COL Trader Summit 2019 - Identifying Reversals with Edmund Lee

ladies and gentlemen let's give a warm sea oil trader summit welcome to mr. Edmund Li how many of you has ever catch a falling knife on a knife on a deeper 90 percent Oh Donna so I'd like to share this coat before I get into my presentation and if you go through history and you read all the wisest and all the best coats in all the world they all say the same thing okay wise men say and not without reason that whoever wishes to foresee the future must consult the past and so what's important is that if we're gonna be talking about reversals and catching falling knives we have to look at what has done before so and this is not something that I planned and I did not coordinate with anybody else okay so this is Samara down thirty percent fifty pesos from the high drops 30% to as low as thirty five pesos per share Buddha cash dividend six seven percent pause another thirty five percent from thirty five all the way to 35 buck twenty-five bucks per share amaura CHP from ten pesos 11 pesos in this area drops forty percent in two months two months forty percent ora was another from seven pesos to three pesos at the bottom Mora Mora so what do you call a stop that drops from 80% to 90% it means another 50% and so my point in this discussion okay is that catching falling knives is it really worth it okay and this is a million dollar question it's because if you notice about Chairman's presentation awhile ago all the money he made the hot crisis not the mantle is you see hey so now the question is is it right is it wrong the answer to all of that is that that's what we're going to be approaching this afternoon and so ladies and gentlemen there's only two ways that you can look at all these crises you can see it scared or you can see it as opportunity or you could just probably see it as nowhere to go okay so this is my point of my discussion ladies and gentlemen good afternoon I'm supposed to be talking about going against the herd so the question is is the herd always wrong and how we're gonna approach everything today is from an F TSR framework and my brother this morning already Illustrated that the FT SR which is F for fundamentals fee for technicals as for sentiment and R for risk management so there's always four parts in a story that we have to understand it's not just the technical portion it's not just the price and it's very common for all of us here to just focus on the price what happened everybody sees CHP go down 90 percent everybody see sure pass going down 90 percent everybody sees all these different stocks that have fallen 50 60 percent without truly truly identifying why most of these went down because I'll tell you even when these guys are dropping 70 80 90 percent sometimes sometimes I repeat these these are the parts where there's so much opportunity and so our job for this afternoon is basically trying to identify whether it's an opportunity or not and basically in this FPS our framework if you notice is that it's a weighing scale so you have sentiment in the middle and you have risk management in the middle and on the left side and on the right side you have fundamental analysis and technical analysis and the reason why there are weighing scale is because usually four different systems people have different priorities for reverse us pay for reversals what's more important is fundamental analysis let's be clear okay then technical analysis if you're trading and you're with the trend meaning everything going up okay long that's fine when you're trading reversals you're making the assumption that everybody else is wrong and that's a hard assumption okay because majority of the time stocks go down there is legitimate reason I repeat every time stocks are going down and it's something solely to the company there is legitimate reason as to why that company is going down and that's why fundamental analysis is so important when it comes to reversals what do I mean we see a lot of times everybody trying falling buying falling knives in speculative companies where there's nothing inside the question is that most of these companies deserve to go down in the first place and the answer is yes what animal M&A ambassador de basura market 100 pesos bull bond a 50 more than a bass or a diesel pursued operating it doesn't change the fact so that's why when you're understanding reversals I keep on telling people fundamental analysis is so important in identifying opportunity and so first and foremost we have sentiment and just to show you and illustrate to you guys what reversals and capitulation is all about is that this is the emotional cycle of investing and this chart if you see this it happens a lot of times whether it's in different asset classes such as Bitcoin in the property market in Nikkei in all your speculative issues this is a common chart you'll see over and over and over again okay what we're trying to assume if this is the if this is the market what we're trying to assume is that this part here these drops that happen one two three and plus this part here at the bottom okay we're trying to participate at what we call the left side of the emotional cycle of investing there's always the left side which is in this part the panic situations and we're trying to find a way to all get and maximize our return when these prices are dropping at the left side hey what do I mean by the left side why do we always have to look at the left side it means the reality of the situation is that there's nothing wrong with the company okay if we're looking at the right side here on this end the drops that you see here 1 2 3 4 this is the part we don't want hey we don't want to be participating in companies when there is a problem hey if the nature of the problem is not temporary meaning there's a fundamental problem to the company please by all means avoid reversals and avoid capitulation trading because I'll tell you for most cases it will go down even lower okay so I hope that's clear so we're looking for the ones at the left side again not the ones at the right side of the equation hey so why does it work because if you look at the last five times the stock market dropped in the last 10 years we've had a 20 plus percent drop five times in the last ten years so meaning every two years year and a half we've had significant drops in the stock market okay now if you're able to just step aside and find a way to enter when it's going down and there's nothing wrong with most of these issues then I tell you you could have saved so much money and you could have made also so much money in the stock market but the biggest question of all is that every time it drops are endued ah ah but I'm feeling more bah-bah-bah make world Pirani problema mega world bah-bah-bah aaand feeling more my problem ah and every time it drops you'll always question yourself but I did it this time it's different and those are the five most dangerous words in the stock market because if you notice the last four years every time it drops you go to Bloomberg you go to CNBC you go to all these different news channels and I tell you bear market territory in a tile every time stock markets are dropping 30 40 % well I'm a problem I am a bankrupt nah I'm city of dreams I'll go bankrupt now I'm CHP but go bankrupt now x:xx so on and so forth okay now tell you at the worst times well it could be right it could be wrong but what's more important is try to move that verify what most of these information is telling you at that point in time okay so some important points for reversals and capitulation number one we have to identify what our objectives are and basically from what I explained a while ago we're looking