At 9AM today, 08/09/09 Falcon Energy will migrate from Catalist listing to Mainboard listing. What is the significance?

There are many differences between Catalist and Mainboard. The differences can be found in SGX website.

But basically, the entry requirement for Catalist listing is not as stringent as Mainboard listing. If I can remember correctly, to get listed in Catalist, companies do not need to show profit and track record, can be very young company, paid-up capital can be lower, etc.

That means investors view Catalist counters as higher risk companies. The stringent requirements to get listed (and continue to maintain its status) in Mainboard is already a good reason Mainboard companies are more reliable and thus more prestigious than Catalist companies.

Thus, Falcon Energy's migration to Mainboard is indeed a good news.

I always got mixed up between Sinomem and Sinotel. Both are Sino companies, price is similar at around 60c, both prices have shot up quite a bit of late, both are in top volume.

Sinotel was halted on 3 Sep 2009 pending announcement, which turned out to be a share placement with price at slightly over 50c, a helfty discount of over 20% over 63c closed price before the announcement. At 2PM on4 Sep 2009, when the halt was lifted, its price gapped down to 60c as expected. Still it is good for placees who made immediate profit of 10c per share. I guess that is how the rich gets rich, huh.

It is not difficult to spot stocks that have potential to raise funds, whether by way of placement or rights issues. They are likely to have high volume recently, their price risen, sometimes in conjunction with analysts' positive reports. Some of the potential counters (my personal view and observation only, no guarantee of outcome) are Longcheer, Sinomem and China Environment.

So is fund raising a good or bad news?

To encourage investors to take up private placement or rights issues, the issue price has to be attractive, that means discount to the last traded price. So the normal immediate market reaction will be a gap down after the announcement.

In the short term, traders might choose to take profit if they think they have made enough profit.

But usually in the longer term, raising funds is good because the fund can be used to reduce debt or to fund new investment. At the same time, in order to "thank" the investors who are involved in the fund raising exercise, the operators behind will ultimately push up the price.

I have never heard of Falcon Energy (by virtue of its illiquidity) until it caught my attention on 15 June 2009, the day when its daily volume shoot up to 64,984,000 shares. But out of the 64 millions shares traded, 60 millions was actually married deal done at 43.5 cents, a good deal when the stock was trading above 50 cents, huh.

Anyway, it does not really matter. Ever since the 64 million daily volume, Falcon Energy has attracted some attention of the trading community as can be seen in the gradual increase in its daily volume (as compared to low or no activity before). Something positive seems to be brewing. But as a technical trader, I do not guess, I enter based on chart formation, which in Falcon Energy’s case is positive.

The breakout of resistance at 67.5c coupled with an increase in volume on 6 July 2009 more or less confirms Falcon Energy’s uptrend. The next resistance is at 72.5c. Short term traders might treat the previous resistance 67.5c as the immediate support. However, the next support at 59.5c is a more realistic support in my opinion.

I cannot help thinking how syndicates operate in stock market. What I am writing here is solely my personal view and I do not have evidence to support my view. Trader88 will not be liability for any consequences.

Genting Singapore hit the lowest level at 41 cents in Feb 2009. Since then it has been on the rise all the way to as high as 91 cents just 2 days before announcing sale of shares by a major shareholder, after a whopping gain of 122% in 3 months!

Has there been much changes fundamentally in the past 3 months? Was it that Genting Singapore was pressed down so much that suddenly investors realize it was too undervalued? I guess none of the two was true.

It is apparently the work of syndicates behind, namely UBS and JP Morgan, who were joint book-runners for the placement.

It all started with Genting Singapore’s major shareholder’s intention to raise more funds for their rumoured acquisition in Macau’s gaming industry. The best way to raise funds is to sell existing shares which will dilute seller’s ownership.

But if the share price is jacked up, the increase in total value of diluted shares is still better off than dilution of shares. Take for example,

Initially, L owns 100 shares of GT valued at $4 a share => Total value = $400

Subsequently, the share price was pushed up to $9, new total value is $900.

Then L sells 20 shares at $7 a share to a 3rd party, L receives $140 cash, with existing 80 shares now worth $560.

The 3rd party is happy as they are getting a hefty discount of 22%, paying only $7, instead of $9.

The result: L’s total shares in GT is $560, on top of $140 cash he received, meaning his net worth at $700 is still way above his initial $400.

