Good day all,
I have been quite bullish on ComfortDelGro, C52.SI, in the last year or so. You can search the archives for my last two posts on Comfort. In my last post, I highlighted Comfort trading near multi-year highs (resistance)- $1.70 region. With a then bullish market, and slightly bullish chart in my eyes (yes, there was a straightforward case for downside since resistance should mean that), I was ready to pounce on a breakout from the long-term trading range. The resistance proved to be strong, and Comfort started correcting down to the 200-day MA, which comes in at around $1.56.
For the sole purpose of showing you all the difference between accuracy of analysis and money management/trade management, I will bring you all through my trading play for Comfort.
Circled in red on the chart below is where I made my previous post on Comfort. For those who are not familiar with Comfort’s chart, the $1.65-$1.70 area is a multi-year high from the 2008 crash. Even though I was somewhat bullish on Comfort, I could not ignore the major resistance. Sometimes when I see an instrument chasing all-time highs or resistance levels, if certain factors tell me to be bullish, my mind will tell me that this time the resistance fails. So I conveniently ignore or overlook the resistance. However, that will not be consistent with one of my principles of taking what I see presently on the chart, and not relying on pure speculation.
So, I tackled this set-up this way. Instead of going in straightaway, I placed a buy-stop order above the price Comfort was trading at. I told myself that if Comfort was really going to take off to another range, I need not worry about not taking part in the profit. Of course, every trade has to have a pre-determined stop-loss attached. Always. So I did that and waited. Days passed, and the general market soured. Comfort was not spared, and tumbled down several cents. I was quite relieved I did not jump the gun. However, this was to be a longer-term play, so there was no need to give up on the set-up. The general market made a V-rebound and Comfort was swept in the buying pressure too. Very recently, OCBC Research upgraded Comfort from a “hold” to a “buy” – http://www.ocbcresearch.com/Article.aspx?type=research&id=20121212091833_86605 . The target price given is $1.90.
The upgrade probably provided a catalyst for Comfort to stay above the major resistance that it broke through two weeks ago. How high can Comfort go to, now that resistance has been cleared? I do not see any pattern that can give me price projections, and there is no clear resistance levels either. So technically, I do not really have a target for now. But, I believe it is reasonable to think of three scenarios: one, Comfort has cleared the previous price range, and should trade in another range which means Comfort should find the relative high in the weeks/months to come; two, Comfort goes into a mid-term, steady uptrend (channel) which is obviously a very good thing for long players; three, Comfort simply drops back down below $1.70 for reasons that may be (in which case, I get stopped out and live another day to trade). Of course, like I have said many times, I try not to involve pure speculation in analysis.
So the point I am trying to make is this. Had I gone in too early and got stopped out of the long position because of a small pullback, I would be kicking myself many times over because Comfort reversed and shot back up. In the weeks to come, if Comfort holds up well and climbs northwards, think of this: the analysis may be right, but the trader will still lose money if the trade management is weak.
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