at stocks that are still at the left side and we talked about left side wallah problema they're still growing so we're trying to take advantage of extreme panic sell offs with an ongoing bullish primary trend that's the first and foremost basic objective we're not trying to catch bottoms on stocks that are problems that are at a bearish right we're looking for the ones that are still in a bullish primary trend and there are two assumptions we have to make first is that these these drops that are happening are primarily driven by market driven sell offs okay not fundamentals okay so for example if I Allah Lana's dropping and it's growing at fifteen percent per year but it's dropping because the entire market is also dropping that is fine oh hey longhand please do not participate in companies where it's going down but earnings continue to bleed especially in the short term people say fundamentals don't matter in the short term that is not true what will move prices in the short or the long is still fundamentals the only difference is in the short term it's the perception of fundamentals that is driving price in the short term okay so what's important is that when you see stocks that are dropping in the short term please learn the difference of market-driven sell-offs versus something that is driven by problems in the business okay and the second assumption okay where most of us made majority of our money okay is what we call turnarounds and this is also very hard to identify because the second assumption is if not a you can go to B F fundamentals are changing there is a turnaround happening in the business there's best examples probably today is like with SSI when an IPO the funny part about SSI hoping on the listener see us okay and that's been that long and when SSI IPO one of the biggest challenges in SSI was that they expanded so fast and they had huge amounts of inventory and the problem is when it comes to clothing Allah Louis so Pagnell ah Louis what do you do very good sale epic sale in Dena Banta la pagina Guam Oh extra sale buy to 90 percent of para Pauline dependent Amanda on me game when Ilan exactly right and they were growing so much that they had so much inventory that for the last six years they had to go through a store rationalization and that's why the price of SSI went from 13 to as low as 150 I believe and the last four years if it's been at this price but the last year something changed and the business now after closing down for the last four or five years for the first time last year SSI started to grow now that's the beauty about it it's because now you see something changing now that's the difficult part to spot okay so when you're treating reversals it's usually a driven by market the second one is where most of us made a lot of money is trying to identify these turnarounds which I'll talk more about later Hey and three is that stocks prices here your expectations will then revert back to their fair prices okay and that's the important part and I'll tell you see your financial and what April and the rest of the team has done the last year alone they've spotted SSI they gave you first gen they gave you mrs. G they gave you Maxis the question is bended in yuba that's the question okay so a lot of things turn around in the last not even the last year I probably say it last three months it's all there they wrote about it everything was there but the question is were you mentally prepared to see it that's the million dollar question because obviously if you saw it hopefully you wouldn't be attending this class anymore so our job here for this afternoon is trying to give you guys insight and how to take advantage when things are actually stabilizing okay clear so far clear good so just to give you guys an example this is a LaLanne so what we're looking for is prices dropping because it's driven by the market so I just wanted to show to you guys this is the PSE eye at the top and this is the drop that happened in 2015 this is aisle on this drop here sabina area look at the market market denial on market went either that also went down hey sorry this is Ayala lon this is the paci okay so PSC I went down I ll and also went down okay now the market started to rally Ayala lon nanana okay so when you're looking for drops and you're looking for sell offs the easiest one okay the easiest one is to look for sell offs driven by the market not driven by fundamentals okay so why why do these setups to happen in the first place right why bother okay because I'll tell you it's two things when people are looking at global and liquidation by foreign funds I will tell you fifty percent okay fifty to sixty percent of all movement and volume in the stock market are done by foreigners by foreign funds so you have to understand how foreigners also think okay so when you look at stocks and you're seeing sell-offs happening because it's largely driven by foreigners I'll tell you the foreigners will always sell at the bottom and will always buy at the top hey no matter what you say okay because these guys are handling ten twenty billion dollars of account and when they want to get out of a certain country they'll start to give you an order of a ten billion fine and they'll give an order ten million dollars some peanuts maintaining again at all at any price that's how they are because what's ten million dollars for a ten billion or 100 billion fine it's nothing right so when these guys give orders it's always orders to finish at any price and that's why when you see liquidation happening in the Philippines and you can look at this for all emerging markets in Indonesia and Vietnam when the foreigners sell samosa bilat yang hey indi Kazuma Suva Corina sushkova Salinas masuleh problema lon the pad seen a saloon in Suganya I'm just kidding that's kind of disgusting but uh my point is right when these guys are throwing up they'll always have a level of exaggeration and when that exaggeration has Bin's that becomes huge opportunity for us here in trading okay second is fundamentals or earnings intact for the next six months to one year and if you look at the stocks today that are rallying today like what one is show this morning he showed you the property was the strongest right and the weakest was mining and if you look at the fundamentals and what's happening on a corporate basis you should be able to identify the property sector is still growing the banking sector is still growing consumer sector is still growing but the mining is not okay so from that standpoint alone please if you're buying a laggard there's a reason why they are lagging okay so please if you look at the market and it's dropping by all means do not pick the ones that is weaker than the market okay and this goes for number three please avoid speculative issues okay we don't want to buy cheap in speculative issues if you're buying buying high and selling higher in which we didn't last year for trader summit last year for momentum trading that is fine that's the type of strategy you should be doing but if you're buying companies okay that have nothing inside and it's becoming cheaper and cheaper I will tell you it will never stop becoming cheaper hey so La Nina Lala Abby got ma Romney Alimentum Latin fundamental analysis the door my point is what you're numb punching in the fastest way is just to buy an index fine okay so what I'm trying to point out is that I'll give you guys identify identification to understand the panic selling and in the reversal and then if you don't know what stock you want to be buying it's harder for you to pick and choose the fastest way for you to participate it's just to buy an index fund when it's about to reverse okay clear so there are