25 Oct 2016

Over the long term, Golden Agri-Resources has been sliding lower persistently within a clear downtrend channel since Apr 2012.

On six occasions over the past 4.5 years, the stock price has always reversed bearishly whenever it came to this key downtrend resistance.

However, there was a breakthrough today.

Golden Agri-Resources has finally overcome this key downtrend resistance line by the market close.

This bullish break was also on the back of a significant surge of trading volume.

Could Golden Agri-Resources be poised to see a further medium to long term recovery from here?

The stock chart that is illustrated below and in the following video is powered by Traderwave stock charting web application.

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Golden Agri-Resources Heading For Upper Channel Boundary?

 

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On a medium term time frame, Golden Agri-Resources has been trending higher gradually over the past one year.

A very clear uptrend channel has been established during this period.

Following today’s bullish break, it seems that there is a good chance that Golden Agri-Resources could now see further recovery from current level towards the upper channel boundary (also key support-turned-resistance level) at around $0.50.

 

Swing Trading Strategy (Medium Term)

If you are a swing trader, you could be looking at riding the current upside momentum to the next key resistance of $0.50 in the weeks to months ahead.

A technical stop loss level of $0.36 should be conservative enough to ensure that any minor pullback from here wouldn’t trigger this stop loss order.

Assuming if you manage to get in at the last closing price of $0.40, you will be looking at a potential risk-reward ratio of 1:2.5.

Is this trade worth taking? The call is yours to make.

Potential Target Level: $0.50

Entry Level: $0.40

Stop Loss Level: $0.36

 

Position Trading Strategy (Long Term)

If you are a long term investor who believe in the long term prospects of Golden Agri-Resources, then this might be the best time to start buying up this stock.

With its key downtrend resistance taken out now, this could best time to start accumulating this stock if you believe in its fundamentals.

However, do note that the fundamentals of Golden Agri-Resources is not within the scope of my discussion today.

Still it is important to pre-determine your technical stop loss level even if you are a long term investor.

Otherwise, you cannot size your investment properly!

A fairly conservative technical stop loss level for an investor should be somewhere below its current 1-year uptrend support line at around $0.33.

 

If You Prefer To Watch The Video Analysis:

 

 

The stock chart that is illustrated in the above blog post and youtube video is powered by Traderwave stock charting web application.

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Click here to experience the Live Demo of the most intuitive web-based charting tool now

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No signup, no login, no downloads required.

In Conclusion

More importantly, you should use this trading idea to understand the psychology of the market rather than using this as a chance to punt.

You might not trade in the Singapore stock market or you might have no interest in Golden Agri-Resources.

But the rationale from which this trading idea came about, can be detected in any other markets or any other stocks.

Learning how to be a better trader is really trying to look at enough scenarios that suggests an potential edge to trade from.

Also, trading is about probability and not about certainty.

The best looking trading idea can fail and the worse looking idea can work.

What is most important, is that you must always have an idea how you plan to take a small loss when a high probability trade don’t work out and how to maximize your returns when a trade do work.

That is where the discipline to decide a stop loss before you enter a trade and the discipline to size your trade correctly comes into the picture.

These are topics for another post. Watch out for them in time to come.

 

Disclaimer and Disclosure

This is neither a recommendation to purchase or sell any of the shares, securities or other instruments mentioned in this document or referred to; nor can this course material and/or document be treated as professional advice to buy, sell or take a position in any shares, securities or other instruments. The information contained herein is based on the study and research of the Traderwave Pte Ltd (“the Authors”); and are merely the written opinions and ideas of the Authors, and is as such strictly for educational purposes and/or for study or research only. This information should not and cannot be construed as or relied on and (for all intents and purposes) does not constitute financial, investment or any other form of advice. Any investment involves the taking of substantial risks, including (but not limited to) complete loss of capital. Every investor has different strategies, risk tolerances and time frames. You are advised to perform your own independent checks, research or study; and you should contact a licensed professional before making any investment decisions. The Authors make it unequivocally clear that there are no warranties, express or implied, as to the accuracy, completeness, or results obtained from any statement, information and/or data set forth herein. The Authors, its related and affiliate companies and/or their directors, executives and employees shall in no event be held liable to any party for any direct, indirect, punitive, special, incidental, or consequential damages arising directly or indirectly from the use of any of this material. The Authors also do not have any ownership or positions in the above mentioned shares, securities or other instruments.

Philip Teo

Founder & CEO at Traderwave Pte Ltd
Philip Teo is an entrepreneur, speaker and trading coach who specialises in the field of Technical Analysis of the financial markets. He is currently the Founder and CEO of Traderwave Pte Ltd, a financial technology company that offers a web charting application to global traders. He has conducted many trading seminars and appeared on national television before. He is also currently an official speaker and trainer with SGX Academy. Learn more about him at his Google+ Profile, LinkedIn Profile and Facebook Profile
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