DNL Technical Analysis
D and L Industries, Inc. (DNL) is trading at 9.43 per share, down by 0.21 percent as of 11:09AM GMT8 of August 8, 2019.
DNL has been traversing the downtrend channel since the last week of January 2019. It has been thrice since then that it registered lower highs only to end up giving up to the pull of the bears.
The immediate support is near 8.70 while the immediate resistance is near 10. DNL freshly broke below its previous resistance of 10 yesterday.
As of the time of writing this report, foreign investors have registered a Net Foreign Selling worth P2.5 million. They are bearish on this issue YTD. Foreign investors are also the major players of DNL.
My 10SMACD combo remains invalid. My Momentum Power Indicator is bearish.
My buy indicators are absent on DNL.
The classic and rustic advice of other stock market gurus is to buy the dips just because you’re investing for the long haul.
I’m all for the idea of maintaining a long-term stock portfolio but I’m not for the idea of buying the dips if there are no signs of a bullish reversal yet.
If your mentor is advising you the otherwise, ask him if he’s a fan of Mr. Bean or Charlie Chaplain.
DNL’s RSI is a few points shy from the classical oversold level. I’d like to warn you that an RSI score of 20 percent and below is not an automatic buy signal. What’s oversold could get more oversold if there are no signs of a bullish reversal.
Attendees of The Evergreen Strategy in Trading the Philippine Stock Market, eyes on the handouts, please. Remember the “Signs of a Bullish Reversal” on your handouts. It’s under Lesson 1. Remember Lesson 2 also, which is “How to Know if the Current Trend Is More Likely to Continue.”
Be better than these investors whose best strategy is to average down but couldn’t present a substantial reason when asked why they are averaging down.
I don’t care if the stock is fundamentally good. If the downward momentum is very strong and there are signs of a bullish reversal, then, there’s no logical reason why you should hurry in buying the dips.
The risk level of DNL remains low due to its historical volatility score of 33 percent.
Not because I said that it has a low risk level, it doesn’t mean you’re going to grab any low-risk level stocks that your eyes will see.
If a stock has a low to moderate risk level, it means it doesn’t fluctuate erratically. If its risk level is high to extremely high, these are the heart-attack stocks that fluctuate erratically as though the Zombie Apocalypse is scheduled to happen at 1PM today.
The purpose of my proprietary method of measuring the risk level of a stock is to align your experience with the risk level of the stocks you’d like to trade.
Are you a relatively new trader? Start with stocks with low to moderate risk level then.
Do you regard yourself as an experienced trader? Feel free to test the waters with the stocks with a high to extremely high risk level then.
The DMI and ADX show that the downward momentum is very strong. The downtrend is more likely to continue.
Trade-Volume Distribution
D and L Industries (DNL)
Last Price: 9.44
VWAP: 9.451730329
Most Traded: 9.44 – 9.45
Most Voluminous: 9.44 – 9.45
The dominant range of DNL is between 9.44 and 9.46. It’s closer to the intraday low than the intraday high.
The VWAP is also higher than the current price.
These are two reasons why I’d say that the downtrend is more likely to continue.
True Market Sentiment
True Market Sentiment of DNL as of Aug-08-2019 at 11:08AM, with a last price of 9.4400.
6 of the top 10 brokers registered a positive Net Amount
6 of the top 10 brokers registered a higher Buying Average than Selling Average
True Market Sentiment: BULLISH
Top 10 Players’ Buying Average: 9.4498
Top 10 Players’ Selling Average: 9.4495
Bonus Info:
20 out of 31 participants or 64.52% of all participants registered a 100% BUYING activity
4 out of 31 participants or 12.90% of all participants registered a 100% SELLING activity
Does the bullish true market sentiment mean that you should buy the dips, too?
Yes, if you have hundreds of millions in your pocket.
It’s a no if you’re like most of us.
The confident buyers are speculators. Since they are deep-pocketed investors, they have the financial capacity to buy the dips and see if they can “infect” the psychology of other traders and encourage them to do the same.
