Market Analysis for KLSE (Thurs 27-3-08)

I already talked about KLSE bottoming and pinpoint for a rally with my friend since last friday. Since the rally is in, I decided to give some critical levels for KLSE market analysis.

Confirmation for Further Upside Level = 1263
If 1263 is BROKEN, KLSE will move up to 1330, max 1352.

Market Outlook for KLSE (March)

(courtesy of Metastock chart)

I haven't been updating my blog for a long time, as I went into a lazy state till now. I have joined a technical analysis firm and have improved my technical skills a lot. So now I will like to see how my training been paying off by applying my new skills to our KLSE.

Time Horizon = 1 to 3 months

Market Strategy = Stay Neutral until either upside / downside pivot is broken. However, I am more towards bearish bias.

Preferred Case = Bearish (sell shorts)

* If downside pivot of level 1340 is broken, a drop will occur to 1270 before max 1160.

Alternative Case = Bullish ( buy longs )
* Unless upside pivot of level 1435 is broken, then a rise will occur. Target not calculated as I am more towards bearish bias.

Bearish Indicators (Not shown on chart)
* Last high at 1524 could be the last top of Wave 5 (not a perfect top of preferred wave 5).
* Daily Volume showing bearish divergence.
* Daily Price action below 30-MOV.

Rebound or Jump?

Time to rebound or time to jump? Massive bloodbath as we continue our week. Yesterday USA continues to show its stock weakness, as investors/traders continue to sell into any rally. Nasdaq almost make it to green, but selling comes in late and takes it down more than 1%. This shows how negative the situation is and at the same time, making indexes and stocks (especially financial stocks) very 'oversold'. Previously, people can just buy any dips and will see a rebound working past previous highs, but unfortunately not this round. This time, the strategy is "take yr time to jump off the plank". But I believe we should see some relief rebound soon, because Thursday is USA's thanksgiving holiday.

Look for HK-warrants, as they are smashed down the most, and will have the most profitable rebound, 'if' the rebound occurs.

GO and Trading: Part 1

There's a board game that I extremely loved to play and has been playing for more than 3-4 years. The game is called 'GO' or in chinese known as Weiqi. This game consists of 19X19 board and two colors - black & white. The game rule is very simple (2 rules only), but the gameplay is very complex. The reason why GO game is very complex, is because there's no fixed or 'perfect' solution for every move, and thus even the current strongest AI computer cannot beat a newbie professional player even with a handicap of 9 ( i can easily beat AI with handicap of 4-6 ).

In GO, different players have different playing style. I will illustrate further with two top pro players below:-

(1) Lee Sedol (korea 9P, Age: 24) (Left Picture)

Playing Style: Aggressive ( focus on killing groups ), Play high-risk moves by sacificing own groups for bigger kills.

If he trades in KLSE, he likes: PN17 counters, HK warrants.

(2) Lee Changho (Korea 9P, Age: 32) (Right Picture)

Playing Style: Conversative, play steady moves that takes into account of overall picture/game balance, doesn't take much risk

If he trades in KLSE, he likes: High-dividends stocks, Blue Chips

Although these two players have different styles, they are the world top players. Lee Changho has the most number of champion titles (International & Champion) in the world, while Lee Sedol, now in the bullish 'form', is now considered as world No '1' due to dominating China & Japan's top players in recent international competition. The reason why they can perform well is because they are playing a style that suited their character and personality. And the most important objective is they are comfortable with their style and brings out the 'best' out of them. Despite each style has their own pros & cons, both styles had helped them to achieve world-class professional.

Likewise in trading, there are many methods to trade the market. You have breakout strategy, mechanical systems, swing trading, support/resistance strategy, intraday strategy, value-investing ,etc. So, to achieve success in the stock market:-

(1) You must find a style that fits your personality and most importantly, you are comfortable with it. All styles can make 'big' money, except individual styles do well in different parts of a trend. Breakout strategy works well in high-momentum stocks, Support/Resistance strategy works well during a stock's temporary correction, etc.

(2) Achieve 'mastery' in your style. Backtesting, continue to upgrade your style through reading books, and doing performance evaluation of your trading style.

(3) If you are investor, dun try to be a intraday-player. If you are investing for the long term, dun look at intraday charts every minute and got into emotion 'fright' when you see big blocks of selling during intraday. Likewise a short-term player shouldn't become an investor. If you see your stocks hit your stop loss, dun think that "oh, i dun feel like taking that loss, lets hold for a few weeks to see if it can rebound for breakeven sell."

KLSE: Strongest Index in Asia?

Seeing the market so 'boring', I decided to study how our asia neighbours are faring in this downtrend compared to KLSE. The rise % is based on the rebound from lowest pt during the subprime meltdown issue in August and the drop % is based on the current downtrend from its Yr High.

KLSE : Rise 24% Drop 3%
Korea : Rise 28% Drop 10%
Singapore: Rise 31% Drop 12%
Hong Kong: Rise 65% Drop 14%

From the stats, KLSE is doing the best of the four, since it only drops 3% compared to the rest of the region dropping at least 10%. Of course, KLSE is the 'least' risen stock exchange. But if you take a real study of this data, our KLSE drop% is definitely look 'distorted'. In fact, the reason why our index is holding up strongly is because of funds holding up index stocks and the bullish performance of some plantation stocks. Based on my calculations (which i rather not shown here, since its pretty complicated), KLSE should 'correctly' drop another 4-5% if it is to follow the rest of the region downfall.

Trades for 16 Nov 07

Our Market closes in the green (+5 pts) with winner-losers ratio of 2:5. We all have seen this quite common, sincely the market can practically support itself with those index-linked counters, while the rest of the 2nd-3rd liners all ride its way 'down'.

The market is definitely trending downwards. I can't find any attractive trade nowsdays. Thus with the spare time i have, i can only read books and search the internet for interesting stuff.

A very funny picture that I come across.

Trades for 15 Nov 07

No interesting trades to look. In fact, i believe our market is getting weaker and weaker. Many charts I look at does not have any high-probability setup, instead they are more looking towards the downside.