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Short-term Bearish, Long-term Bullish.

2 weeks had passed since I last express my bearishness (on the night of 16th June, in the private group where all my students are in). I hope none of you get caught in the recent market volatility. Here’s a quick update.

I mentioned on the June 21st that there should be a technical rebound following a 3-days dip and true enough it happened. I taught you guys before on how to judge the sustainability of a downtrend. If there’s no strength in the technical rebound, it is highly likely that the market will fall further. The technical rebound happened on the 22nd and 23rd of June (2 days) barely recover 21st June’s losses (1 day). That shows extreme weakness – not much bargain hunting.

28th of June was interesting. The index went from +8 at the opening to -8 at the closing. The major shift in sentiment for the day (or the black candlestick alone) is enough to tell you that the market will definitely fall further (big boys are selling on strength aggressively, knowing that its going to fall further). This sort of day will only trap very short-term traders who might jump in at the opening, believing that he’s wrong on his bearishness. For the majority of you whom I encourage only swing and trend trading, you should not get emotional on a strong opening.

The market continued to drift lower and on Friday it tested the previous high of 1757-1760. Again, I believe this should be a temporary support and not the major turning point as by now it should be quite clear to you that the market is in a downtrend (lower high lower low). A technical rebound should happen again early next week and I shall watch the strength of this technical rebound closely. I strongly believe that this is just the beginning of more sell-down as the index just broke below the 50dMA line for the first time in 6 months. Also, global indices are experiencing huge volatility in the last 2 weeks (trending downward), further strengthening my view. Foreigners are starting to sell heavily as well – last friday was the first time in 6 months foreigners sold more than RM200million worth of shares in a single day (net). As such, I’m maintaining my short-term bearish, long-term bullish view of the market. Expect the market to stay sideway above 1760 throughout July, at best, or down towards the 1730 area, at worst. I will be staying extra conservative as the notorious months of August and September  are just around the corner. If you are still an amateur, I strongly suggest that you stay conservative as well.

–If you remember what I taught in the conference, an important low should be formed next week and most likely to be at the end of the week.–

Top Performing Sector(s) in 2016

The easiest way to make money in the stock market is definitely by riding the strongest trend. By buying the strongest stock in the strongest sector of the year, one could make enormous gain with minimal risk. Hence, the biggest task for every investor/trader at the start of the year is to identify which sector(s) would outperform the market for the year. My best guess for year 2016 would be the FINANCE and PLANTATION sector. Here’s why.

Gamblers, Amateurs or Professionals?

“The market fell by 4 straight days. In total, the index loss about a hundred points without any sign of rebounding. More than 80% of the share prices were below yesterday closing. Of the small amount of gainers, most are up by merely a bid and closed with huge ask queue. Investors and traders were mostly panic. Then a savior appeared. He boasted in the social media on his 1-day-5-digits trading gain despite the bad market. With the public scrambling in search for a solution which this trader seems to have, he immediately got everyone’s attention. Drowned by an overnight popularity, he proudly shared his “profound” analysis. Amateurs who are eager to make some quick bucks in the dampening market were quick to apply the new methods learned – only to lose more money.”

What went wrong?

All the Way UP

On January 7, I posted in my Facebook group telling to buy. On January 9, my Sentiment Analysis shows a clear uptrend. Today, on January 15, gainers still outnumbered losers. This good sentiment streak had last for 7 days, the longest since August 2013. If you bought something for mid-term, HOLD them. If you are trading, you could switch your portfolio to shares that require longer holding period to realize bigger gains. If you are not in the market yet, don’t be afraid because this Bull is going to last for some time. Do more homework today, look for continuation pattern like flags (my favourite, which I see a lot today), retracement with low vol etc.

My view for the market? Super Bull. From my conversation with the people around me, I realize that they are several views on 2015 outlook: Rise a little, drop a little, or drop a lot. No one actually dare to say RISE A LOT. Because of that I would bet that the market will rise a lot this year. Of course, I don’t base my analysis on just that. Here are some of the reason why I think the market is going all the way UP.

7 Key Takeaways For You To Be a Better Trader/ Investor in 2015

strategy

The volatility spike that occured at the second half of 2014 is one that is not seen since 2011. This causes a lot of confusion among the public on whether 2015 will be a good year. Regardless of what the general consensus are, if you are discipline and have the right investment/ trading strategies, 2015 should not be a big problem for you. So here you are, 7 key takeaways that one could learn from the happenings in 2014 which will help you in becoming a better trader/ investor, not just in 2015, but in all your trading/ investment years.