many index funds there's three I believe if I'm not mistaken it or there's four index funds I'm not allowed to recommend so pick and choose which one of those four differences should be minimum hey so what we're gonna do now is to give you guys a checklist for fundamental analysis and here we go there are three things you always have to ask when it comes to looking at companies first is what is the market pricing in second is where's the miss pricing and three is how will the market see what you see if you can answer all three questions all the time I will tell you you will become like Benjamin Graham and Warren Buffett long term investing in rich over time which is correct okay now to break down those three questions to understand what is miss price the first thing that you have to do is to understand what is the business reality okay now this portion about business reality is understanding again financials understanding the company understanding what it does what its product well it's competitive advantage to is what is the market now pricing in okay now this is what's happening to the company it's making so much money charlie be every year and out so many people flock to Jollibee Jollibee is always full weather we're in a bad market or not it's always going at ten fifteen percent per year because it's not just growing domestically it's growing internationally all over the world the next question is does the market know it you guys eat I did Alan banana tantowel more than done jalebi oh that's why if you look at the valuations it's always expensive Bobby laggy hold anjali be sassy you l or every year every year oh my god that's probably the only company if you look at C ul and look at not just you if it's all brokers it's the most expensive company but every year Charlie B just continues to go up every single year right so people like it market also likes it so thing is how do we make money it's hard that's why old okay so the thing is if you can go through these three questions all the time Hey sure press lost 800 million what is the market pricing in bankruptcy Tama bind a baka get server right if you can just do this process all the time max is chicken reversing business is changing people are now going back in and it's showing because 30 percent growth market pricing in one third the price of Jollibee Mura up with a mukbang go okay so that's actually like what i say it's easier said than done right obviously because I'm very familiar with most of these issues okay but for majority of you if you can go through this process of understanding these three questions all the time okay and your ability to find this disparity you will make a lot of money okay and this is not what I'm trying to point out here is that this question here what does the market think about that company a lot of times you will always get ahead meaning you'll see stuff before everybody else sees it example first gen Mura I own a lahat so it takes time for everybody else in the market to see what you see that's why you need to understand charts and you need to understand technical analysis to find out when the market is about to see what you are seeing but if you're not able to identify where the opportunity will come first if there is a disparity right you'll not be able to mentally press that button and execute it and buy that stock okay so some key points here about understanding I know you don't like fundamentals but I'll just explain it okay when we're looking at sales and we're looking at growth in the business there's always two things sales growing or in sales slowing down and sales is a function of two parts price and volume so if you're looking at business don't just look at whether sales are going up that's not the point you always have to look at the function is prices going up or is it driven by higher volumes and by all means for most good businesses you want a healthy combination of both okay you don't want to be buying a business where sales is not growing so if less people are shopping and SSI please do not touch SSI okay second is about competition remember when you look at sales it's always two parts if people are eating less in Shakey's in max's where are other where are they actually eating more that's what we want to know okay so if you look at all three companies from Jollibee to Shakey's to Max chicken which of the three are actually still growing in terms of sales okay and you have to do this function by trying to understand not just yourself or that company but understand where the sales of everybody else is also growing of competition oops hey second part is about margins okay so people ask me what's more important sales or how much you're making I always tell people it's my margins I don't want to do a business where I'm going to sell a product nah tal oh what's the point why am I gonna build a business to sell a product when my cost to produce it is more expensive than my selling prices that's ridiculous okay so please remember when you're understanding any single company try to identify where that margins is going to be coming from okay so some parts about understanding whether cost is going up so one of the biggest themes last year was that we had a huge sell-off because of inflation where all the cost of all goods sold went up last year whether it's vegetable whether it's rice whether it's sugar or even oil last year and just by understanding where input cost is going up you'll actually have an idea which industry should be affected the most so sugar sugar prices going up because of excise tax because of lack of supply so what industries will be affected carbonated drinks coffee three in one right so on and so forth and if you understand that and you look at oil perfect example which industries will be affected by all the most right you'll have an idea what's going to happen to majority of the margins and profits of all these companies okay because there are two parts about here about profits about margins it's controllable and uncontrollable most companies most companies have their cost that is controllable the things that are uncontrollable are usually the big factors whether it's oil and and usually input costs driven by global scenarios not by local and some other things to consider about the reality of the situation is regulatory and capital raising exercises I just had to put it here because how would I put it the political uncertainty okay has been positive for some in some companies and has been negative for some other companies as also okay so you have to understand what's happening whether it's government contract like our water today excise taxes because it would happen with train or something that is external whether it's happening in a different country or not okay now in the second part is about capital raising exercises usually companies that are raising capital plan to raise capital in the short term usually have some form of overhang okay but that overhang normally normally tends to be positive okay if your capital raising for a development of certain PP&E usually it's a positive sign okay but normally what happens in the short term there is an overhang of shares because there's some people who don't want to come out with money anymore a case in point with CHP now understanding that business reality the second part about understanding stocks is what the market also thinks of it so there are other parts whether understanding valuations p/e price the book and it's not just understanding historical but also understanding what the industry is also so if you're looking at companies whether it's retailer or it's a grocery or it's a restaurant please don't just understand what that company is trading and also