Small stock (2010-07-06 KwangSung Electric analysis)

So after analyzing so many large stocks which are highly affected by Hang Seng Index, I now give some recommendations on some small stocks which could possibly move in different direction. But before that, I have to warn everyone about the high volatility of these kinds of stocks. Please assess your ability of bearing risk before deciding whether to buy these stocks or not.



OK Let's get started. Above is the daily chart for KwangSung Electric (2310.HK). The main interesting part for doing analysis on small stocks is that you do not have to know what the company is and what the cash flow is. What I look at is the psychology and the actions of BIG guys who want to get profits from this stock, so basically candlesticks would be the main indicators, together with some basic resistance and support areas.

As we can see, in Jan2010, this stock surged from 0.43 to as high as 0.98 after a long horizontal movement starting from March2009. We would say the area from Mar09 to Jan10 to be "collection period". Then the stock price starts to shoot up and BIG guys gain. However, we have to look at whether these BIG guys are selling their stocks. As we can see, after going up to 0.98, the volume afterwards is not large. This somehow gives us hints that BIG guys are not selling yet. So we can expect the stock price going up again. First resistance would be at the red line which is at around 0.75-0.8. However, I think that it would break this resistance and go up to around 1.4.

Stop loss would be at the break of the lower support red line, which is at around 0.40.