SUM - Summerset Group

[couta1]

I think sum changed direction because of industry news on wages and property prices. I don't think it had anything to do with how the chicken bones landed or tea leaves. #NotABelieverInTA

Yep, the triple whammy of the warning of headwinds in Auckland at the AGM combined with the data on property prices, and to top it off, the not to be underestimated effect of the pay equity settlement have all come together to form the perfect storm of negative sentiment at the moment. It will all come out in the wash given time as the gale force tailwinds overwhelm the current sentiment.

[Joshuatree]

From KW
Using TA to time entries and exits

I thought I might start a little discussion on the usefulness of TA for timing. Now I do NOT advocate trading based on TA alone (tried it, lost a lot of money) but if you have used FA to identify a select list of good prospects, TA can be quite useful at knowing when to buy, when to top up, and when to sell. The following are all examples of some of my recent share purchases and sales.

1. When to BUY
I only ever buy companies that are in an uptrend. (Tried buying downtrends, lost a lot of money). The trick is to know when to enter. Get in too early, and the uptrend may turn out to be a dead cat bounce, or fizzle out. Get in too late and you may miss most of the run. My favourite entry point is when the 50 day moving average crosses above the 200 day moving average and the share price is above the 50 day MA. While you miss the early run, the risk of the uptrend not continuing is somewhat abated. I have tried entries based on just the share price crossing above both MA, but 3 out of 4 picks fail to continue on. I confirm the trend by watching the MACD (needs to be in positive territory).

Example: CGF - entry was in early March, when the share price moved back above the 50 day MA and the MACD turned up ($3.64 - $3.81)
Attachment 4517


2. When to TOP UP
Companies that are on exponential uptrends often present difficulties in deciding when to jump in. I have found that many pull back to a moving average, providing excellent entry points while the stock pauses and gets ready for the next leg up. Again, I use the 50 day average and MACD to confirm the uptrend is continuing, rather than the price decline being the start of the new downtrend.

MFG - has been in a strong uptrend for ages, but it took a breather and retreated to just below its 50 day MA. Entry point would have been end of April when the MACD went positive, and the stock price crossed back above the 50 day MA ($6.94 - $7.14)

Attachment 4518

Another great example is SIV - entry point is end of February ($5.90 - $6.28)
Attachment 4519

3. When to SELL
The first warning is when the share price drops below the 50 day moving average and the MACD turns down. This should put the stock on a watch list - its either a good time to top up, or a sell signal is going to be coming up shortly. If the price drops below the 200 day moving average I usually sell (I say usually, because its not uncommon for traders to try to drive the price down that far in order to trigger a bunch of stop losses, so you need to watch out for this little trick as often the share price rebounds immediately. IIN and CSV are good examples of this manipulation). If the "death cross" occurs (where the 50 day moving average crosses below the 200 day moving average, this is a signal that the downtrend is now firmly established).

ALQ - I bought into this thinking it had turned the corner and was heading back into a strong uptrend. Alas it was not to be, and in mid-March an exit was signalled ($10.50 - $10.80). Even though the price has rebounded recently, its still a death cross situation, and its more likely than not that the downtrend will continue for a while.
ALQ.jpg

I hope others find this useful - its how I make decisions at the moment, its very simple, but pretty effective. Its part of my "get rich slow" investment strategy :-) If anyone else has any examples of when they enter or exit, then please post them.

[RupertBear]

TA 'measures' market sentiment - nothing more, nothing less

And at the moment market sentiment towards SUM is ****. Why is anybody's guess.

Can't fight that and until sentiment improves SUM will be a 'laggard'

Another half gets disposed of next week - should've sold the lot last time instead of only half. Come to think of it selling half at a time seems rather stupid if the intent is to get back in in the future .....so probably sell the lot I have left

Hmm its sods law for me because as soon as I sell the lot they invariably shoot back up again, so i now keep a few and buy and sell around them. Probably a silly novice way of doing it

[BlackPeter]

KW is summarizing well known TA rules - and as long as only a small number of people observe these rules, they are (in my view) likely to improve their investment records.

