Reflection from Heavy Losses in NOTION: Why Technical Analysis is More Important than Fundamental Analysis
As Malaysia continues to attract more data center players, HDD suppliers like $NOTION (0083.BMS)$ stand to benefit from the increasing demand for data storage, driven by enterprises focused on cloud services, data centers, and AI.
Among others, NOTION was my top pick, primarily due to its strong turnaround, with a recent quarterly report announcing a net profit of over RM 20 million. This surge in earnings was driven by increased orders from existing customers, along with new job opportunities expected to last for the next 2-3 years.
While my initial decision to heavily invest in NOTION was based on its strong uptrend on the technical charts rather than solely its profit growth, I have to admit that the initial decline in share price made the stock even more attractive, prompting me to increase my position.
Throughout July, multiple broker houses imposed a cash upfront requirement on NOTION, which raised concerns about a sudden lack of liquidity in the market. This requirement created a greater incentive to sell NOTION shares instead of buying them, potentially leading to a crash in the share price. However, NOTION proved resilient during the 1-2 months of cash upfront requirements, which only strengthened my confidence in holding a significant amount of shares.
When the cash upfront requirement was finally lifted after NOTION announced a profit after tax (PAT) of slightly over RM 20 million earlier this month, its share price started to decline—a first warning signal I should have heeded.
Why Did NOTION Fall?
Why did NOTION's share price start to decline after the cash upfront requirement was lifted? To be honest, I don't know the exact reason. From my research, both research houses and funds remain optimistic about NOTION's future prospects.
HLIB set a target price of RM 3.28, while NOMURA gave a target price of RM 3.51.
The share price held strong during the cash upfront requirement period, which suggests that serious investors were still in play. If they weren't, NOTION would have crashed much earlier. Some speculate that the strengthening of the MYR against the USD, leading to potential forex losses, could impact NOTION's profit margins in the coming quarters.
While I acknowledge this possibility—given that the MYR appreciated by about 7-8% against the USD over the past 1-2 months—I still don't believe this alone justifies a drop in share price of over 60% from its peak.
There could be other factors at play, such as margin calls from large private investors forcing them to dump a large amount of shares on the open market, or other elements unknown to us for the time being.
My Biggest and Most Expensive Mistake
My biggest mistake was not adhering to my own trading plan's stop loss of RM 1.85. Had I followed it, I would have only lost 10% on the NOTION trade. Unfortunately, my overconfidence in its profit growth clouded my judgment, resulting in a loss of over 50%.
To my knowledge, several prominent investors and investment funds significantly increased their holdings in NOTION around the RM 1.90 to RM 2.00 range. These investors are now also caught in this massive sell-down, and most of them are still holding on to their shares, hoping for a recovery.
This is my biggest loss to date—a very expensive lesson that price action often tells the story before fundamentals do. When the chart shows a downtrend and dips below the stop loss, it's crucial to cut losses, no matter how strong the fundamentals seem.
I've made significant profits from NOTION in the past, and now, ironically, I've lost heavily due to my overconfidence and disregard for price action. In hindsight, if I had started selling when the downtrend began, I would have retained most of my earlier profits.
This experience has taught me an invaluable lesson: never buy or hold a stock that's in a downtrend, regardless of its future prospects. There's always an opportunity to buy it back when the chart signals an uptrend.
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103164496 : Nvidia has also met its performance targets, I don't know if it will boost the technology sector.
JoeyMoo : company losing money.after the eps release u can see a huge downtrend
104589469 : Agreed with your point on "...price action tells the story before fundamentals do.....".
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Sentiment on nasdaq tech stock also crucial to klse tech stock although not related.
fundamental + technical + sentiment
104148536 : so are u still holding? heard someone comment on the support. I am newbie with heavy loss (same as u, believe on its strong financial performance) and don't know where is the support
跟着我一起飞 104148536 : Do you want to add more tickets to average out the loss?
103164496 跟着我一起飞 : I added 30 sheets at the price of 0.840 each.
104148536 跟着我一起飞 : not sure should do it or not
跟着我一起飞 103164496 : If it were me, I would do the same, it's just that stocks are very strange right now.
103164496 跟着我一起飞 : I added 100 contracts when it reached 1.00.
103164496 跟着我一起飞 : Just pay in cash.
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