look for comparisons in differ in its own sector okay and second part about expectations if you want have a better view is understanding earnings result whether it's growing or not and versus what Co L and other brokers have estimates on and last but not the least fair value should be used at least to just give you an idea what most brokerages are pricing in okay Maura Metallica and I'll I'm into lat the answer is yes unfortunately hey so I could took this list and basically what I'll do is just do you guys a favor okay these are the highest Co all traded companies Metrobank MPI Ally now is M corporation CHP video jolly BAC and Meg I'll skip the last four because video is doing well jolly B is doing well Ayala despite what happened should still do well and last mega road is all new high also so we'll talk about the first six and the first six I guess the best and I looked at it is all difficult for me to question okay so let's start first with metro BAM everybody's favorite Bank I don't know okay metro bank lending growth still growing lending still growing positive but it's lower compared to all its peers funding cost is growing but nonetheless is still improving year on year okay so what happened recently was that there is higher provisions due to the fraud incident in fiscal year 17 and with Han Xin plus the share rates offering a service offering plus the MSCI increase in waiting so what's happening today is that now you have an overhang because there's so much foreign funds that entered because of the MSCI which now are still liquidating today Hey so that's what's happening on the reality of the situation what is the market thing obviously it's cheap buying co le but Green Book value more and more ah okay so the next question is if it's cheap and it's still doing well and we think that there's gonna be an RoR card reserve requirement ratio card plus there's so much liquidity in the market right now what's stopping it from gonna be going up in the short term and I'm still waiting for that as well okay so my point is okay everything is positive but the perception is still negative in the short-term okay so at least if you understand that portion when a proper opportunity comes then we can find a way to participate in metrobank okay so this is just the chart of the price the book for the last ten years if you notice here today it's trading and one times price the book if you look at 2009 2009 it's trading at the same valuation so what my point is is that Metrobank is already trading at recessionary levels since 2009 okay so is it cheap it's been cheap for too long okay second everybody's favorite I don't know why everybody likes M's okay second Metro Pacific MPI okay so what does MPI own four subsidiaries Meralco doing well obviously because if you look at the price of Meralco new high toll roads indirectly doing well then growing also hospitals growing also that's why they're planning to do an IPO fourth line is water okay and for the longest time the biggest challenge with me MPI everybody knows it's cheap everybody knows it's growing what's the problem that's the million-dollar question with MPI what's wrong with MPI okay the best answer I can give you is largely due to political uncertainty okay now the question is new administration will this change just to give you guys an insight Needham Milazzo MVP last administration so in the Pinoy period when you talk to them they're waiting but Apple staying term a Pinoy Mohammed caetna the funny part is look at nan MP I went from four pesos to 750 in 2016 and then when the new president came into play I a man a man and I don't know arbitration I put a mug buyer so all these political certainty is even more Manila water not too big but in Manila damn i din okay so what happens in these types of scenario okay what happens in these substances in our when you have that political overhang it's very difficult for people and other institutions to participate on so when they say there's any political uncertainty most institutions I own an LAN okay so please remember even though everything is growing maybe one day it might change but these were still keeping our positive end that there's still opportunity X if you look at it for for 40 very values 8 pesos per share ok so my point is we're just trying to look at what's positive what's negative but we'll find a way to find it we'll find a way to enter it later on I'm just showing you guys what's happening on the fundamental checklist first ok third I ll add nothing to talk about here in Ayala line doing well new high growing every year not just from the local but even from the Chinese here that are buying our property I'll skip this hey next da four five six now I assume CHP hey now you guys are in a trading summit so rule number one if you're a trader Patrol are on a detour obviously do if you're in a bitkha that means invest orga okay so the question is if you're gonna get stuck I repeat if you're gonna get stuck in companies such as this and you think that it's already cheap here at 250 I'll tell you this can go to 150 one peso $0.50 there's nothing there hey so I hope you guys are diversified enough and that you guys don't get stuck in these types of companies going forward hey if you pay your tuition fee congratulations it's always the most bitter to go through that experience by yourself okay so this is now this is M D poem wah ba-bah but do not think it cannot go down also and just to give you guys the biggest difference behind now in is M now it's 10 billion corporation oops oops crap sorry now it's a three and half billion corporation is M is a hundred and fifty six billion hey so just to put this into perspective to is M is equal to globe Hey so people are already pricing in a level for is M that one day they will already be the size of the and P LED going forward okay so I'm telling you guys these things now because if it doesn't pan out please pride is cheap and being wrong is a choice okay sorry if you're wrong or at managua that's fine but being wrong and staying wrong is a choice so please remember okay you have to know if you're trading these issues Hong Kong Sangala that's why risk manager this morning was one of the key topics it's because when we looked at the top ten number of stocks where our clients were stuck in I was surprised when I saw four or five and six being now is M and last but not least our favorite CHP okay the reason why I have to talk about CHP it's because of the three par on this time it's different para this time it's different okay so Sam X it's a ten billion corporation and for the first time for the first time first quarter earnings came out now CHP is growing first time okay out of all the three corporates CHP is the only one that's making money the problem is I got the Latin power hay market na maloom open e McCurdy's Kappa and Kappa dal hey to be honest if you ask me raising capital is actually a good sign okay because if it's raising capital to do something and do it well temporary that's always positive but always the market is taking it wrong because well I'm gonna get Akita a gracious cup an impaired a little oil nope I'm a and I understand why you don't public and the shareholders are already pissed off and I can understand why because everybody's been waiting for this to turn around and here you are still raising capital here at the bottom okay that's the negative side but we have to look at things two ways there's always positive there's always negative and like what chairman said we always have to keep an open mind okay so for the first time in first quarter released I believe one week ago for the first time it's actually growing they still had hiccups but with lower power costs with