As shown on Hengyuan share price chart below, it started to drop from Rm 7.39 on 17th May to close at Rm 4.34 today. It has dropped Rm 3.05 or 42% in the last 5 weeks.
Price chart takes preference over financial analysis. Price chart is more important than its profit growth prospect which is wishful thinking.
Price chart cannot lie. It is a record of the daily closing price. Currently there are more sellers than buyers every day. As a result, it is dropping continuously. Even financial institutions and syndicates cannot stop it from dropping because the daily volume traded is several million shares.
Hope is not a strategy
Hope is only a wishful thinking. It is only a dream. Despite the chart showing down trend, many investors refused to sell to cut loss because they still hope for Hengyuan to report better profit in the next quarter ending June which will be announced before the end of August. At the meantime, it continues to drop. Hope is not a strategy because your hope might not materialise.
Ukraine war
Russia invaded Ukraine on 24 February. NATO including US imposed economic sanction against Russia. As a result, the prices of consumer goods including petroleum products have been surging up. Ukraine and Russia produce about 80% of the wheat in the world. Moreover, Russia is the 3rd largest petroleum producer in the world.
The Western media do not tell the truth of the Ukraine war. It keeps saying Ukrainians are very brave and they would continue to fight. The Ukraine war has been going on for 4 months. The truth is that more than 500 Ukrainians are dying every day. Ukraine will soon surrender because Russia has more firing power. In another 2 months the war might be over and petroleum price might drop back to pre-war days.
Current situation
Investors must examine the current situation to make investment decisions. You should follow the chart and should not hope for Hengyuan to stop dropping. You should have sold as soon as possible when the chart started to show down trend. The earlier you sold the better. Even now, it is not too late to cut loss. It is more painful to lose than gain. But you don’t have to be right all the time. If you sold earlier, you could have used the sale proceeds to buy some other winning stocks.
Why investors refused to cut loss?
Investors hate to lose and hate to admit they are wrong.
But in life, losing is inevitable. Warren Buffet is wealthy not because he never loses money, it’s because he’s better at minimising his losses and capitalising on his wins.
Most investors refuse to sell a losing stock because of loss aversion, a term used very often in behavioral finance and economics. When we sell a losing stock, we not only lose money, we also lose our pride and ego.
My sole purpose for writing this piece is to prevent my readers from losing their hard earned money or life time savings.
