On the 2nd of October, the Kuala Lumpur Composite Index (KLCI) broke below the very important major support of 1585 and closed at its low of 1575. Today, it closed even lower at 1564.12. To-date, the KLCI is already the worst performing index in the world. Breaking the major support signals more downside ahead for our country’s stock market, and since stocks in general have a correlation of around 70% to the index, we can say that most stocks will fall along with our index in the near future, making it tough for the general public to make a positive return. But is it actually possible to find THE winning sector in this tough environment? You could, by applying Relative Strength Analysis.
Relative Strength Analysis can be done in 2 ways – by comparing the performances of all the different sectors, and by comparing the performance of a particular sector with the country index. Your goal should be to identify which sector is the strongest and invest in stocks within that sector because that’s where the HOT MONEY IS FLOWING INTO. Let’s look at the chart of several sectors below.
By comparing the movement of the 12 sectors in our country, we can easily conclude that the Financial Services and Property sectors are the 2 worst sectors this year thus far. Smart money is flowing out of these 2 sectors and thus you should shun them altogether. Looking at the other charts, we can see a few sectors registering strong gains in 2019 – Construction, Energy, Technology, Telecommunication. These are the few sectors that you should place your focus on. And if you look even deeper, by comparing the price movement of these strong sectors with the KLCI over the last 2 days, you could actually find THE STRONGEST sector this year – Technology, as it is the only sector that continue its upward momentum despite the overall bearish market. That is where you should put your money into. Not very difficult isn’t it? To learn more, check out our December workshop here.
Good luck investing/ trading in this tough environment!