rising prices for the first time earnings of CHP started to pick up and hopefully in the second quarter which I'll explain later is confirmation okay good and if you look at this it's trading at six times evie to a beta and just to give you guys a perspective most cement industries are at ten to eleven evie to evide okay good every time okay so we're done with fundamentals now we're going to the more important part okay now you've done your checklist okay and you've tried to understand which companies are good which companies are bad okay some tips that will help you finding that checklist for fundamentals is that usually at the bottom most companies will go through a form of share buyback okay and that's usually a positive end at the bottom and not at the top so when stocks are going down you'll start to see a lot of companies for example SSI their shares max is buying back their shares the Gaisano family buying back their shares in mrs. G so on and so forth usually you Julia these are good signs that at least they're trying to support share price okay but at the very least please you have to combine not just what the insiders are doing but what price is also telling you because sometimes the insiders can be wrong hey not all buybacks are correct just because he's buying back sooner I got a problem and I do buy back Pasha okay so please identify whether but one's buying back there's a legitimate reason as to why those conglomerates and those insiders are buying back their shares okay so fast forward other side of the coin about technical analysis okay remember encounter trends okay today's topic is all about reversals encounter trends there is always two aspects first is the extreme fear or the capitulation this is where chairman made most of his money if you notice in his slide a while ago it's always in capitulation why it's because if you notice all of his examples when did they happen 1987 financial crisis 1999 sorry 1997 financial crisis 1987 2008 2009 sigh no line you are see so on and so forth so most cases when chairman was participating in these issues was when there was major a major crisis happening all over the world okay this is the first part about having capitulation oh crap sorry this is the first part about having capitulation primarily driven due to market fear that's the first part and normally we will not talk about too much about capitulation but you need to understand when compensation is happening and usually if you look at all your momentum indicators to look for exaggeration for us we use a DX if you don't know what a DX is you can google a DX to find out what the a DX means some people use RSI I don't think that will work because it's too short term so for us what we're looking for exaggerate in the market we use a DX and we're looking for stocks that are greater than 50 here 50 okay and if you use MACD also which will not be as helpful but it will just show you that MACD will just really way below zero okay that's the first part about any single drop in every single condition the first part is the extreme panic nd what we call capitulation second part is that after a cup of capitulates don't think I'll get done in a straight line so the reason why chairmen always sells is because after it capitulates McKenna McGraw lien mimic boob ain't happenin say oh okay and it's simple if everybody here is making money we don't have a problem we're looking for opportunities to make even more money and that's the idea of the stock market we're all here trying to make money the problem is if your stock is done 40 50 percent what's on your mind Sanna boom on away sada McGraw Alicante sanim a tabula rasa Tahoe and what happens is you're not in the stock market to make money in the stock market para Nikola metallo how ironic okay and that's the case for a lot of stocks that are going down and going down dropping 50 60 % they won't go up in a short in the long time that's why a lot of times after this capitulation happens normally this process of unwinding all that resistances that happened in between usually that's the rational portion and that's where reversals start to come in and that's where today's topic is all about okay so first part just to show you what capitulation looks like is that this drop here way below the 200-day EMA ADX above 50 you'll start to see panic selling start to come in so there are three things we look for a DX rising above 50 NOK be way below zero and if there's volume just for added value you'll see the heart to see volumes start to come in that means people are finishing their orders at any given price sometimes there's volume sometimes there's not but majority of the time there's always going to be a DX the and not be way below zero hey so for this irrational and excelling all the way down here hey this is actually just last year panic selling all the way down here if you look at ATX above 50 already ATX above 50 if you look at MACD it's way below zero and if you look at volume at the very bottom volume is at its highest yeah and this portion here I'm just trying to illustrate what capitulation looks like the reason why is because we're not seeing one anymore today why because the markets already rallying okay but my point is when you see it next time at least you know that it could most likely be an opportunity than for you to be scared okay next one this is LTG okay from 23 pesos ldg fell over 50% because of the excise tax that happening in tobacco okay but this time if you look at 80 X 80 X about 50 this is the time also when LTG was making record profits because even though excise tax went up everybody excise tax went up okay and the benefit about what happening with tobacco is that if it's more expensive and you have to choose behind cigarettes most people would pick Marlboro okay so what happen is a takes about 50 MACD way below zero and if you look at volume it's at record high okay so again if you're spotting irrational selling let MACD let your ADX tell you when it's something irrational but what I'm showing to you guys both companies are legitimate businesses there's something good happening with the company preferably what you don't want okay this is sure pass a DX above 50 you guys see it MACD way below zero a volume come on all ba right which is correct right there is a difference we what's happening with surpasses that there's a problem with the business okay so please there's very big difference even though they might look alike remember if it's capitulating and there's a valid reason why it's capitulating maybe the best thing to do is not do anything okay clear so again remember to pick and choose your battles not everything just because it's being panic sold is an opportunity okay not only one okay so most important part is today about reversals why it's because you're seeing a lot of reversals that are happening today in fact some of the stuff that I was supposed to write before they broke out two days ago I was finished my chart you had video you had a lot of second third liners and what's important again is to know again you're know the company and your fair values look for stocks that are stronger or at least the same as a market and this is the third part hey if you don't know what durations and consolidations are I suggest you listen to Lawrence's talk last year on position trading he shared about looking for coils and looking for durations looking for consolidations okay I will not go over that but ideally when you're picking bottoms after that first irrational selling what you want is for you to show signs of strength and for the next consolidation to happen why do consolidations happen after panic selling it's like what I told you guys a while ago because