HK Daily and Stock Pick (1200) for August 13,2008
Posted by Book Eater in HK Market Picks
Hang Seng Market Overview: Up and Down = Directionless
As was mentioned by my colleagues at work, Hong Kong's Hang Seng is like a roller coaster. I copied below the 10 day 15 minute chart to show just how fast it is to lose money, despite the rallies in the US markets and the falling oil prices. Every rally in Hang Seng is mostly being sold down. HSI is essentially going nowhere but don't think it is a quiet day. It has been violently shifting back and forth from news driven events such as China's CPI, PPI and JP Morgan's $1.5 Bil loss from debt prices. Hong Kong traders are essentially too jittery to say the least. They are either over-bullish or over-bearish. From the daily chart, it is very much apparent that Hang Seng is just going inside a resting box currently moving between 21,600 to 23,000. Don't think shorting is such a good idea, because although the bias is still on the down side, stocks are still oversold and is trying to look for a bottom. 
Recommendation: If possible, avoid trading HK stocks unless you are very aware about the company's earning reports that may likely beat estimates assuming it is a short term earnings play trade. It seems as though the stocks are mostly news-driven. Note that there are a lot of resistances. Allow the market to correct, or simply probe on good risk-reward ideas. I highlight a stock pick below on 1200 HK.
Stock Pick: Midland Holdings (1200 HK)
Support: 3.30
Resistance: 4.50
Preferred Entry: 3.55
% Risk Reward: 7.04 % Loss, 26.76% Gain
Risk Reward Ratio : 25 cents loss for 95 cents gain ~ 1 : 4
Technicals:
Midland Hldgs (1200 HK) is exhibiting a MACD divergence which may finally breakout tomorrow. Notice that the volume today increased on the upside. RSI is also resting at the same 20 which was the short term low exhibited by the stock last time when it moved from 4 to 5 in a matter of 3 days.
The intraday graph confirms our bullish bias for the stock as it bucked the Hangseng Index trend which has fallen afternoon following Shanghai and European indices when news about JPM's losses came out. Notice that Midland Holdings surged from 3.30 to 3.60 during the morning and held on to its gains, closing at the high. This indicates that there is a lot of demand getting in the stock.
Midland Hldgs (1200 HK) is exhibiting a MACD divergence which may finally breakout tomorrow. Notice that the volume today increased on the upside. RSI is also resting at the same 20 which was the short term low exhibited by the stock last time when it moved from 4 to 5 in a matter of 3 days.
The intraday graph confirms our bullish bias for the stock as it bucked the Hangseng Index trend which has fallen afternoon following Shanghai and European indices when news about JPM's losses came out. Notice that Midland Holdings surged from 3.30 to 3.60 during the morning and held on to its gains, closing at the high. This indicates that there is a lot of demand getting in the stock.I pasted the data from Bloomberg. Company's P/E ratio is dirt cheap at 4.02, Dividend yield at 3.96% with a return on equity of 47.41%. The company is liquid with value turnover greater than 10 Mil HKD. I am cautious about the prospects of the company, knowing that it's clearly an under performer from the rest of the companies listed in Hong Kong but I believe that there might be a technical rebound. I'll be reading on any research published on the company.
