At last, after weeks of consolidation, the strong support of 1766 gives way today. The break of the rectangle signals the beginning of a downtrend. At the moment, with the composite index dipping by a staggering 32.25 points today and a total loss of 50+ points in just 3 days, the most sensible strategy is to wait for the right time to take long position. A technical rebound is ought to follow after such a huge move in such short period of time, possibly at the start of the gap (1718) or at the psychological support level of 1700. One can capitalize on the rebound of the market by betting on shares that had dropped a lot recently and are now close to its major support level. It would be best that the shares had fell by at least 10% from the recent top and had fallen consecutively for at least 3 days. High transacted volume tomorrow will be another plus point. Remember, we are trying to profit from the rebound and not to buy-and-hold.
Some may ask, isn’t it possible that the index will rise tomorrow instead since it had fallen so much today? Yes it is possible, since 1743 could be a support level. If the market really pullback tomorrow, then the strategy should change from preparing to take long to take short. Watch for opportunities to short the market again if the pullback is weak. The support-turned resistance of 1766 would be a good spot to initiate short future contracts.