there's so much resistances that is happening and you need to unwind all those people who still want to throw up and think of it this way I always have this analogy but my analogy is always bad hey it's like you're always going to a club whether you go to a club or not that's different that's lisinga right lisinga sumo vara rocks Walker now technically o'hagan ahh bra lisinga Smoove are are technically awakener but sometimes so sobre la sing Moe Musa mopus Omaha próximos ooh la la laaa in allah allah miyan feeling indirectly that's what we're looking for in reversals because that's what's happening after that initial sell-off in that capitulation people who are still stuck are still trying to liquidate and we sell whatever shares that they have left pero Ilana Larnell Illumina bus that's your reversals okay so that's the part about what we're trying to understand we're looking for durations and consolidations after the panic and usually criteria that you'll see MACD is usually near zero prices are above or near the 200-day EMA and six months to one year of consolidation from the lowest point why did I say six months to a year and this goes back to what I explained a while ago usually we use six months because it's two quarters worth of earnings so again going back to CHP first time now grow the hot io2 dhaba a whole do topper interval so normally what majority of people are looking for is next quarter fotona well do the upper in another quarter okay it's the same thing with what happened to SSI first quarter of 2018 they were growing at ten fifteen percent do dhaba second quarter ten fifteen percent do the hopper in like that in a fourth quarter last year they grew 40% now Latin town not in the corona SSI forty percent okay but they've already told you at the start of the year last year that they were about to grow okay so in most cases companies need at least six months to a year of consolidation coming from the bottom and the reason why it's because most people are looking for confirmation on earnings yeah so again from the lowest point here this is the lowest point you're looking for at least six months to a year after I did this let me be clear I did this presentation on last week so when I submitted it nopal macchiato this is video okay so we're looking for six months from the bottom here so this is one two months three four five six months of consolidation from the bottom okay so we're looking for stocks that are near MACD this is your MACD near zero indicating that it's still undergoing some form of consolidation okay now the question is what's the fair value more about Mahalo okay people ask me it's our top choice in the bank if you're picking a bank and you're picking any stock in any sector I always tell people always choose the best company okay so prices near the 208 EMA and it's consolidating for the last especially here this last one two three four five months this is over six months though from the top to the bottom nineteen year zero so that's what we're looking for okay if you like the company and I'll show you guys an example later of companies that I don't like that look like this okay if you want to do it now you can take a look it's I am I I don't like it it was consolidating I thought there was an issue that's why we don't participate in all consolidations that's why you need to understand the company behind every single stock that you buy ok good another example this is everybody's almost year and a half in the making although I only have a one year chart of this this is our LC this company for over one year this is way way before this one has been going sideways for a long period of time this is more than eight months but from the one year chart it's eight months already okay so MACD if you look at it here zero breaking out of the 200-day and consolidating near the 200-day EMA hey so when you're looking for turnarounds and looking for companies and your charting and you look at every single company that you were participating in and you see a durations and you see consolidations that are happening what's important is to find out what's going to take it to the next level if there's a valid reason it's a great company they're continuing to grow they're changing their business and doing these that are positive then obviously these are chances for us to find a way to participate the reason why it stayed here for a long period of time it's because similar to what happened the CHP RLC also went through share rights offering I believe two years ago hey now this is MPI hey everybody's favorite Hospital hey one year from the bottom to near the 200-day EMA this is your 200-day ma hey MACD near zero consolidating also for the last four months pero boom bappa okay so my point is okay my point is please going back to this morning learn how to cut when you're wrong okay just because it went down doesn't mean it's a bad company maybe it's telling us it just needs more time that means one year is not enough it still needs more time okay clear okay so reversals is about two parts and the two entries first is your aggressive entry and second is your conservative entry and the second part about understanding every single stock that you're going to be doing before we do our exercise is that you always need to have a stoploss somebody asked me over the break I know my entry I'm buying at this price what's my stop-loss okay that means indicia trader that means investor Shah okay so today I'm trying to give you guys semblances of whatever says stop-loss and what how do we identify that price before we get stopped out and first it's about aggressive entry okay this is very common and the reason why it's because in reversals in reversals when you know what's happening to the company most cases you'd be buying before the breakout even happens okay this is ICT I don't think you guys can see it here it's very small so usually when we see consolidations what we're looking for is ranges quieting down at certain periods so if you're buying it here to buy it here these are very what we call aggressive entries Hey these are usually anticipation now the conservative part about buying is when it actually breaks out so consolidation buying actually at the breakout that's the reacting part so whenever remember whenever you're participating in any single reversal first identify where you want to be buying you want to be buying when it's quiet in aggressive or you want to be buying at least fotona when it breaks out okay nonetheless nonetheless if you're buying aggressive or buying conservative what's more important is that you know where your stop-loss is okay and when we're identifying stop losses it's always at the pattern low okay so if you this is your consolidation here and this is your duration that's happening here your aggressive is buying cheap conservative is buying when it breaks out your stop-loss is always at the pattern low hey clear so far very good so again this is first gen okay if you notice all the stocks that I'm showing you here today all happened in the last seven eight months okay if you look at the stock market today para and depo market if you look at the PSE eye today I will show you it looks like it's finishing its duration but even though it's finishing in duration in the last four months a lot of stocks have they already gone into new high right so my point is is that you have to be mentally prepared to know what to do in the next coming months so at least when it happens you don't get carried away again this is first in buying when it's quiet and you know that there's a durations already happening Magnezone ready near zero conservative is when it actually breaks out and when you're putting your stop-loss