Lesson Learnt from Parabolic Curve – Did you Get Burnt?

Be careful when you see any stock chart shows Parabolic Curve. The price goes up very fast and comes down even faster. I posted 3 stock stocks here from Genting Singapore, Z-Obee and HL Asia and you can see the commonalities of the chart patterns.

  • Stock price climb very fast in a very short period. Chart gradient is more than 45 degree when you zoom out the chart by expanding the time frame.
  • When the chart breakdown,  the stock price plunges close to 50% Fibonacci Retracement Level within one or two months.

 

Lessons Learnt from this Parabolic Curve Chart Pattern

  • You can make fast money by riding on Parabolic Curve but you must know when to get out.
  • The above three charts start crossing down the 20D MA, that is the 1st signal to get out. When crossing 50D MA, that is the 2nd signal to take profit or cut loss.
  • When trading stock with Parabolic Curve, must keep an very close eye on the chart pattern every day.

Feel free to leave a note here if you see any Singapore Stocks are showing Parabolic Chart Patterns.

If you are still not clear what is a Parabolic Curve is about, I have compiled this pattern in my Breakout Patterns Quick Reference Guide which is a little token of appreciation when you sponsor this website.

Z-Obee – Over Value

The recent crash of Z-Obee price was not to my surprise because the it is predictable base on the following two observations:

  • Parabolic Curve
  • PE = 35 (base on current price of $0.36). If base on the high of $0.61, the PE is 57 which is extremely over value. At present PE of 35, the stock is still over value.

I hope this post can help people to avoid get burnt badly when chasing over value stocks especially the chart pattern is showing Parabolic Curve.

Genting Singapore – Very speculative and forming a Parabolic curve!

Genting Singapore is getting very speculative recently as everyone is putting very high hope on Integrated Resorts and Casino. However, I am staying out of this stocks due to the following reasons:
(1) There is no fundamental to support the increase in the stock price. The company has been losing money for the past two year and expected to continue to make a loss this year.
(2) All future earnings of the company base on numerous assumptions. There are assumptions that the economy will recover as per plan, tourism will pick up in Singapore, the IR will be launched on time and have no delay, all revenues and profit are base on projection, etc. For those who have involved in drafting a business plan and doing a sales projection will know that everyone want to make the plan looks GREAT in front of the management and analysts, otherwise we will be challenged if the numbers do not meet the expectation. Very soon everyone will start to realise that the reality is very far away from plan, and the stock price will plunge!
(3) Looking at the chart, the stock price climbs too fast and become a parabolic curve. This parabolic curve happened before in Dec 2007 where the stock price went up 175% in one month. Then the stock price crashed 40% back to $0.75 within two months. History always repeat itself, now the similar parabolic curve is seen again. The price has gone up 70% in two months (remember: WITHOUT any fundamental), we can predict what is going to happen next. In addition, there are many speculative professional traders in the game. Unless we as retail investors know what we are doing, it is better to stay out of this counter.

There are still many questions unanswered to convince me to buy this stock. What if the economy recovery is a L shape or W shape? What if another pandemic outbreak occur besides the bird flu and swine flu? What if there is another terrorist attack and everyone is scared of travelling? What if a war breaks out and causes the oil prices to shoot up 100% causes more expensive to travel? We just need ONE case to affect the future earnings of Genting and the stock price will plunge! I don’t see myself looking at this stock in the near future.