Here’s another pattern to take note.

In bull markets higher prices are supported by higher volume, as is the case for the KLSE lately. This can go on for sometime. But since nothing travels in a straight line forever, we have to be vigilant for when things start to turn. But how do we know? One of the signs is this classic distribution pattern I have attached. If you think about it logically, bull markets need buyers. This is characterised by higher volumes as more and more people turn up to buy stocks. This pushes up the price. But then even more buyers turn up, which pushes up the price some more. After a few days, or weeks, or months, some buyers decide to take their money off the table and cash out. During a bull phase, there will be enough buyers to absorb this, and the price will go up anyway. But if the numbers of sellers start to increase, then eventually there will be more sellers than buyers and the price will be driven down. But before that happens, a state of equilibium will occur when the number of buyers match the number of sellers. This will result in a market with a high volume of trades but where the price does not get pushed up or down. It closes where it is. And that is what happened to the market on Friday. In fact, you can see that the low went below the low of the past few days, but then it recovered to close up. This is called a hanging man - where last minute bulls stepped in to keep the close within the range of the last 2 days.

But technical analysts beware - this is a sign. Nothing more. There is nothing to prevent the bulls from stepping in next week to reclaim higher prices (unlikely as people are starting to pack up for the Chinese New Year holidays). However I believe it’s a fairly important one to pay attention to.