My market outlook as at July 6, 2006 remains unchanged. I still expect trading to be range-bound between 920 to 935 levels, with greater volatility than what one has experienced in the past 2 to 3 weeks.
My market alert issued on Thursday (July 6) may now appear a bit alarming. To wit, I had issued the market alert to point out that the market’s short-term outlook might have turned negative as a sign of reversal in the form of a Japanese candlestick pattern known as an Evening Doji Star was sighted. On hindsight, we can attribute the sharp drop in the CI on Wednesday (July 5) to the market’s overreaction to two news items; firstly, the Tajudin Ramli’s revelation regarding his acquisition and subsequent disposal of MAS shares and, secondly, negative development in the Korean Peninsular. The subsequent recovery on Friday (July 7) was very convincing as reflected by the 5.56-point gain in the CI (which closed at 925.56). Gainers led losers 482 to 241. Volume increased to 794.4 million shares compared with 677.0 million on the previous day.
Yesterday’s trading was even heavier with 1.062 billion shares traded. Losers, however, outnumbered gainers 381 to 329. The CI dropped 0.70 point to close at 924.86. Heavy volume unaccompanied by gain in the CI after a sustained rally could be a sign of distribution. In the light of the earlier market alert, I would advise caution for any trading in the market for the days ahead.
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