It has been hard to find any opportunities this week. And I’m talking globally. Almost every country and sector was in the red (except bonds). I’m convinced that something, somewhere must be oversold, but I’m just not sure what.
The one thing for sure is that the bulls did encounter resistance, this time from the technical traders out there who sold out on strength. KLCI did not even reach its previous high as I was expecting. If you look at the daily chart for most counters, it would be hard for any trader to remain convicted. The only bulls out there right now are fundamental long term bulls and I doubt that even they would be willing to go in at these levels.
Given all this, what should we be doing? The answer, hinted earlier, is to look for value. I’ve got my bargain hunting hat on and am starting to look for good, cheap buys. My criteria is a combination of low PE ratios (relative to their historic PE), rising earnings and weak sentiment (e.g. where RSIs are below 30 on the weekly and monthly charts). Ideally I would love to smell some blood (negative newspaper reports, horror stories etc.) so I don’t think we’re quite there yet. In fact, I would like to see a protracted bear phase lasting a few more months before I start loading up on stocks heavily.
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