KLCI: Expecting Window Dressing Activities

Another strong green day in the local market with the local Composite Index rose by around 11 points and the gainers clearly dominating the losers. While shares are generally in the green territory, some profit taking activities in the last hours of trading can be seen in a number of them. But hey,  since its the last trading day of June and window dressing activities are expected to occur tomorrow, it’s worth a bet to hold your shares until the end of the trading day before disposing them off – if you are already looking to take profit – unless crucial support is breached. If you are underwater, don’t hold it and hope that it will rise at the end of the day. Cut it when you need to. For those of you who are curious on what window dressing means, its essentially pushing up the price of shares so that the semiannual performance of funds calculated based on the portfolio value as at the last trading day of June shows an improvement as compared to the last trading day of December last year/ the previous quarter/ the month before (May).

Okay. Enough of that. Let’s look at the the composite index. After falling by around 60 points fom high to low in wave 3 (you can count them from the red line that I’ve drawned above), the index recovered swiftly and had reached the 50% Fibonacci retracement level today. In normal circumstances, it means price are poised to reverse soon. But since its window-dressing-day tomorrow, the general market are expected to continue its winning streak for another day before the momentum is expected to fizzle out eventually on Monday or Tuesday.  Which means,  you could hold your share for at least one more day. Again, if you are in a losing position and your share goes below your cut loss point, do be discipline and cut it accordingly. Forget about window dressing. You don’t want your losses to grow so big that you are even more reluctant than before to cut your losses and eventually become a “long-term investor”.

Now that we are in wave 4, it is worth mentioning that the strength of the pullback created in wave 4 (as judged by its duration and/or its spread from high to low) is crucial in determining the change in the big trend. If wave 4 matches the previous swing high (meaning it continues to climb in days to come and touches the blue horizontal line connecting the last high) before reversing, the possibility of a change in the major trend from the current downtrend to consolidation (sideway) or uptrend will increase. With that, we would expect wave 5 to have a matching low with wave 3 or a higher low. If, however, the index reverse after testing the support-turned resistance of 1766 (meaning a lower high is created), we could be seeing the index closing the post-election gap or having a matching low with wave 3.  Always remember that knowing the general market trend is vital in determining the strength of the individual share price movements. Like it or not, the general sentiment of the market will affect the price movements of the shares you held in your portfolio most of the time.

P/S: Do like our fanpage as updates on individual shares and educational “tips” are posted more often there.

Do enjoy the article. ;)

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