Sunday, 29 July 2012

Singapore Stock Tip: My 2 cents worth view on Wilmar

Question: Should I short Wilmar next week?


It goes down to a low of $3.21 before closing at $3.28 on Friday. A couple of days back, it broke down from trendline support of $3.50


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Dear Friends,

I am asked to give my view on Wilmar, which has been banged upside down on Friday and in recent times. Though I have not paid much attention to this stock, but after I have done a bit of homework, would like to offer some suggestions. (Please do your homework too!)

Answer:

Shorting is probably ok only if it breaks $3.17. Currently $3.20 is a support. Why I said so? Based on my founded theory "Law of Gravity of Price" (a specific set of figure), there is a support resistance price at $3.20. And on Friday it reached that point, $3.21 to be exact, and rebounded.


If you wanted to short, probably a few days ago after breaking down off $3.50 was a good point, but now not so. Unless it reach $3.17. You may be surprised why I am so precise about this figure, well it is a theory based on "Law of Gravity of price".

Recently, I have heard a lot of negative news and sentiment about this stock that I feel uncomfortable about shorting. Even the retailers are calling to short... Maybank downgraded this stock is to me, a signal of hope that for its earnings this time round 2-3 weeks away, Wilmar might beat expectation. Companies often beat earnings when expectations of it is low, and after successive misses. But of course, we have to wait till earnings to know if it is bad.

Do take note that for Wilmar's past earnings, this stock gaps down bcos analysts' expectation is high. 

For next week, if you see if go up past $3.33, take note of the speed also. If it goes past $3.33 fast, it might mean people covering their shorting position, a rebound may be in sight.

Rgds
Daniel
www.danielloh.com


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