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In the article entitled Trade Setups Assistance: Are You Interested?, I introduced how we assist our clients in constructing their trade setups in our forum.
The first stock that we discussed with our clients was LMG. That was last April 19 after it registered a 21.59% increase in its share price.
Some newbie traders are prone to thinking that top gainers will continue to ascend and top losers will continue to descend. That’s not always the case. That’s why we thought that tackling one or two daily top gainers and losers in the Trade Setups section would be helpful for our members so they can see how we analyze.
The Trade Setups section of our forum is like an interactive workshop. Understand that we do not give stock recommendations. Demonstrating to our clients how we assess things based on our own financial goals, investment horizon, and risk tolerance is a lot better than spoonfeeding them with a ready-made table of stock recommendations.
What makes it better?
Once you’ve learned our discipline, methods, styles, and psychology, you’ll be able to pick some ideas and mix it with your own methods. Then, you’ll be able to develop confidence in your investment decisions.
Our purpose is to make sure that you are disciplined with your stock investment decisions, organized with your trade and investment setups, and knowledgeable with why you do what you do and how you do it.
Here is what I published last April 19, 2017, at 7:15 PM.
LMG is today’s top gainer with the highest total turnover value. I know some of you can’t help but ask, “Will it continue to ascend tomorrow?”
My practical answer: I don’t know.
But let me share with you what I know.
LMG’s strongest price points with volume today were 6, 5.97, 5.90, and 5.40. Take a look at LMG’s price-volume distribution table below. The longer the bar, the bigger volume was transacted at that price. That should give you a clue were the strongest actions took place today. As an additional information, I do not see significant cross-trades at 6.00 and 5.97.
What could have triggered LMG’s 21.59% price surge?
It could be this:
This disclosure was released on April 19, 2017, at 2:05 PM.
If you were watching LMG on its 1-minute intraday chart, you knew that it was moving sideways in the first half of trading. Price surge and volume happened after recess. Of course, some insiders had an idea about that disclosure already even before its release.
If you’re going to assess this company from the fundamental analysis’ standpoint, you’ll be disappointed. It registered a negative income for the entire 2015 as well as a negative 3Q2016 net income.
I want you to realize that 9 out of 10 top players of LMG for April MTD were able to secure a good position between 5.20 and 5.50. Venture Sec had the guts to register a Buy Average of 5.94 for April MTD. Some of them have locked in some profits between 5.70 and 5.87. You can see these numbers from the Top 10 Players chart below.
Foreign investors took advantage of today’s rebound to sell. However, I would say that foreign fundies’ participation on this stock is insignificant for me due to the size of their holdings. See the Foreign Fund Flow chart below.
Based on our proprietary Risk Level calculator, LMG is not for the faint of heart. It printed an Extremely High risk level. See the chart below.
Are you going to buy on price and volume breakout? Are you going to take the risk and buy at the opening price just because MACD crossed the signal line and the price broke above the 10SMA?
Realize that LMG has just crossed the previous resistance at 5.86. If today’s bullish sentiment won’t be sustained tomorrow, especially in the first half of trading, profit-taking could take place.
Plotting my Down Fibonacci, I see that today’s candle has touched the 50% retracement already. If you’ve been reading a lot about Fibonacci, you must have known by now that some traders believe that there’s a reversal sentiment when the price touches or breaches the 50% line (retracement or extension line).
As always, pretty please, calculate your reward-to-risk ratio. Don’t attack any stock without knowing the percentage of risk versus the reward that you’re vying for.
Here’s a sample reward-to-risk ratio calculation of someone who can stomach up to 10% risk.
“But Jaycee, I only see 6.20% risk on the image. I thought you said 10% risk.”
The fees (broker’s fees, tax, etc) from your buy and sell transactions could eat up to 3% of your trading capital. Yes, it’s so expensive to day-trade in the Philippine Stock Exchange.
Note that support is at 4.80 before 4.40.
Again, this post is NOT a recommendation to trade LMG. We’re just giving you facts so you can consider all these in your final decision.
Have a trailing stop-loss when you trade so you don’t get whipsawed.
You’ll find the real-time three-level support and resistance on LMG’s solo page. Click LMG from our Stock Ranking System. You’ll be redirected to the stock’s solo page.
Consider these real-time support and resistance levels when you’re identifying your entry price and target selling price.
Now, here’s where LMG is as of Friday closing.
Apparently, what happened matched what I said in the Trade Setups section of our forum.
“Plotting my Down Fibonacci, I see that today’s candle has touched the 50% retracement already. If you’ve been reading a lot about Fibonacci, you must have known by now that some traders believe that there’s a reversal sentiment when the price touches or breaches the 50% line (retracement or extension line).”
To wrap this up, we let you get inside our brains in the Trade Setups section of the forum. We do not pollute or influence your decisions prematurely. We just lay down the facts.
You are a rational being. We encourage, let, and motivate you to exercise that in the Stock Signals Philippines.