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We’re back to our EquiTalks program. We are now on the tenth episode of our daily EquiTalks.
For those of you who may have missed the previous nine episodes, you can still catch up and pick up a lesson or two that you might use on future trades. Visit www.equilyst.com and click on learn. Then, click on EquiTalks Video, EquiTalks Audio, or EquiTalks Note.
If you’re a visual learner, watch the videos. Click on audio if you are an auditory learner. If you prefer reading, I would recommend that you click on EquiTalks Note.
In this tenth episode, I’d like to talk about DMW. No, this is not the model of a car. That’s D.M. Wenceslao and Associates, Inc.
Before we talk about the chart of DMW, I’d like to check if it has any future dividend announcements.
Based on edge.pse.com.ph, DMW has no future dividends announced yet. It had one with an ex-dividend date of February 27, 2019. You are supposed to receive your cash dividend on March 28, 2019.
Now, one of the frequently asked questions when it comes to dividends is this, “Sir, will I receive dividends if I buy or sell before, on, or after the ex-dividend date?”
There are three different dates that you would see on the dividend announcements: the ex-dividend date, the record date, and the payment date. Just remember one when it comes to qualifications on whether you will receive dividends or not: the ex-dividend date.
If you will buy before the ex-dividend date and you will hold those shares until the ex-dividend date, then you will receive dividends for those shares.
On the other hand, if you will buy either on or after the ex-dividend date, then those shares will no longer be included in the dividends.
Now, if you will sell before the ex-dividend date, those shares will no longer be entitled to receive the dividend. However, if you will sell either on or after the ex-dividend date, those shares will still receive dividends.
As of Monday, March 18, 2019, DMW closed at 11.32 per share. Immediate resistance is at 11.80; immediate support is at 10.49 or 10.50. The major support is at 9.6.
This closing price is moving above the 10-day and 50-day moving averages. In the short-term period, DMW is bullish. It managed to break out above its resistance near 10.40 last Friday. That ascending price came with a robust bullish volume.
How strong is strong? Well, if it’s above the 10-day volume average of the stock.
How do I know where the 10-day volume average is? Click on Volume, choose Settings, and make sure you put in the ten on the moving average length. I think, by default, it’s at nine.
I’m using Trading View Chart (FirstMetroSec platform), and I plotted the volume histogram. This mountain-like shadow in the background is the position of the 10-day volume average.
Yesterday and last Friday, those volume bars are both above the 10-day volume average of DMW.
If it’s a green candlestick supported by a green volume bar that is above its 10-day volume average, then for me, the ascent in price is more likely to continue.
The opposite is true. If it’s a red candlestick and the volume bar is above the 10-day volume average, the descent in price is more likely to continue as well.
I said, “more likely”; I did not say, “surely.” We aren’t talking about certainties or guarantees in the stock market. This is all about a game of statistics and probabilities.
DMW gained a fraction from the foreign investors at nearly PHP 13 million worth of net foreign buying last Friday. On Monday, it got about PHP 12 million of net foreign buying. That is not as sizeable as their participation among index stocks, but they speak volumes.
When you see a green candlestick, the volume bar is above the 30-day volume average, and the foreign investors also participate into the buying spree, that speaks volumes about the bullishness of the prevailing sentiment toward that stock.
That’s how I mix and match these things I see on my screen and how I form my overall sentiment toward the stock as well.
Nearing Overbought Territory
MACD is also in bullish territory. RSI is nearing the overbought territory (80% score). RSI hitting the 80% level is not always a signal for you to sell just because it’s “overbought.”
When RSI is nearing the 80% level, sometimes, it is a confirmation of the ongoing bullish sentiment of the stock. So, for you not to get whipsawed too early, here’s my suggestion: you use a trailing stop loss. There’s the word “trailing,” not just the plain stop loss.
I wrote several articles about the trailing stop loss. Go to www.equilyst.com and search for it, so you will understand what this strategy is.
For the Equilyst Analytics subscribers, you’re already marinated by this trailing stop loss thing. You should be familiar with this by now. If you’re a new subscriber, visit the Newsletters tab, then read Newsletter Volume 1 to 13. I explained what a trailing stop loss is and how to calculate it in the vernacular (Tagalog).
DMW has a historical volatility score of 39%, and that puts the stock at a low-risk level.
My Overall Sentiment
Based on these things that I see in the chart with you, my overall sentiment is bullish.
Does that mean it is generally okay to try DMW? Is it okay to chase the stock especially that it’s already at 11.32 right now?
Well, you asked close-ended questions that deserve a Yes or a No answer, but it can’t be answered with just a Yes or a No. The answer is: it depends on your investment horizon and your risk tolerance.
First thing: if you’re a relatively new trader, my answer to that question is also a question, and that is, “Are you happy with your reward-to-risk ratio?”
How do you calculate your reward-to-risk ratio? Let’s say this potential loss at 10.48 is your risk and this resistance at 11.8 is your potential gain. Just do the math so you can calculate the reward-to-risk ratio.
By looking at the chart, you know that the candlestick of the last price is closer to the resistance than to the support. Therefore, that reduces the potential gain. It means to say that there’s a more significant risk than the potential reward.
If you’re a young trader, my advice is that you pick stocks that give a reward-to-risk ratio of 2:1, 2.5:1, or 3:1. But for now, maybe DMW is a candidate for monitoring – for you to study – not to trade.
As you gain experience, maybe you could then try to buy on the breakout, just like what happened to DMW.
For those who are experienced, do you still need my advice? If you already hold a position on DMW, all you have to do is to know where your trailing stop loss is. You can top up, if you’d like to, in tranches. Never go all in.
In case the price goes south after topping up, at least you are protected because you are using a trailing stop loss.
How about for those who don’t have a position on DMW yet and experienced traders? You have to decide. Ask yourself, “I am an experienced trader, but there’s a bigger potential risk than potential reward. But I think I already know what I’m doing. I’m going to use trailing stop loss anyway.”
You have to do some “self-talk” as well. My advice is this: monitor the price-volume distribution/ volume review. As soon as the opening bell rings at 9.30, I suggest that you monitor the volume within the first 15-30 minutes of trading. That’s when volume activity spikes.
Catch That Range!
If you see a strong demand to buy the stock at a higher price, catch that range that got the biggest volume and the highest number of trades. That’s where you position your top-up buying price.
However, if the price declines lower than 11.32, you will also have to re-evaluate the price-volume distribution of DMW. Find out which range got the biggest volume and the highest number of trades — most probably it would be below 11.32. That’s where you need to park your buying price.
On the other hand, if the price is strongly descending, then I don’t recommend buying right away. Continue observing.
I hope you’ve learned something new from my analysis of DMW. If you have some questions, feel free to comment on the video or our SoundCloud.
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Want to Learn More?
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Lastly, I would like to introduce to you our Seminars. This coming May 4, 2019, in Makati. I’m going to conduct a 4-hour seminar about my evergreen strategy to profit in the stock market.
I want to accommodate only 30 people in every seminar. This is for me to address or answer everyone’s questions. I don’t want to go out of the room leaving some questions unanswered. I want to have a very limited number of people in the room so that I can focus on giving a substantial and detailed answer to every question.
First come, first served! Make sure that you buy your tickets otherwise, I don’t know when will the second batch be (in Manila) because my calendar is already full for 2019.
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