All these cannot be achieved without the help of big players like UBS and JP Morgan, who not only made their professional fee as book-runners, they also made tons of money churning up the stock.

So the big winners are Genting’s major shareholder who sold their shares, the book-runners and the related parties who churned up the stock. (As of today, the identity of the 3rd party has not been revealed though.)

The big losers are retail traders, especially those latecomers.

Sounds unfair? Well, that is the way it is. Like the saying goes, if we cannot beat them, join them and make sure we join them earlier so that we have more profit to spit out if situation turns out bad.

Celestial Nutrifoods' setup was very beautiful with break out price ready at 30.5.

It has come a long way since it hit a historical bottom of 8 cents in Mar 2009. All indicators and signs confirmed Celestial’s bullishness so far (before today). Volume is substantial, price is trending upwards, Directional Movement shows strong up trend, MACD is bullish, etc.

All seemed well until this morning when it opened gap down at 20 cents. This bearish big gap altered Celestial’s fate in attempting to be the next Big Star.

Without much hesitation, Trader88 liquidated all positions held in Celestial with some losses. Exit price was at 20.5 cents. Trader88 first bought Celestial when it broke out at 20.5 cents on 6 May 2009 and accumulated more on its way up when it became clear to be the next Big Star.

It is after Trader88 liquidated Celestial that he found out from SGX’s web site the plunge was actually due to the “UPDATE ON FINANCING FOR THE POTENTIAL EARLY REDEMPTION OF THE S$235,000,000 CONVERTIBLE BONDS”. That means fundamentally, uncertainties are ahead of Celestial now, whether there could be more borrowings, rights issue or new shares issues. As a trader, Trader88 does not like “known” uncertainties to be in his trading equation. So liquidation is the only way to go. In fact, the gap down this morning was already a big hint (excuse) for him to sell off Celestial before reading the news.

It is not that all indicators were inaccurate, it is due to the “unforeseen circumstances” that happen all the time. Traders just have to be alert at all times for such events to happen.

Since the market opening bell, amid the volatility, it has been the short sellers’ day, who have been kept out of the market for too long. Aggressive intra-day short sellers should have good returns so far today. But is it time to go short all the way?

My view is that it is still not the time to turn to short yet. If the temptation is too great not to go short, the best strategy is to trade hit-and-run.

Many traders or investors with ready cash have been on the sidelines in the past weeks and they were left out from the money making opportunity during the same period. If the market does rebound after this temporary retreat, this group of participants might be the next driving force to push the market higher. Beware of this potential force if one has short positions.

How about buy-on-dip? I will not even think about this “aggressive” approach either. In view of the weak real economy, the market does look like it has not really bottomed yet.

I would rather stay at the sidelines, watching the ups and downs of the market and wait for clearer signals before taking any actions whether long or short.

Generally, in a daily chart, when a stock opens higher than the previous high price, a gap up is said to have occurred. If the opening price is lower than yesterday's low price, it is a gap down. There are actually different types of gaps in reality, I will go into details in my later entries.

There is a general belief that gaps will be closed/covered some time in the future, and hence profits can be made if that happens.

However, I sometimes do not pay much attention to gaps, as the time for stocks to close/cover the gaps might be too long.

Personally, I feel that if a gap takes too long to cover, it is not significant anymore. For example, if an upward gap is covered only after weeks/months, the stock might be on its way down after that, instead of the wider belief that the stock will rebound. In recent volatile market, a few days is considered a long time to me. That means if a gap up is not covered as soon as possible, by the time it is covered, it could be game over.

Referring to Singapore Industrial Index (STI), having a good steep run up in such a short period of time, some form of pull back is quite common, allowing it to rest a little before continuing its charge ahead. Yes, I am talking about the formation of resistance, likely to be at 2284. and later a new support which is still not visible yet.

Will STI plunge from here? If we were to look at the real economy, which still appears very fragile, the chance of further decline is possible.

However, there is a saying that stock market runs 6 months ahead of real economy, in which case the much talked about "green shoot" could mean the real economy is going to turn around in 6 months' time. Sounds too good to believe? Only time will tell.

If STI is able to break out the current resistance at 2284, the "green shoot" will grow into a big plant. Otherwise, STI will form support, stay sideways before turning either bearish or bullish.

Stay alert.