it's always at the pattern low hey if you want further clarifications what durations and consolidations look like please again go to see ul YouTube and look for Lawrence's talk on position trading last year it's more concise the reason why is this is longer because I had to talk about the fundamental side of things okay so the best part about all this is for us to do a workshop okay and you guys have a paper there and in fact the funny part about this is that said just broke down two days ago so this is perfect just to show you that I'm wrong okay so there's three stocks there one two and three for Cebu Pacific mega wide and mrs. G okay all I want you guys to do is first thing is identify where that duration is so I'll draw a line at the top to identify where the buying pattern is okay put a line at the bottom to identify where your stop-loss and that low of the pattern is okay and then answer your questions on the right side of that exercise you have questions about what your buying price is what your stop-loss price is how many shares you're buying and total amount which is if you have your var calculator that you have a while ago or if you want to do it manually you can easily do it hey I'll give you guys five minutes to do it kinda ba then we'll do it all together okay so this is the first chart I have here on the board and this is simple Pacific okay so when you're looking at any single company normally what happens first is this one so this is the what I talked about extreme panic situation okay so if you notice about extreme panic normally must gonna be extreme but it's this rally here if you notice about Chairman's presentation a while ago he takes advantage of this part here so that he'll get this bounce here cuz this bounce is over 25 percent already hey my point of this discussion is that after these selling panics have been normally matically on so even though it rally is here don't think that this is small this is a very big rally this is almost twenty percent okay usually they take so much time and effort that normally when they retest they see are very normal so what I'm sure to you guys in the reversal process normally you want to wait after ok so you want this to show signs of strength this rally here so at least when this consolidation happens if it's a good company then we can find a way to participate okay so normally when we're drawing something whenever you're drawing any single pattern and you don't know there are many patterns in technical analysis that you'll probably learn and go throughout you have wedges boxes triangles so and so forth a cloud or whatever my point is the fastest thing to identify is that assume assume everything is a box that's the fastest way to assume a consolidation so if you're drawing anything just get this box and assume everything is just a box hey so let me just draw my line here draw my line here and draw my line here okay it's a box now to get a better entry what we do is get this line if you can find a way to turn it instead of here to diagonal by trying to find a way to connect the points this is the ideal hey simple on keno Allah I just assumed everything is a box if I can find a way to connect it this is always the better way to do it okay and then if I drew my line especially in your chart it's supposed to be here but two days ago it broke down but that's life okay just so happens I picked the wrong stock at the wrong time okay clear so far so if you're buying it let's say assuming it's conservative you want to be buying it here around 86 you put your stop-loss here at 81 something if you're buying aggressive you could have bought it during these times at 82 but at least your stop-loss is very tight at least you should know where you're gonna be selling in the event that you were wrong okay so the question is what now does this mean Bob Barnett oh the answer is we don't know okay so what what's important is that whatever happens now well if you're out or not what should be important is that if this still goes down and starts to rally what's important is what happens next so this still quiets down after and you draw your line like what I did then we can find a way to participate in Cebu Pacific again next time hey so we just need to find out what's happening with Cebu Pacific why is going away and JG is continuously buying back their shares in Cebu Pacific is it cheap is it expensive why why is it going down because of oil prices is it something sustainable so on and so forth okay so there's a lot of positives and there's some negatives happening with Cebu Pacific to me I think it's still attractive but obviously the timing is more important than anything else okay clear any questions I won't solve the paper on the right if you have your var calculator it should be very easy to do Hey next is megabyte hey so after going down so long after going down so long it rallies and then enters very short this is easier so if you're drawing your lines very easy to do simply so after going up we're just looking for consolidations and it's quieting down that's all we're looking for so if you're buying here at conservative whether it's here at 1850 or buy it quiet somewhere around here it just depends on whether you're buying aggressive here or buying more conservative as it starts to break out okay clear so far on durations and on reversals so we're not trying to for this part this extreme panic normally it's always better to enter after the fact after it starts to rally and consolidates this is the most important part because if it's weak if there's a problem with the company when this rally is this if it's weak and there's a problem this will continue to go down make sense so what's important is that after this rallies what's important is to see what happens after that's my point that's why usually when we're participating in reversals it's usually after the fact we're not trying to catch this bottom because nobody knows if it's going to hold here and I can give you guys many examples so like PSP recently I'll show it later ok last but not least okay and I drew a chart there on the right side I drew my own consolidation I hope it looks nice hey so if you're participating and you like these companies at least you know when you're drawing your boxes it should be here okay if there's a way for you to align it better then obviously this would be more optimal okay so if you're buying aggressive you have your price here if you're buying conservative at the breakout it's here what's important is that you should always know what your stop-loss is okay so if you miss this at the capitulation it's fine what's important is that when these durations start to happen we should find a way for us to participate after okay and the reason why I'm sharing this to you guys today it's because in the last four months I'm dominum yari hey there's a lot of companies that are trying to break out and reversing okay but there's also a lot of companies that after it's it's our certain resistance it starts to go down those are the one you want to avoid okay so just to give you guys other examples breakout right starting to reverse but it starts to fall back below why what's happening with Toyota what's happening to the car sales it's still going down it's still not picking up okay so at least when you are trying to understand why it's going out at least it makes sense but there's a reason why these companies are I'm not saying GT cap is a bad company that's not my point okay what I'm saying is that usually companies that have problems in the short term if you look at the business there's a reason why most of these are still down and it takes time for these guys to unwind okay so other companies you have