According to Mr.Koon Yew Yin, most investors including fund managers consider P/E ratio and NTA important. Very often, shares selling at single digit P/E ratio and strong NTA cannot perform. You must bear in mind that the P/E ratio is based on the earning of last year. Moreover, the company is not giving you the cash which is shown in its healthy account and its NTA.

What will happen if the company makes less profit this year than last year? The share price will drop, you will lose money and lose the opportunity to make money if you knew how to select a better share to buy.

Another phenomenon as Mr.Koon learned about buying a low P/E stock is that it can continue to sell at low P/E for a long time. Don’t waste your time and opportunity to buy this type of shares. The price will remain cheap if it continues to make same amount of profit year after year.  

To reduce the inherent risk to a minimum, you must know the company very well. It is like choosing a girl to be your wife. It takes many years to know the girl well enough before you dare to make marriage commitment. As you know, more often than not, many short gun marriages end up in devoice court.

"Before I am willing to risk my money to buy any share, I do not just look at the P/E ratio and NTA. If I rash to buy it, it is like a short gun marriage. I must study the history of the company and make sure the company can make more profit this year than last year and it will make more profit next year than this year."

If you have the ability to identify companies that can make increasing more profit in the next few years, you can be sure to make a lot more profit than ordinary investors.

original article from http://klse.i3investor.com/

I would like to take the opportunity to explain how big fishes/company directors setting up a honeypot to trap the small traders to pick up their unwanted shares. i will take DSCSOL as a real case study because today is the last day when they 'release' the final trap and i believe thousand if not million of victim traders fell into their intentionally designed trap.

Let's assume the big fishes have RM 300 000 of cash.

By referring the the chart above, during the consolidation or accumulation period, let's assume they have accumulated 1.1 millions of shares at an average price of RM0.09 which is equal to approx. RM100K.

Next, on 1 Oct 2013, the big fishes started using their remaining cash to push up the price to get attention from the public. From the first arrow till the second arrow they might only used a small portion of the cash to push up the price. Let's assume they used only RM50K to accumulate 454K of shares at an averaged price of 0.110.

At this moment, they have accumulated 1.554 million of shares at an averaged price of RM0.096525. 
( The calculation is Rm150K/1.554)

Next , on the second arrow till the last day, the big fishes push the price more aggressively and more and more traders coming in. The victims that fallen into this trap has helped to push the price even further making the big fishes who has accumulated at low price earning big chunk of paper profits now.

 Let's assume the big fishes have bought another 500K of shares at an averaged price of 0.3 which costs them RM150K

So the final shares they have accumulated were 1.554 million + 500K which is 2.054 million of shares. The new averaged price was RM300K/2.054m = RM0.0146. 

But the question is, why they choose to cash in their profit today? Because today , 28 Nov 2013 is their company Q3 quarterly report announcement date and they (as a directors) have already known they are making losses!

So, on the final day, they have earned enough and start disposing their shares. Let's assume they dispose all shares at an averaged price of RM0.40. Ermm....how much they have earned?

Amazingly , 2.054m X RM0.40 is RM821 600. 
After minus the cost , their net profit is RM521 600.

And don't forget i am just using a conservative calculation for you to understand easier. They might have accumulated more during the consolidation period :-)

Now the question is, if you have fallen into the trap today? What should you do? i personally think that it won't go up again anymore.

Here is the daily chart for 28 Nov 2013

as you can see , Tgoffs is actually riding on an uptrend line. it has been touching this uptrend line for 3 times and it did rebound. As a result , i foresee Tgoffs will rebound tomorrow.

In my previous post, i had a buy recommendation on Airasia and set a first target price at fibonnaci 50% level which is near RM3.00. It touched at RM2.960 and it did retrace. Unfortunately it formed a Shooting Star after touching this level. A lot of traders when seeing this Shooting Star they will start selling. As a result, Airasia was retraced quite heavily.

I think the selling pressure will end very soon. Besides that, Stochastic shows oversold signal already. So i will remain a Hold rating or average down if you think the coming quarterly report will be a big surprise.

From the Chart, it looks like Pelikan is going to shoot up for the second wave. As i am writing this post, this morning the price has gone up to 0.700 coupled with big volume. Thus, i strongly believe the second wave is coming.

To justify my buy call, the technical analysis shows that Pelikan has found its support at 0.600. This zone is also near the 61.8% Fibonacci level.

Secondly, after the first wave ended on 27 Sept 2013, the volume was reducing. Thus, the recent price dropping was just minor profit taking. More to come!

Thirdly, Stochastic shows a oversold signal.

i would suggest to buy for short term.

On 26 Sept 2013 and 17 October 2013 i have published two analysis reports on Airasia. I strongly suggested to buy in. Since then it has increased more than 12.5%.

The question now is can we buy at the current price or should we hold/sell for existing traders?

From my technical analysis , i notice Airasia has broken the uptrend tunnel. Thus , it will be very bullish. And it seem like has broken the 61.8% Fibonacci line too. As a result, Airasia price should be and will be heading to 50% Fibonacci line very soon.

However, both RSI and Stochastic has shown overbought signal. Thus , it may retreat a little bit before heading up. Thus, i would suggest to buy on any correction.

First  Target  Price : RM3.00

Second Target Price : RM3.120

i wrote an analysis report on Airasia on 26 September 2013 and i strongly suggested a buy recommendation at RM2.560 at the time of the article published. It has since up near 10% as of today at RM2.810.

When i am writing this post , 10:40 am , the price is at RM2.810 and this is actually a breakout of the up trend tunnel. As a result, if the price manage to hold at or above this price by end of today, there will be a strong buy call again on Airasia and the near term target price should be RM3.00.

* This is solely based on Technical Analysis , no sentiment news is taken into consideration.