Technical Analysis
Megaworld Corporation (MEG) ended the first half of trading on July 31, 2019, Wednesday, at 6.15 per share, down by 2.38 percent. MEG is down by 1.60 percent WTD, up by 0.82 percent MTD, and up by 29.47 percent YTD.
As of 12 noon, foreign investors registered a Net Foreign Selling worth P5.6 million. Nonetheless, foreign investors are net buyers YTD.
MEG is at the brink of breaking below the support at 6.15. Historical resistance is near 6.50. If it breaks below 6.15, the next support level is near 5.85.
If it breaks above 6.50, I’m looking at 7.30, 7.60, and 7.90 as its next resistance levels, which are in confluence with the 38.2 percent, 50 percent, and 61.8 percent extensions of the Up Fibonacci, respectively.
Even if the three simple moving averages of MEG (10, 50, 200) are in a perfect bullish position, the last candlestick is already moving below the 10SMA. My 10SMACD combo was invalidated last July 25, 2019. That’s the first signal we have to look for if we’re trying to spot a buy signal.
Those who attended my The Evergreen Strategy in Trading the Philippine Stock Market seminar understand why and when we should watch out for the validation and invalidation of the 10SMACD combo.
RSI is in the neutral zone but it’s downward-sloping already.
The risk level of MEG is low due to its historical volatility of 30 percent. However, know that having a risk level is not a signal to buy the stock. There are many stocks with a low risk level that are still in a downtrend.
The purpose of knowing the risk level of a stock, through its historical volatility, is to align the risk level of the stock with your risk appetite. For beginners, I suggest that you pick stocks with a low to moderate risk levels. These are the stocks with a historical volatility of 1 to 70 percent. Don’t search for a reference on this idea on Google because I’m the author of this Risk Level indicator through the use of historical volatility. Let me just reserve further explanation in my The Evergreen Strategy in Trading the Philippine Stock Market seminar.
The +DMi is still hovering the -DMI. ADX is above 25 points. By classical definition, this means MEG has a strong upward momentum. However, I do not have the confidence to agree with that classical interpretation because of my invalidated 10SMACD combo.
Also, my Momentum Power Indicator, which consists of 4 criteria, is bearish. That adds up to my lack of confidence in following the classical interpretation of the combination of DMI and ADX.
Don’t look for a reference on Google for Momentum Power Indicator because I’m also the author of that methodology. If you attended my The Evergreen Strategy in Trading the Philippine Stock Market seminar, please brush up on what we talked about by reviewing the updated handouts I sent you this week.
Trade-Volume Distribution
Last Price: 6.15
VWAP: 6.158259244
Most Traded: 6.17 – 6.14
Most Voluminous: 6.18 – 6.14
The dominant range is parked closer to the intraday low than the intraday high. This confirms the intraday bearish price action. The dominant range is between 6.13 and 6.20.
True Market Sentiment
True Market Sentiment of MEG as of Jul-31-2019 at 12:00PM, with a last price of 6.1500.
6 of the top 10 brokers registered a positive Net Amount
5 of the top 10 brokers registered a higher Buying Average than Selling Average
True Market Sentiment: BULLISH
Top 10 Players’ Buying Average: 6.1566
Top 10 Players’ Selling Average: 6.1645
Bonus Info:
13 out of 32 participants or 40.63% of all participants registered a 100% BUYING activity
8 out of 32 participants or 25.00% of all participants registered a 100% SELLING activity
Some deep-pocketed investors bought the dips of MEG this morning. Does it mean you should mirror what they exactly do? No, unless you have at least half a billion in your pocket. These institutional and foreign brokers can afford to buy the dips just because they can. Besides, “buying the support level” is also one of their favorite strategies simply because they can afford to do so.
Then, what’s the essence of me showing you what the top 10 brokers did or have been doing if the purpose is not to imitate what they do?
Okay, I’ll give you one rationale.
If my 10SMACD combo is valid, if my Momentum Power Indicator is bullish, and if my trailing stop loss has not been yet, I’ll have the confidence to continue my plan to top up if the True Market Sentiment is bullish.
On the other hand, if my trailing stop loss has not been hit yet but the True Market Sentiment is neutral or bearish, I may have to consider postponing my plan to top up until the True Market Sentiment becomes bullish again.
Attend my The Evergreen Strategy in Trading the Philippine Stock Market seminar if you wish to hear me explain this in great detail with live charts.
Recommendations
If you still have MEG because your trailing stop loss has not been hit yet, I suggest that you wait, at least, for my Momentum Power Indicator to become bullish. MEG may have to touch the 6.50 level again before my 10SMACD combo to be re-validated so wait for the Momentum Power Indicator to become bullish again before you consider the idea of topping up. Hold your position for now. By the looks of the volume in the first half of trading today, I do not see a reason for you to pre-empt your trailing stop loss.
Of course, sentiments change when trade and volume distribution changes. So, if you’re a subscriber of Equilyst Analytics, immediately request for MEG’s latest Trade-Volume Distribution and True Market Sentiment charts in the Private Clients Forum so we can tell you if it already makes sense to top up or not yet.
If you don’t have MEG but you’re interested to enter a new position, it’s ideal for you to wait for the 10SMACD combo to be re-validated and for the Momentum Power Indicator to become bullish again. You can skip the monitoring of the status of the 10SMACD combo only if you are a relatively experienced and disciplined trader. Also, you must calculate your reward-to-risk ratio first before you push the buy button. Calculating the reward-to-risk ratio is the extra but important process we have to do if we are to trade a new stock that is not yet in our portfolio. If, and only if, you are satisfied with your reward-to-risk ratio, that’s the time when you should buy within the dominant range.
Please remember not to buy or sell at any price. You can do better than those who do peso-cost averaging who know nothing but to keep on buying at any price for as long as the price is below their Buy Below Price.
I’m super passionate in teaching my clients to forget about peso-cost averaging. Some people only popularized the belief that if you’re busy, you have to stick with peso-cost averaging. I only sleep 5 to 6 hours a day and I still manage to do active trading and maintain a long-term investing portfolio without doing peso-cost averaging.
Being busy is never a valid excuse not to be better in trading or investing. It is the lack of technical knowledge on what data to check, how to check it, when to check, and why it should be checked that prevents other people to lazily embrace peso-cost averaging.
Attend my The Evergreen Strategy in Trading the Philippine Stock Market seminar anywhere in the Philippines. I’ll prove to you why you should bury peso-cost averaging near the core of the Earth. If you can prove that my anti-thesis is far from being logical, I’ll give you a 100 percent refund. That’s more than fair, isn’t it?
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