Sapura Energy looks promising back in April 2019 as the March quarter report stated net profit of RM500 millions. I did not acquire the stock because the technical analysis does not show an uptrend or an accumulation phase has been completed. I decided to keep it in the monitoring list and wait for the next quarterly report. Fortunately, the weakening price reflected the earning might be decreasing and it turned out my decision was right.
The rally in Feb 2019 shows huge demands for the price above RM0.26. I was alert because it could be the next big move. When it was breaking RM0.33 resistance on 13th March, my friend contacted me for advice to average down his previous buy. He was struggling with huge paper loss. It was a tough decision, you want to average down at the right time to get the right long term uptrend. After reconsidering the technical analysis, we decided to banish the idea of averaging down at that time. Luckily, it was the right decision and the stock did not ease further.
Cut lost is very important in trading, be it long-term or short-term investment. It is risk management and your mindset must be strong all the time to make such a decision. Some people say death by a thousand stops, in some event they are right. However, if you don’t set cut loss at 10 per cent it might get you into bigger trouble like my friend’s case. His current paper loss is 50%, do you know how many per cent gain he needs to make to earn back the 50%? The answer is 100%.
The stock price continued to fall and it touched RM0.26 support again on 28th August. After a bounce in September, the stock retested the support on 3rd Oct. Here, it slowly forms a descending triangle and RM0.26 serves as strong support. The support was confirmed by green candles on 11th and 23rd Oct. I like the low volume retest in the early November, it shows the stock might have bottomed.
The stock rallied 7% on 8th November and it closed above the 65-day moving average. Breaking 65-day moving average is a piece of good news for traders because it indicates the possibility of a new uptrend. In addition, the high volume displayed a positive outlook on the overall price chart. On the other hand, breaking the descending triangle means further upside move is likely. My friend will contact me this weekend again, let’s hope he able to make back his money this time.