However - just imagine what would happen if everybody would follow these simple rules. Just try a simple scenario: All shareholders following (not just her) advise to sell after the "cross of death" and never buy in a downtrend. Result: All (and I mean ALL) SUM shares on offer, but nobody buying any. Result: market is dead and will stay dead forever. Stupid.

So - it is easy to see that this set of rules can't be the whole truth. There must be people following some other strategy - and while there are obviously always some bigger fools splashing their funds around, there are many who follow a more fundamental investment strategy and do well using it. Haven't heard yet that Warren Buffet made his money using TA. NZ Superfund (and any other successful and big enough fund) are not using TA either - they can't. You can't ride the waves you are making yourself.

While it is good to talk about the various strategies - I don't think that (properly applied) there are right and wrong ones. They all have their ups and downs depending on the context - and I don't think that we have so far talked enough about this very context. So - lets come back to SUM and the retirement industry:

True - there are some threats:

- For some funny reason it does sound like that building resources are strained (and this despite a number of posters claiming (on other threads) that doomsday for the property market is approaching (given a in my view pure seasonal low). Looks like people can have it both ways ... Whatever this is - it sounds like a problem nice to have (if you are employing your own building team) and it will not last forever. Certainly not an issue for a long-term investor.

- Salaries for care personnel are rising, which inevitably means higher cost for somebody. Summerset as well as other retirement villages are embracing this trend, highlight the benefits in higher staff retention and easier staff recruitment (which both safes them money). They expect as well that all stakeholders (clients, state) will contribute to these higher salaries (as they must). At he end of the day it is never the industry paying and always the customer - unless there are competitors who can supply the same service for less money. Anybody seeing this competition?

More important however in my view is the strong tailwind for the industry:

- The grey avalanche keeps moving and accelerating - and not many conceivable external events will or can take the pressure from the retirement sector. Sure - some old people might decide to spend their sunset years in a warmer and lower wage environment (Malaysia, Indonesia, Philippines anybody? ....), but this would mean giving up NZ Super and all the other state subsidies, so probably not a big cost saver for many. The increasing demand on our retirement sector is actually very inflexible - people in most cases don't have a choice to wait ... the only real option they might have is to reduce the quality of life for their sunset years in order to safe money. Would you do that if you have got the money? Any other alternative (like care at home) is subject to the same context (higher salaries for care personal).

Having said all this -
Do I know whether SUM is for the next month / quarter / year / decade the best investment opportunity? No, I don't. My (and your) money might well do better (or worse) invested in RAK, PPH, OHE, WHS or FPH instead (I know - this list is not meant as investment recommendation ...).

Do I think that now is the best time to sell them? Well, it depends - if we assume the SP will drop for another 15%, than may be, though realistically ... if it really does, than it will take some time for the indicators to look happy after the bottom again, meaning that we probably would buy back at a similar level like now - so why sell out in the first place?

I think the only justifiable reason to sell out now is if we assume that the retirement industry is fundamentally screwed and the company will do a WYN on us. If you however believe that this industry (and this company) is a winner long term, than why would anybody sell out at a time the shares are cheap? I always found it more profitable to sell stuff which is dear ...

Anyway - my 2 cents.

Discl: holder;

[Joshuatree]

I never understood T/A until KW posted her user friendly version, changed my views and informed me about helping with entry and exits strategies.Keep it simple stupid ;i say to myself.
Being human we just don't do the same thing (thank goodness ,although the bot era is upon us)especially when our competitive egos get in the way, maybe thats why women do better then men at investing.
Sometime in the future i think the govt will move the goalposts as they have in Aus and returns won't be as juicy.

Im seriously thinking of buying some SUM for the first time; when the trend changes; but closely watching the property mkt too.

