Koon Yew Yin - 24th April 2014
Yesterday the total volume traded for T H Plantation was 2.6 million shares, while its daily average traded is only about 200,000 shares. The share price traded between Rm 2.03-2.05 and closed at Rm 2.04, up one sen.
In my previous article I posted on 27th March 2014 with a title ‘Best Time to buy Plantation Shares’. My main reason for writing the article was to alert readers that due to the recent price increase of CPO, almost all plantation companies will be able to make additional profit which is the strongest catalyst for pushing share prices up.
In that article, I stated that I was buying TH Plantation among a few other plantation shares I was buying. This exceedingly high volume traded attracted my attention.
The Computer can tell you everything you want to know
As I am only a novice in technical analysis, I have to find out the importance of volume in predicting price movement in order to write this article. So I found out from the computer which can tell you everything you want to know.
The two methods commonly used to analyze securities and make investment decisions are fundamental analysis and technical analysis. Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach; it doesn't care one bit about the "value" of a company. Chartists are only interested in the price movements in the market.
Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will enable you to be a better trader or investor.
While price is the primary item of concern in technical analysis, volume is also extremely important.
What is Volume?
Volume is simply the number of shares traded in one day. The higher the volume is the more active the security. To determine the movement of the volume (up or down), chartists look at the volume bars that can usually be found at the bottom of any chart. Volume bars illustrate how many shares have traded per period and show trends in the same way that prices do.
Why Volume is Important
Volume is an important aspect of technical analysis because it is used to confirm trends and chart patterns. Any price movement up or down with relatively high volume is seen as a stronger, more relevant move than a similar move with weak volume. Therefore, if you are looking at a large price movement, you should also examine the volume to see whether it tells the same story.
Volume should move with the trend. If prices are moving in an upward trend, volume should increase (and vice versa). If the previous relationship between volume and price movements starts to deteriorate, it is usually a sign of weakness in the trend. For example, if the stock is in an uptrend but the up trading days are marked with lower volume, it is a sign that the trend is starting to lose its legs and may soon end.
Volume and Chart Patterns
The other use of volume is to confirm chart patterns. Patterns such as head and shoulders, triangles, flags and other price patterns can be confirmed with volume, a process which we'll describe in more detail later in this tutorial. In most chart patterns, there are several pivotal points that are vital to what the chart is able to convey to chartists. Basically, if the volume is not there to confirm the pivotal moments of a chart pattern, the quality of the signal formed by the pattern is weakened.
Volume Precedes Price
Another important idea in technical analysis is that price is preceded by volume. Volume is closely monitored by chartists to form ideas on upcoming trend reversals. If volume is starting to decrease in an uptrend, it is usually a sign that the upward run is about to end.
Good Luck
Chart | Stock Name | Last | Change | Volume |
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Hi Mr Koon, 3 weeks ago, my niece had applied your scholarship for UTAR. After sending in her parents payslip and offer letter to Mrs Koon, we no longer receive any reply from you or Mrs Koon. We are in the dark as to the status of the our application. Her course is going to start next month and by 5th of May, UTAR is asking us to make the payment. Please help. Do you have a phone number we could talk directly? Thanks.
2014-04-24 19:52
Titicamara, I am very sure my wife who is charge of my charity will answer every application within 1 or 2 days. Please write again to kitpheng@gmail.com
2014-04-24 23:19
Uncle Koon it is interesting to notice that you are paying attention to Technical Analysis.
I have also started learning about TA. So far it is quite fun
2014-04-24 23:30
Dear Mr Koon, hope you will make another talk / speech on technical analysis....
2014-04-25 09:05
Mr.koon, if which one signify a downtrend more? High volume with price drop or low volume with price drop?
I believe you only trade in fundamentally good company using technical analysis as an additional tool.
2014-04-25 15:39
dlsh 2, just to correct - there's no discovery of oil at pengerang and no exploration of oil and gas there - only project RAPID
2014-04-25 15:47
vaentec, as I said, I am only a novice in technical analysis. I agree with you. I select shares to buy basing on good fundamentals and only use chart for reconfirmation. In any case, I only bought a relatively small amount of TH Plant because I believe it, like most other plantation companies, will benefit additional profit due to the CPO price increase for this year.
I think I read your article on "integrity" on you website. You are a very successful fund manager and you should post your article to benefit readers and also to gain some publicity which should be good for your business.
2014-04-25 16:01
Thank you so much for the affirmation, Mr. Koon. I will step up my effort and share what I know with the readers. :)
2014-04-25 16:17
SOP, Everyone can be successful in investment even if he does not have higher education. For a start, a new investor must get a good broker who can introduce good shares and with explanation so that he can learn. He can then improve and become a clever investor.
2014-04-25 23:19
icon8888 u start learning TA ka. i also want to learn. where u learn from?
2014-04-25 23:59
Hahaha Optimus I thought you have experience....Kekekeke learning also ya.mlets learn together gather
2014-04-26 00:49
Vaentec, Can you please advice if the volume is very high and the price is still dropping, do this mean that the downward tread is going to end.
2014-04-29 20:58
As I observe the if a share drop then form a bottom ..... and then side way at the bottom for long time. Then volume come...and share price start to move this is one good side the share can help us make profit.
2014-04-30 10:26
dlsh2
Dear Mr. Koon,
I do agree with you on the various pointers you have pointed out in the past. I have read that MPHB Capital is a good counter for long term investors. It was mentioned that they have large tracts of land in Pengeran, Johor which has been identified for oil and gas explorations. The land around this area has sky-rocketed to as high as RM800,000 per acre due to the discovery of oil. It was also mentioned that MPHB Capital has valuable lands around KL and Penang which are open to JV with reputable companies. The owner, Tan Sri Upatkon is mopping up any available MPHB Capital shares even at current value.
What is your view on MPHB Capital? I would appreciate very much to hear from you.
Thank you, Mr. Koon and wish you all the best.
2014-04-24 12:43