The technical rebound could have come to an end

The technical rebound could have come to an end

The last week was indeed one of the happiest and satisfying weeks for the retailers after the sudden bear strike. However, the favorable short term trend could have come to an end. For those who have not profit taking on some of the fundamentally sound stock, you could have to consider doing so.

Technically speaking, the technical rebound is weakening last Friday due to lower volume. The intraday chart is clearly showing weak price and volume actions when KLCI reaches strong resistance line at 1200. Besides, the technical rebound itself is too fast, and it is highly likely that speculators would like to lock in profit gained from the technical rebound during the week. Despite lower volume which indicates danger, the strong opening for everyday in the past week, which had produced amazingly four gaps on every morning of the white candle, is unhealthy. In my opinion, this could be highly likely a tactic used by the foreign investors to spike up the price for distribution. Definitely there are still some foreign investors, hedge fund particularly, who are sucked in the strong downturn. As such, while not predicting the next trend (even though it is anticipated a down turn again the next week), speculators should be advised to take profit and stay sidelines with cash. The Friday doji that signal a possible reversal point is already a strong valid reason to leave the market. Again, safety first, make money later is always an important part of the trading game.

Looking forward, it is reasonable to expect that the carry trade effect is not over. Assuming the human behavior is a normal distribution, it is reasonable for us to expect there are still some carry trade speculators, driven by greed and hope, still in the market; be it intentionally or being forced to do so. Besides, US economic problems and uncertainty in Middle East nowadays should also demand a higher risk premium for investors, which mean a lower stock price in the near term. Moreover, March is also often associated with low price, where the possibility of China to increase the interest rate compounded the problem.

Patient is everything now. Stock timing is nothing and stock selecting is also nothing. Patient is everything now. The sound support line for the next boom hasn’t been formed yet. The bottom of the seabed is still unpredictable. It is now better to hide in the house like a tortoise to watch some nice shows in the market. Ultimately, it is not the thinking, but the sitting that make the money. To rest, by itself, is also a kind of investment…