[Why I suggest you should not sell your glove stocks now but also aware that the share price are not at its lowest yet]
Let's get straight to the point.
Fundamentally, its irrational for glove makers to deserve this kind of valuations right now.
Realistically, the development of vaccine should not impact the demand of gloves to a large extent as the world becomes more health-conscious.
Imagine if the vaccine is approved and released, there is no certainty that the virus will be fully removed from everyone who is administered with the vaccine. Implementation of public vaccination also requires at least 1-2 years to complete. If the virus effect is only reduced but not fully terminated, second dose of vaccine might need to be considered.
The biggest concern is therefore the supply of gloves to the market.
No doubt the supply of gloves will kick in when all the players come into the party, however do note that the barrier of entry is high. It takes times to install the production lines and achieve certain economies of scales (for small players). In this regards, how long do you think its gonna take for the small players to gain their market shares, and how big is their slice of pizza?
In a nutshell, what we are seeing here is that from now till the end of 2020, the "big 7 glovers" will still be dominating and enjoying their times where they will receive more spot orders at lucrative margins (albeit the spot prices would have been stabilized).
Technically, if we take TopGlove as an example, the gloves are currently experiencing Wave C of Elliott Wave.
Wave C is the last corrective wave in Elliott where the prices will move impulsively lower out of the five waves. This is where almost everyone would realize that a bear market is firmly entrenched.
The only question now is where is the bottom and how long more until we can see a shred of light from the tunnel? Obviously we do not know the answer.
What comes after Wave C should be your concern now in terms of technical analysis. It might be a new wave restarting at a next largest degree. It is possible to stand above Wave 1 and extends to 1.618 times of Wave A based on Fibonacci principles, with another 15% of downside before hitting the low.
Psychologically, if you have sold and realised your losses at 50%, you would need to earn a 100% return using that 50% of your money that was left to earn back the 50% of your realised losses.
In conclusion, the fundamental of gloves is still intact. Of course, now it is just a guessing game. Nobody knows when will the gloves rebound or stop falling. You can take my post as a pinch of salt or you can reconsider your moves.
Again, trade at your own risks. There is no buy/sell call, just purely sharing some thoughts.
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No buy call. No sell call. No bullshit. Only content.
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