Sentiment Analysis: Trend Changed to Bearish

Today is the first time in 2014 we see more than 500 losers in our local bourse as the sentiment took a dive after a few days of rally among a number of small caps and pennies. Looking at the Sentiment Analysis Trend Indicator, it is clear that the sentiment is expected to worsen in the coming days. The Sentiment Trend shifted from bearish to bullish (meaning the overall environment is condusive for trading and the probability of winning is much higher) on the 31st of December 2013 as it created a higher high and today it shifted back to bearish (lower low detected). At this period of time, it is highly advisable to stay out of the market or at the very least, reduce your position in the market. Regardless of how good your analysis is, share price could hardly rise when the sentiment is bad.

Sentiment Chart
[What is Sentiment Analysis?] Technical analysts trade based on probability. When we say a method under Technical Analysis (TA) has a success rate of 80%, it implies that there are time when such method perform better than its average (probably as high as 90% or more)  and there are also time when using it doesn’t give you a distinct advantage (probability of winning could be 60% or even 50-50). Wouldn’t it be good if we can identify the time period when TA works at its best so that we could choose to trade during this period only, or take larger position during this time? Sentiment analysis does just that. It helps in identifying good or bad time to trade in our local market.

KLCI: Profit from the Rebound.

The local bourse started the year pretty badly with 2 consecutive days of dipping. At the close, the composite index had shed by 30+ points in the last 2 days. If we were to include the black candlestick on the last trading day of 2013, that’s a total of about 50 points from high to low. Not a small number. So, is this the beginning of a bear market since our local index had rose for about 3 months starting from 28th of August 2013? A number of analysts especially those from the west have been predicting that a recession will occur in 2013/2014. Gann’s disciple will tell you that 2014 will be a bear market (or at best in consolidation mood) in preparation for a 2 years bull in 2015 and 2016. My opinion? No idea. I will let the weekly chart tell me. As for the near term, I’m very bullish. Let’s take a look at the chart of our composite index.

The Latest BTS2 System: How the Stock Quotes Work

I notice that a lot of people are still confused with the way the Theoretical Opening Price (TOP) and Theoretical Closing Price (TCP) are determined under the new Bursa Trade Securities 2 (BTS2) platform, so here’s an article explaining in detail how the new system works.

The way TOP/ TCP is determined remains the same, actually; what has changed is the way the orders submitted by every market participants are displayed on the screen. Overseas trading platform has been using the new display format for years and our local exchange is merely catching up with the developed markets. Let’s look at a hypothetical scenario so that you could better understand the quotes displayed under the new BTS2 platform.

Be extra Cautious: Inari [0166], Fibon [0149], Ghlsys [0021]

I’m bearish at the moment. Why? Because most people are bullish after their big gains on penny stocks in the last 2 weeks. The higher the stock price escalate, the more optimistic they are. The ordinary folks are getting more confidence about their stock picking ability (without realizing that their returns were actually beta return and not alpha return) and are giving “tips” around. Bets are getting larger and a lot of them are increasing their exposure to leverage, hoping to extract higher returns from the seemingly good market. And if you notice, the top 20-30 most active volume list of shares is dominated by penny stocks (Keep in mind that pennies are always the last to move). These are obviously signs of a coming downturn.

Now, here are 2 simple ways of telling whether the uptrend of the stocks that you are currently holding are expected to reverse or consolidate soon: (1) If volume does not pick up as the share price moves higher (In other words, there’s a divergence in price and volume) AND (2) If you are making money WAY faster than the professionals and you are started thinking that making money from trading/ investment is easy when just a few months ago you were worried that your investment could turn sour, the uptrend IS EXPECTED TO END SOON. I would normally be extra cautious when I could earn about 50% (as measured from low to high/ from the point when the volume is at its peak to high) on one single counter in less than 3 months. Let’s look at a few examples below.

Stocks to Watch: Instaco [0069], MYEG [0138], MAA [1198]

First and foremost, I apologize for being absent for so long as I was busy with the preparation of a trading software that is expected to launch in November. Let’s discuss briefly 3 shares that I think will make a move in this coming week.

instaco

Instaco [0069], a technology company that got beaten down after its bonus issue of warrant, is expected to move higher in the near term. Lows are getting higher and higher, indicating that the break above the ascending triangle should be around the corner. The average accumulation price by the smart money is at RM0.29, estimated using my proprietary Relative Volume Density (RVD). RHB Investment Bank gives this company a target price of RM0.46 per share.