To start off with, what is a BB ? A BB stands for big boys and that is a term that is often used in the local stock market circles. It refers to those who have the funds to move the price of a counter and that include funds, syndicates of investors or any investors who has a significant amount of shares in this counter. Collectively, I will simply call them as the marketmaker.
So what kind of business is Biosensors involved in ? As taken from the SGX website, Biosensors develops, manufactures and commercialises innovative medical devices used in interventional cardiology and critical care procedures. Since 1990, Biosensors has manufactured and marketed critical care catheter systems and related devices that are used during heart surgery and intensive care treatment and monitoring. In the year 2000, the Group entered the interventional cardiology market with the introduction of their proprietary coronary bare-metal stent, along with stent delivery balloon catheter system, followed by an expansion of the product line to include angioplasty balloons and catheters.
The Group has internally developed technology to address each component of a drug-eluting stent system, including a stent,, a stent delivery catheter, a polymer and a proprietary drug. The Group is pursuing two drug-eluting stent programs independently, and has licensed aspects of its drug-eluting stent technology to four licensees.
A quick look at the financial statements reveal that Biosensors is not an attractive company at all to own from an investment point of view. It has been making losses year after year and in fact, this company has no retained earnings at all ! Cash flow from operating activities has been negative and most of the cash in Biosensors are being raised through financing activities such as the issue of convertible bonds. Futhermore, this company has no sustainable source of revenue from its operations and relies mainly from borrowing to finance the research and the operations of the company.
I noticed that this counter was under speculation during last year and saw how the marketmaker made use of news to profit from the market speculators. In general, the markemaker will accumulate this counter prior to the release of bullish news. At that point of time, the market would be waiting for news such as the Conformite Europeene (CE) mark approval, which is an international symbol for medical devices that adhere to strict quality assurance standards issued by the European Union. The CE mark approval is of significance because it must be obtained before the stents can be allowed to be sold in the European Union. Furthermore, the approval process for the other regions such as Asia are less difficult thus if the CE mark can be approved, it will help to pave the way for approval in other regions.
I have attached the chart for Biosensors. If you take a look at the chart, you will notice that there are regions of peaks and throughs. The movement can be summarized below;
1. Consolidation will take place with light volume and the sideway movement of the counter. This is the time where the marketmaker will buy this counter slowly and quietly at a low price in anticipation of the next rally. This is known as accumulation. Since the marketmaker will try to accumulate this counter at a low price, it cannot buy too much of this counter within a short period of time. Otherwise, the price of the counter will start to move up and the price will no longer be low enough for the marketmaker to purchase. Furthermore, it may also trigger off bullish speculation or rumours in the market, causing the price of the counter to increase.
2. Upon the release of bullish news, the marketmaker may try to buy this counter in large quantities to lure the market to buy more and push the share price up. Even though the marketmaker may buy in large quantities at this stage, the average buying price will still be rather low due to previous accumulation of this counter in the consolidation stage. This is the stage where the share price will rally and it can be seen by huge price movement of the counter coupled with heavy volume.
3. Once the share price reached its peak, the marketmaker will try to sell off this counter slowly to take profit. This is also known as distribution. It is done slowly to maintain the high share price in order to maximize their profits.
4. After the marketmaker have sold off this counter, the market will be left holding the counter. Since the markemaker is not buying the counter anymore, the price of this counter will start to plunge. Once the price is low enough, the marketmaker will start to accumulate this counter again and the whole cycle will be repeated again.
So what are some of the important lessons which I have learned from my observation of the movement of this counter ?
1. If one can identify that there is a marketmaker moving a counter, one can buy the counter during the accumulation phase and sell them off during the distribution phase. This is rather difficult to do as identifying the accumulation and distribution phases can be quite hard. In the case of Biosensors, this counter moves with a predictable pattern of peaks and troughs which coincides with the release of certain news thus it is quite easy to see what the marketmaker is doing.
2. One should always exit his position if the direction of the movement of the counter is not moving according to how one is expecting it to move. This is because if the marketmaker decides not to move this counter anymore, the price of this counter will simply plunge. If one continues to hold on to his position, it is likely that he will incur a huge loss. This is especially true when one is doing any speculation. One should always get out of a losing position when your opinion proves to be wrong.
I have attached the chart for Biosensors. If you take a look at the chart, you will notice that there are regions of peaks and throughs. The movement can be summarized below;
1. Consolidation will take place with light volume and the sideway movement of the counter. This is the time where the marketmaker will buy this counter slowly and quietly at a low price in anticipation of the next rally. This is known as accumulation. Since the marketmaker will try to accumulate this counter at a low price, it cannot buy too much of this counter within a short period of time. Otherwise, the price of the counter will start to move up and the price will no longer be low enough for the marketmaker to purchase. Furthermore, it may also trigger off bullish speculation or rumours in the market, causing the price of the counter to increase.
2. Upon the release of bullish news, the marketmaker may try to buy this counter in large quantities to lure the market to buy more and push the share price up. Even though the marketmaker may buy in large quantities at this stage, the average buying price will still be rather low due to previous accumulation of this counter in the consolidation stage. This is the stage where the share price will rally and it can be seen by huge price movement of the counter coupled with heavy volume.
3. Once the share price reached its peak, the marketmaker will try to sell off this counter slowly to take profit. This is also known as distribution. It is done slowly to maintain the high share price in order to maximize their profits.
4. After the marketmaker have sold off this counter, the market will be left holding the counter. Since the markemaker is not buying the counter anymore, the price of this counter will start to plunge. Once the price is low enough, the marketmaker will start to accumulate this counter again and the whole cycle will be repeated again.
So what are some of the important lessons which I have learned from my observation of the movement of this counter ?
1. If one can identify that there is a marketmaker moving a counter, one can buy the counter during the accumulation phase and sell them off during the distribution phase. This is rather difficult to do as identifying the accumulation and distribution phases can be quite hard. In the case of Biosensors, this counter moves with a predictable pattern of peaks and troughs which coincides with the release of certain news thus it is quite easy to see what the marketmaker is doing.
2. One should always exit his position if the direction of the movement of the counter is not moving according to how one is expecting it to move. This is because if the marketmaker decides not to move this counter anymore, the price of this counter will simply plunge. If one continues to hold on to his position, it is likely that he will incur a huge loss. This is especially true when one is doing any speculation. One should always get out of a losing position when your opinion proves to be wrong.
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