SEC me after rallying the resistance you have your durations now start to appear now if you like it like what's happening today it started to break out because hopefully we have an are cut soon if you ask me this is what our number one pick is in the bank sector so after this capitulation if you miss it that's fine what's important is what happens after in this reversal when it starts to quiet down there's no excuse for you guys not to participate in these stocks in the duration and consolidations that happen after this from this lowest point okay here so far and same thing with SSI after going up from the bottom if you know this this bottom two here it's almost eight nine months also this entire consolidation hey what's important is that after this rallies what's important is the consolidation that happens after it's not about catching bottoms it's what happens on the consolidation after that lowest point that's when we get to maximize and get to sit and ride as much as we can okay because if you're participating in capitulation you have to make the expectation that when it rallies it you have to sell us a Galaga we turn around companies just don't turn around in one go unless there's something event-driven and normally it takes so much time for companies to turn around and that's why when you're waiting for that time it takes for it to turn around usually that's the optimal time for us to enter during this period of reversal so you see this a lot today whether it's in all the different types of sectors that you'll come about reversals will be so common and the reason why because if I show you our paci after this bottom point it rallies people ask me this rally that's not important to me what's important is the duration after this rally hey so if I draw my box at least it should be able to identify it's your consolidation so the question is hey up sidebar that's the important question is this fundamental is there fundamental reason enough for this to be sustained okay if you ask me my answer is yes but obviously you have to keep your expectations in check and that's why if you notice about Juanes is talk this morning it's always about stock picking hey you have to be very selective about the type of companies that you are buying and that's why if you ask me about bliss buying anything across the board the answer is no you have to pick and choose which ones you like stock picking today and fundamental analysis has never been more important okay if you know that all the traders and you're trading your momentum stocks even though your market looks like this you'll probably see nine in fact the last momentum stock that we've probably seen in the market was PHA everything else was not even counted okay so when you're learning about all these companies I'll tell you fundamental analysis will play a huge role it's just a matter of understanding and pick and start picking and choosing which ones and the fastest horse will go higher okay so can we move back to my presentation right okay so okay just to wrap things up again yeah these are the three stocks this to wrap things up again okay capitulation is very important to understand don't get me wrong we made a lot of money in capitulation but you have to understand the circumstances when it comes to capitulation it's usually a form of extreme selling driven again by market sell-offs not fundamental driven sell offs okay if it's a fundamental driven seller meaning may problema in Campania please step aside if the company is turning around and business is turning around wait for the earnings to come in and participate in the reversal instead okay if you're participating again in capitulation please remember it's largely driven by the market okay because even if it goes up it will take a long before it actually reverses some signs of indication that maybe something might be positive you'll start to see buybacks come in just like to see participation by the insiders and the shareholders okay second reversals take a lot of time from the bottom to where it is today normally it's approximately at least six months because six months is at least two quarters worth of earnings and you need earnings to verify and ballot and verify all the problems that there's going back to growth there's still situation and so if you look back to see HP from ten to seven pesos earnings were declining seven to three pesos even at three earnings of CHP was still declining three to one fifty maple blame up but in but for the first time in this quarter now they're showing signs of growth now the question is is it true or not in is it sustainable or not because if it is then maybe we might see some changes happen to the overall cement sector itself okay so when you're looking at reversals make sure you understand the reason this is a fundamentally driven exercise the reason why it's because actually spotting the consolidation if we know this should be very easy and if you learn and you try to listen they'll come in different forms some might look at it as a darvis box a consolidation or duration they all mean the same if you want to draw your wedges whatever type of formation you see I'll tell you there are all boxes and all you have to do is just realign on a better buying point and make your life simple okay and third is always have a plan okay don't come into trading if you don't have a plan meaning you have to know where your stop-loss is where your entry is and where your exit will be okay don't come into trading and assume billing more long term not a lot okay you guys came in to treating and you got to make sure that every single thing that you do you have a plan I'll show you guys one last code before I end and it's by Confucius and the reason why it's because Confucius always talks about reflection and it's the noblest type of learning in fact that's what later on and data analytics will help you it's about understanding and doing your data if you've never done a journal before today is the perfect time for you to do it if you've never done a journal in the last 4050 years I'll tell you it's never too late you need to do a journal I've done a journal of every single trade I've done in the last nine years even chairman hasn't done a journal at least today I do journal arrange a chairman hey and a student a lot the example you think it's the first time longer the Surat nada nada Sabu and yeah okay second okay the most noblesse is about reflection the second type of learning okay is learning from other people's mistakes and that's the fastest imitation it's not is the easiest way for you to learn learning from other people the reason why is because don't go through what we went through anymore we reason why we explain our stories the reason why chairman had to share your stories about Ann score and everything so that you don't buy two board seats and become a shareholder of an score okay if you want to do it by yourself Hilario okay and the third one is about going through your own experience and it's the most bitterest okay like what Confucius said the reason why is because if you want to experience things on your own I will tell you good luck because you'll need it as much as you can because in the stock market you get through your own experience I will tell you it will be more painful going through it on your end instead of trying to learn from what we were able to share to you guys here today so I hope there is something you guys were able to learn we're going through a Q&A and that's it thanks guys all right all right thank you very much to Edmund Li another round of applause to our expert

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Length: 76min 0sec (4560 seconds)

Published: Wed May 08 2019