supporters (basec, bdo, angping, goldstar) stopped pushing the price up. Though MVP reports that weak Php is good for $PX, gold price remains the primary catalyst.

Buyers are simply waiting @ 8.14. Sellers are hesitant to sell and are looking for a higher price. Bid @ 8.14: 1Msh.

Trading decision: avoid not until $DXY corrects and $ XAUUSD breaks the 1200 resistance.

$ALT's Big Picture

For the past few weeks, I have been bashing $ALT due to its price action after lifting that 21 October suspension. However, reading an email about the importance of biotech sector, I got interested searching for biotech stocks in the PSE, and I found two: $ALT and $EURO.

After reading several news articles and company disclosures about $ALT, a big picture in my mind was formed about what's going on in the company. 

It all started with Mr. Navasero's dream of putting up the largest BPO in Asia for genomics. The challenge is for him to find a capital to fund Philab's business expansion. He's targeting a CAPEX of Php 2 to 3 B and included in that CAPEX is the plan to purchase the 20 hectares in UPLB and to create a healthcare mobile application. Once such capital is achieved, he is looking forward to a 4B revenue and he is expecting it to double into 8B the following year. In order to achieve this goal, he thought of backdoor listing Philab instead of taking the IPO road. 

Backdoor listing is a cost-effective way for a private company to go public in order to access the capital market. To do this, Mr. Navasero has to acquire an already publicly-listed company. In this case, he thought of $ALT as the way to go. And so last 12 August 2016, he purchased the 208,624,801 common shares of $ALT amounting to Php 362,324,961.21M or 1.74 per share.

Two months after, on 21 October 2016, $ALT obtained approval to acquire up to 361,390 shares of Philab or 100% of its issued and outstanding capital stock with a total price of Php 500M. Results of the transaction include the change in authorized capital stock of $ALT from 20M to 2B and the change in corporate name from Alterra Capital Partners Inc. to Philab Holdings Corp. Finally, on 16 November 2016, Mr. Navasero disposed 50M common shares @ 2.88 amounting to Php 144M.

Two questions come to mind:

One, why that buyer bought 50M common shares if the price of $ALT will continue to decline? I think that buyer contrary to the speculation of many traders that $ALT's price would drop to 1.74, was anticipating a higher price in the coming months and years.

Two, now that Mr. Navasero has disposed his 50M common shares of $ALT, what do you think is he going to do with that Php 144M cash in hand?

Remember 2008

One of the privileges in studying the Austrian school of economics is knowing how the business cycle works. Unfortunately, the mainstream media does not go beyond mere description of booms and busts. They just accept it as facts and an inherent nature in a "capitalist" society.

The two most recent examples of busts were the collapse of the 2000 dotcom bubble and the 2008 housing bubble. Those who have been trading and investing in the PSE for decades have a lot of experience to share how they survived those financial storms. As a PSE newcomer, the only thing I can do is to review the past.

If you were a long-term investor in 2008, I don't know how did you deal with a 58.27% loss in your capital in just 4 months, from September to December? In fact, entering PSE in January 2015, my original plan was to invest long-term. But after experiencing the huge drop in months of June and August, I changed my mind. 

I admire those who confidently say that they are not worried about busts and see them as buying opportunity. However, at the back of my mind, I am thinking that perhaps these people have no first-hand experience of market crash.

I have been warning people I know that the current market situation is ripe for a massive correction. However, since I am no market expert and have no finance-related credentials, my warning was just simply brushed off particularly by those who happened to be fortunate enough to start investing after the 2008 market crash. They thought that the "cyclical bull" that followed would extend beyond 2016.

Even as a newcomer, I could not avoid worrying about the potential financial loss of my friends investing long-term in PSE. I came up with a list of alarming events in global finance since 2008. Some of them are accelerating and others are coming soon in the next few years.

Here is the list: ZIRP, NIRP, war on cash, decreasing international reserves, SDR, rising USD, rising bond yields, European banking crisis, political promise of huge infra spending funded by fiscal stimulus, and global taxation using climate change as a convenient platform.

Determine if this list contains facts or simply fear-mongering. If these are facts and you combine them into one, what message do they tell you?