The True Market Sentiment is not an indicator of trend but sentiment.
The True Market Sentiment indicator is not a barometer for the direction of the stock.
I created it to give us an idea of what the top 10 brokers are “thinking and doing” for that stock within a specified period.
Here’s an example of how to make use of it.
Let’s say the stock is still moving above your trailing stop loss. The Momentum Power Indicator is bullish.
You want to top up but you saw a huge Net Foreign Selling. Now you’re half-hearted to continue your plan to top up even though the Momentum Power Indicator is bullish just because you saw that the foreign fundies are bearish.
However, you saw that the True Market Sentiment is bullish. That means the majority of the top 10 brokers bought the dips.
That gives you the confidence to pursue your plan to top up then.
That’s the essence of the True Market Sentiment indicator.
I’ll give you another scenario.
Let’s say the stock is still trading above your trailing stop loss. However, the Momentum Power Indicator is bearish.
Now, you’re torn between pre-empting your trailing stop loss (selling even before it gets hit) and respecting it (sell only when the TSL gets hit).
But you see that the True Market Sentiment is bullish.
That may give you the confidence to hold your position because you see that the majority of the top 10 brokers are still interested to buy the dips.
Here’s another scenario.
Again, the stock is still trading above your trailing stop loss.
You see that the foreign investors registered a huge Net Foreign Buying.
Now, you’re asking yourself, “Does it make sense for me to top up (buy the dips) because the foreign investors are aggressively buying the dips EVEN IF the Momentum Power Indicator is bearish?”
But seeing that the True Market Sentiment is bearish, you decided not to pursue the plan to mimic what the foreign fundies are doing.
You realized that the foreign fundies can afford to buy the major dips because they have billions in their pocket.
You realized, “Why should I hurry in buying the dips when the majority of the top 10 brokers are not even showing signs of interest yet?”
I hope these examples give you an idea of the purpose of the True Market Sentiment.
When the TMS is bearish, it does not mean the price should also be bearish.
When the TMS is bullish, the price doesn’t have to be bullish.
The TMS chart is not a determiner of trend but sentiment.
Those who attended The Evergreen Strategy in Trading the Philippine Stock Market seminar have a few to zero questions about the True Market Sentiment because they heard me explain its purpose during the event.
Recommendations
Do you have DNL in your portfolio? Is it still trading above your trailing stop loss?
If your answer is, “What’s a trailing stop loss?”, I regret to tell you that you have a bigger problem.
Whether you’re into short-term trading or long-term investing, you must have a trailing stop loss.
I have a bigger percentage of risk applied in my trailing stop loss when it comes to long-term investing. It plays between 20 to 30 percent.
I have a relatively conservative percentage of risk applied to my trailing stop loss for short-term trading purposes. It’s between 5 to 10 percent.
Follow the formula below if it’s only now that you’ve learned about this concept of using a trailing stop loss.
If your average price is HIGHER than the current price:
Trailing Stop Loss = average price x (100% – your percentage of risk tolerance)
If your average price is LOWER than the current price:
Trailing Stop Loss = current price x (100% – your percentage of risk tolerance)
I already exerted so much effort in writing this free analysis. If this is not yet clear to you, it’s best for you to attend my The Evergreen Strategy in Trading the Philippine Stock Market seminar. I’ll be in Cavite this August 10, in Makati on August 17, in Davao on October 26, and so on.
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The bottom line is I don’t advise that you average down unless and until the Momentum Power Indicator becomes bullish again.
If you do not have a position on DNL and you’re planning to enter, I suggest that you pinch your arm or slap your face as hard as you can so you can wake up from your hallucination.
I said above that my buy signals are absent. The lines are downward-sloping. The bars are red. If you see a different color, you must see your eye doctor.
Whether you have DNL or you’re only planning to trade it, I strongly advise that you request for this stock’s latest Trade-Volume Distribution and True Market Sentiment charts in our Private Clients Forum so that my team and I can alert you as soon as we’ve spotted signs of a bullish reversal.
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