Tag Archives: bearish

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.–

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.

KLCI: Getting Weaker

Yes. You read the title correctly. W-E-A-K.

While it’s not entirely bearish yet (the index edged only slightly lower today and the losers outnumbered the gainers just marginally, so for some people there’s still HOPE… Hey! It’s time to wake up!) several signals show that the bears are about to launch an aggressive attack on our market in days to come. If you are an active trader, you would have notice that majority of the shares that have rose for the past few days are starting to reverse. Some are even approaching lower support levels already. For shares that still manage to hold up, the momentum is obviously fizzling out. With the smart money booking in their profit since the first trading day of July, there is no way the market is going to move higher, especially when the regional peers are falling. A correction is needed before traders and investors are willing to take fresh position again. Let’s take a look at the chart.

klci (5)

KLCI: Pre-Election Dip

On the last trading day before the long-waited general election, the local index took a dive and broke the 1700 psychological support. The index moved down by as much as 28 points before recovering by around 10 points to close at 1694.77. This came after a divergence in the true sentiment of the market with the index movement (one of many of the signals under Sentiment Analysis) appeared on the 30th of April, sending strong signal of bearishness.

klci (4)