[Jantar]

Hmm its sods law for me because as soon as I sell the lot they invariably shoot back up again, so i now keep a few and buy and sell around them. Probably a silly novice way of doing it

KW is summarizing well known TA rules - and as long as only a small number of people observe these rules, they are (in my view) likely to improve their investment records.

However - just imagine what would happen if everybody would follow these simple rules. Just try a simple scenario: All shareholders following (not just her) advise to sell after the "cross of death" and never buy in a downtrend. Result: All (and I mean ALL) SUM shares on offer, but nobody buying any. Result: market is dead and will stay dead forever. Stupid.......

BlackPeter is absolutely right. If TA were the way to go then the market would collapse. And there are others who are very successful at doing just the opposite. I think it was Bob Jones who advised that when everyone else is selling, then buy, and when everyone else is buying, then sell.

I am not a wizard at investing, so I do the same as RupertBear. Most of my decisions are based on the fundamentals, but if I see a definite down trend developing I sell some, but not all. Then when I believe the to market turn around I'll buy them back at a cheaper price.

Yes, I sometimes catch the falling knife, but often it is by the handle, not the blade.

[Joshuatree]

Simply; T/A is another investing tool to use ;especially for entries and exits; just need to sharpen it occasionally. No wrongs or rights and if you don't want to use that tool; thats better for the people that do use it. You must be an octopus jantar

[peat]

interesting to arrive and find all the TA discussion which I hadnt seen before drawing this chart.
Two bullish gartleys are drawn. The vicinity of the purple line is strong support /resistance
I'd like to see confirmation of a turn at this point , but if it happens there is good bullish potential.

SUM18-6-2017.jpg

[Hoop]

BlackPeter is absolutely right. If TA were the way to go then the market would collapse.

Beware of the part-argument....Lets add another part....If FA were the way to go then the market would collapse.....

What do I mean?....Simple logic...If all traders were of one make-up and only used one discipline whether it is FA, TA, Contrarian, Momentum, tea leaves, whatever they would all want to buy in at the same time creating buying chaos and very sharp movement up into overpriced territory (supply/demand).. ditto in reverse...Volatility to the max, or if no-one cared, boredom to the max..

Now lets be sensible guys this never happens in a free market apart from the rare panics...We are dealing with a marketplace..In the short and medium term FA can be worthless as sentiment rules..In the long term FA is very valuable as it can either confirm earlier negative sentiment was correct (company going to the dogs) or confirm earlier negative sentiment was misplaced (e.g AIR last year)...Share investors may be buying shares in a company but they have to realise they are also buying into a marketplace...The market place dictates and it can ruin you..e.g A FA disciple buying DIL at a high price deciding to ride out a bad bear cycle knowing that eventually the price will reflect the favourable forward FA, only to see it bought out and de-listed from the market...ditto investing in Frucor as along term "superannution" buy and hold forever, the market delisted it and you the shareholder had no say in the matter so much for that B&H strategy....The marketplace is made up of all sorts of people with differing ideals,attitudes, personal strengths and weaknesses,temperament, and beliefs, some have moral attitudes and will never buy SKC or RAK some will never buy cyclical stocks e.g AIR.....TA discipline ain't tea leaves or the holy grail of knowing everything.. it just measures (and uses tools to analyse) the sentiment of all the people within the marketplace at specific times from the past up to the last trading moment of present day..Like FA TA does not know the future as it is impossible to collect and analyse data that doesn't yet exist..but we all love to predict the future using our "expert" knowledge and it doesn't matter if we are FAers, TAers or believers of groundhogs, we all love to share our opinions, debate about it and shake around our crystal balls..It's us that makes up the marketplace (and these forums)...May it continue for centuries to come..

So today, what does all this mean .....TA says market sentiment towards SUM sucks at the moment.....that is all......

[Joshuatree]

Yeah or until the bots takeover