Friday, March 27, 2009

Market Outlook as at March 27, 2009

On March 24th, I've noted that "a reversal in the USD uptrend could push funds managers to divest their USD assets (or, take some profit on their portfolio of US Treasury bonds) & invest in their funds in other asset classes, such as commodities, equity markets (domestic or overseas), etc. This could lead to a sustained rally in many Emerging Markets, including Malaysia. I believe it is a good time to take constructive position in our market". I am going to expand on this a bit.

Looking at the KLCI's daily chart (Chart 1), we can see that the KLCI has broken above the medium-term downtrend and is now consolidating in a side-way market. This bottoming process is likely to last for 3-4 months, with the KLCI trapped in a trading range between 840-950.


Chart 1: KLCI's daily chart as at 26/3/2009 (Source: Tradesignum.com)

From the weekly chart (Chart 2), we can observe the following:
1) The 20-week SMA has capped recent rebound. Currently, the 20-week SMA is at 898.
2) The MACD indicator is still in a "downtrend". In fact, it is now testing that downtrend line, which appeared to be blocking its upside move.
3) The -DMI is moving lower while the +DMI is moving higher. Coupled with the declining ADX, this seems to indicate the current downtrend is weakening.

When the KLCI was in an uptrend in 2007-8, there were two occasions (denoted as 'a' and 'b') where panic selling broke out in the then elevated market. Similarly, panic buying may also break out in the present depressed market. If that happened, you may use that opportunity to take some profit. What is a panic buying situation? You would know it when you see it. For example, it could be many days (say, 10 days or more) of double digit gain, to be followed by a break above 1000 mark (within the next 2-3 weeks). Sounds too good to be true? Normally, it is.


Chart 2: KLCI's weekly chart as at 26/3/2009 (Source: Quickcharts)

After the sharp run-up in global equity market over the past 3 weeks, some correction is likely to set in. You may use this correction to accumulate some stocks. Look out for laggards in the construction sector (eg. MMC, Gamuda & WCT); gaming sector (eg. MPHB); oil & gas sector; and, plantation sector. Good luck.
at

9 comments:

  1. Voyager8Friday, March 27, 2009 10:47:00 AM

    Hi,

    Is Resorts in the gaming sector a good counter to monitor for now?

    ReplyDelete
  2. Alex LuFriday, March 27, 2009 5:31:00 PM

    Hi Voyager8,

    Resorts is in the gaming sector. Some classify this sector as the gaming & casino sector.

    The stock has a strong rally in the past few days. It has tested its medium-term downtrend line resistance at RM2.20 today. While it managed to go above the downtrend line at one stage but failed to close above it. Genting has also come very close to its downtrend line resistance at RM3.94-96 today.

    Let's see whether these stocks will be more successful next week. I think both stocks are likely to enter into a correction phase, to consolidate some of their recent gain.

    ReplyDelete
  3. value investing in malaysiaFriday, March 27, 2009 6:32:00 PM

    Resort has a long term proven track record of profitability. thats a fact. but at current price maybe it is not cheap enough.

    is technical analysis really useful?? I dont think so.

    my views:
    valueinvestinginmalaysia.blogspot.com

    ReplyDelete
  4. edge2002Friday, March 27, 2009 8:36:00 PM

    everything gots its value, do not ruled out TA

    ReplyDelete
  5. messiSaturday, March 28, 2009 6:11:00 PM

    edge,

    would you mind to explain whats the value of TA?? how u determine its value? objectively?

    TA can b ur game, but experience and time will tell you whether it is workable.

    TA is not my way of investing.
    happy sharing!

    ReplyDelete
  6. edge2002Sunday, March 29, 2009 4:58:00 PM

    it doesnt make sense to me to discuss how TA works and FA do not works, it has been discuss for so many times, as long as the method u use is working for you or me.that is the best method :P
    it doesnt work for you doesnt mean it does not work for everyone :) peace

    ReplyDelete
  7. Alex LuMonday, March 30, 2009 9:51:00 AM

    Dear All,

    Thank you for sharing your thoughts on TA & FA. This is an interesting topic that I may devote more time on in the future. For now, let me say that you can live without TA, just as you can live without FA. A good example of a successful investor who lives without TA is Warren Buffet, the second richest man the world. A good example of a successful trader who can live without FA is Steven Cohen, the 36th richest man in America in 2008. From the book "Invest Like a Fox . . . Not Like a Hedgehog" by Robert C. Carlson, one would learn that even Steven Cohen, who used to buy a stock without knowing anything about the company nor its financial performance & position, begun to adopt some FA for the stocks that he purchased since 2002 because he felt that the condition of the stock market had changed.

    Personally, I believe in both TA & FA. I do not see why one must use one or the other exclusively. However, I think that the emphasis on TA may be more relevant in short-term trading, while the emphasis on FA may be more important for long-term investment, especially the kind of investment that borders on contrarian approach.

    ReplyDelete
  8. value investing in malaysiaTuesday, March 31, 2009 4:35:00 PM

    edge,

    if u insist on using TA, then good luck to u young man. but dont let emotions rule you. maybe u can use stop loss for short term trading.it is not easy to make money in stock market, let alone as fast as possible. :)

    example of TA:

    http://valueinvestinginmalaysia.blogspot.com/2009/03/market-forecasting-made-easy.html

    ReplyDelete
  9. edge2002Wednesday, April 01, 2009 11:40:00 AM

    I'm doing fine with TA all this while, I do not see the needs to switch to FA...still the same old works, it doesnt work for you doesnt mean it doenst work for me :)

    ReplyDelete