Wednesday, April 22, 2009

Asian markets poised to correct

A quick glance at some of the major Asian markets (with the notable exception of Shanghai) will show that many have been rising in a near vertical fashion, gaining 35-40% over the past 6 weeks. Most of them are now marginally below their respective uptrend line. If they break below the uptrend convincingly, we are likely to see a deeper & longer correction in the days ahead. Our market, which has been a laggard, has only managed to record a gain of 16% (from its low of 836 on March 12 to today's high of 976). Unfortunately, we will not be spared if many of the regional markets were to enter into a correction now. So, we may have to reduce our trading position over the next few days. Those hoping to buy for longer term, can do so when the prices have retreated.


Chart 1: Kospi & TWII's daily chart as at 21/4/2009 (Source: Stockcharts)


Chart 2: Kikkei & HSI's daily chart as at 21/4/2009 (Source: Stockcharts)


Chart 3: STI & BSE's daily chart as at 21/4/2009 (Source: Stockcharts)
at

2 comments:

  1. chanyipFriday, April 24, 2009 11:48:00 AM

    Hi,

    May I ask, normally how long does correction takes place? Does correction also include the long term downtrend?

    Thanks!

    ReplyDelete
  2. Alex LuFriday, April 24, 2009 2:05:00 PM

    Hi Chanyip,

    Corrections can happen in different timeframe and in different market- an uptrending market or a downtrending market. It simply means go back some of the territory gained.

    So, you may have intra-day correction, i.e. a correction within the day of a big move. There are corrections that last a few days, which some would call consolidation. There are also some that last weeks or months, which are called bear market.

    For the present market, what we are trying to avoid is a correction that may last a few days (hopefully). If you have a bullish view of the market over a medium-term period, you may just ride through the correction. This means that you hold onto your shares. You may use the correction to accumulate more position in the market.

    If you are a trader, then you should be concern about this correction. The swing in price could be as much as 10%.

    ReplyDelete