Ichimoku Kinkou Hyou (Itchy Mushrooms)

[iam802]

Updating thread with case study from China Environment.

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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.

[kennynah]

i may go Long now..

[lithium]

Any support at current level?

[kennynah]

i say i go Long...bcos of the 2 most recent candle bars shown on the chart 2 posts above... these are possible reversal candles.. but recognise that this is a short term trade, if i play it..

[iam802]

I will choose not to play it. Just side step and get out of the way.

I think we have seen quite a few cases in the Singapore Exchange...where things start to move even before you hear about it.

This could even be a pause before it goes down much further.

But, if this turns out to be a multi-bagger that can shoots all the way to $4 (for example), well you can always pick it up when it is $1, $2, $3...etc.

[Aspellian]

But, if this turns out to be a multi-bagger that can shoots all the way to $4 (for example), well you can always pick it up when it is $1, $2, $3...etc.

It is also possible that the counter will be suspended and totally freeze.... eg. Celestial, Ferrochina etc...

or it could be a multibagger... risk and reward.

[iam802]

Palm provide one of the best case study for Ichimoku as a trend trading tool.

If you have gotten the stock back in end 2008 or early 2009, you will have ride it to the top at around $17 from somewhere between $3 or $6.

Here’s one for the bearish trade. Do note that it is used for trend trading.



1. If we have went long back in 2009, the best time to get out is around Oct 23 or Oct 26 when the Tenkan sen cuts the Kijun sen to give a bearish cross.

2. The price also went down very fast with the kumo providing very little support.

3. Palm stage a rebound and tried to break through the kumo from Jan 4 to Jan 19.

4. There is a weak bullish cross around Jan 8 at $10.98 and if you tried to do a bullish trade it will ride you to the top at around $13.56 before it turns.

5. The key point to note here is how it hit the kumo and reverse; a very strong signal that there is no catalyst to push it forward.

6. For trend traders, a bearish Tenkan sen – Kijun sen cross will have been seen on Jan 29. In this case, we can see how with a weak trend, the trade will not be profitable if you wait till the bearish cross is confirmed.

7. A better way is to start taking profit when it dip below the Tenkan sen on Jan 22. Assuming an entry price of $11.04 on Jan 8, and an exit price of 12.50 on Jan 22, the profit will be around $1.46 per share.

8. Noticed how the price never went above the Tenkan sen after that? In fact, assuming we enter a short trade when the bearish cross is seen on Jan 29 at around $10.98 till now, Feb 24, … the closing price is $8.40. That represents a profit of $2.58 per share.



Note (Reminder) :

- No long entry if price is not above Tenkan sen (for short term trades)
- No long term entry if there is no confirmation from Tenkan sen and Kijun sen (long term trend trading)
- whether to take profit when price dip below Tenkan sen will depends on timeframe that one is trading in

[kennynah]

neat TA tool...thanks 802 for this free Itchi Mushroom lesson...

[iam802]

FUQI : Ichimoku Case Study

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FUQI just announced that it has accounting irregularities for the past few quarters and that sent the stock plummeting by more than 30%.

I miss the boat when FUQI breakout of the kumo resistance and did not partake in its rise from $6 to about $32.

Having said that, FUQI represents a very good case study for Ichimoku as it has went one round of bullish signal and bearish signal.

Let’s have a look at the Ichimoku chart.



1. FUQI makes it first move when it breakout of the kumo resistance back in April 30, 2009. On the day of the breakout, the price went as high as $5.94 and we will use the high as an entry (we assume that we get the worst possible price)

2. After which saw the rise of FUQI from $6 to $25 in September where there is a small cross but without much heavy selling. As such, during trading, we can decide to take a profit or leave it as it is.

3. The big sell signal appears somewhere in October, 2009 when it breakdown from the peak and closes the gap and along with it, we can see the Tenkan sen crossing down rather aggressively (look at slope of Tenkan sen) and the Kijun sen is flattening which suggest the trend may be coming to an end.

4. From then on, there isn’t much strong buy signal. But a very strong sell signal appear during November, 2009. A one day reversal is noted right after its earnings results. Despite beating market estimate, there is a huge sell down on high volume. That, in my opinion is probably the last ’safe’ day to get out.

[millionairemind]

Thanks 802.

So (some) CHINESE companies are an equal opportunity fraudsters..... be it on SGX or on Nasdaq