Gong Hey Gong Hey and all that…
Let’s see whether Uncle KLSE is going to give us more angpows next week. Certainly all the newspapers seem to think so. It’s certainly not an understatement to say that the optimism is infectious. Everyone from uncle Sam to Cindy the hairdresser is talking about the stock market. Interest is hot hot hot.
So… what would you do if you were the smart money? If your answer was ’sell’ then you’d be right. This is because by the time the good news reaches the newspapers you can pretty much bet that most of the money has been made and that the sharks are just looking for lambs to offload their overpriced positions. So when the music stops, the only one without a chair will be… you guessed it.. uncle Sam and Cindy. The public who rely on newspapers for their investment tips.
Don’t believe me? Take a look at some of these charts. See the resistances forming on some of the larger caps? Now that doesn’t mean that there are no other shares making new highs (like Batu Kawan), nor does it mean that I have called this top correctly, but the important question is do you want to take that chance?
Commerce
Public Bank
Tenaga
Maybank
PPB Oil
[...] This baby gave us some turning signals before Chinese New Year which I wrote about here. At the time many of us were “ho-hum” about it because it wasn’t the first time that a reversal signal was given before the market resumed its uptrend. And after all at the end of the day it was just that. A signal. I myself took the opportunity to lighten my positions but I respect those who decided to hang on. But then yesterday we got a down day. You can see in the chart below it was a black candle. Also, this was supported by high volume. So we had a few days where a reversal signal was given, followed by a day the market lost about 50 points before (barely) recovering. This was what technical analysts calls the” confirmation”. If you’re a technical day trader, you must learn this golden sequence - “signal” and “confirmation”. Once this occurs you must liquidate any short term day trades. But I know a lot of people who went in by following the gap-up on 5 February which was a technical buy signal, saw the confirmation to sell, but then decided to hang on because they hadn’t made any money on that trade. I would advise beginners and intermediate traders not to do this because the buy signal has come and gone. A sell signal has now been generated. There is no longer any reason for you to be in the trade anymore. “Ah, but I will hold on for the longer term, because the market always goes up in the long run.” is the frequent response. Then let me ask you something: Are you a long term trader or a short term trader? Do you know that the majority of “long-term” positions are the result of failed short term trades? Therefore if you’re going to trade, stick to your plan and be consistent. Don’t switch tactics in the middle of a trade. This is bad planning and the main reason why people lose money in the market. [...]