Tuesday, April 20, 2010

SSEC may have a bearish breakout

Shanghai's SSEC index lost 150 points to close at 2980 yesterday. In the process, it broke to the downside of its symmetrical triangle at 3000. So far this morning, there was no sign yet of any recovery in SSEC index. In the early hour this morning, SSEC index dropped further to hit a low of 2940 before rebounding. As at 10.10pm EDT, SSEC rebounded to 2967, still nursing a loss of 13 points. It is important that SSEC index should recover above the 3000 level quickly. Failure to do so would sign a reversal from the prior uptrend. If this scenario panned out, the outlook for SSEC index would then turn bearish.

Chart: SSEC's daily chart as at Apr 19, 2010 (Source: Stockcharts.com)


Unknown said...

Hi Alex ,

will KLSE stock bearish breakout ?

Alex Lu said...

Hi phkoay,

I know this comment is belated. I like to say that at this time, we find more traders getting into the market, taking sizable position because they feel that the market is good & the risk is low. I do not agree. I feel that the market is fairly extended & the risk ignored. The current rebound will soon test the short-term downtrend line resistance at 1338-1340. If it failed to surpass that level, we may see further correction in the market.

kyong said...

Dear Alex,
My view on the KLCI is extremely bearish , if it drifts below the 25D moving average, then we have to be cautious and stay aside temporarily.
I AGREE with your comments totally.

kyong said...

Dear Alex,
Do you deal with indices future markets ? I would propose for those who deals with index futures to look for opportunities for 'Shorting' the future indices, it may be a good timing!

cheer said...

HI Alex, how do u think the TA for Success base on ur last post at http://nexttrade.blogspot.com/2010/03/success-slowly-but-surely.html

Alex Lu said...

Hi kyong,

I am very cautious in the present market. If you feel the same way, then you should consider reducing your exposure in the market.

Shorting the index futures can be viewed either as an aggressive move or a form of insurance. Assuming you are long on stocks (say a RM100k portfolio), you may choose to protect the entire portfolio by shorting the index futures for an equivalent amount. In this case, you are only exposing yourself to the upside of the stocks in the portfolio. The financial term referring to a stock's performance relative to the market is 'Alpha'. Fund managers also use this term to describe their effort to beat their index.

If you have no position in the market, then shorting index futures would give a net exposure in the market- where you would gain if the market dropped, but you would suffer if the market rallied higher. While you may be bearish, it may be too early to short the market. I remember a fund manager who shorted Qualcomm in 1999 after the stock has risen from USD3 in October 1998 to a high of USD100 (adjusted price) in early 2000. The stock continued to rise & eventually he had to cover his short position at a huge loss. The stock crashed thereafter & dropped back to a low of USD13 in August 2002.

Alex Lu said...

Hi cheer,

Success has tested its uptrend line support at RM1.19-20 on April 19 & 20. If the uptrend line is not violated, the stock may rebound & continue on its prior uptrend.

kyong said...

Dear Alex,
I agree with your comments fully.
I have actually reduce significantly my exposure in the share markets since last week. Normally I do not want to insure or hedge my KLSE trading ,unless when trading US shares which I would use Options to protect my Share Investments.
When the KLCI is bearish,I would look for opportunities in trading the future index of KLSE , so that I still can be busy.
Thank you again for your excellent comments.