Thursday, September 15, 2011

Blue chips are also topping out...

Over the past few days, our market has been very lethargic. When European & US markets dropped, we followed. When they rebounded, we failed to rebound. In fact, if you looked closely at the individual stocks, you would notice that more & more stocks are going down even though FBMKLCI was relatively unchanged. The reason is for this dichotomy is that a few blue chips are holding up the index when many stocks are loosing ground.

If we looked at the monthly charts, we can see FBMKLCI has peaked & is poised to drop. This is based on the MACD & RSI indicators turning downward. We should note that the ADX is dropping but the -DMI has yet to cut above the +DMI. This means that the downtrend has yet to start. However, if we have waited for the ADX to flash a warning on a monthly chart, that warning would be too late for effective action. In my opinion, the signals from MACD & RSI are sufficient to put us on guard & to step aside from the market. For the Chinese readers, you can check out my column in Merdeka Review for this week (here).


Chart 1: FBMKLCI's monthly chart as at Sept 2, 2011 (Source: Tradesignum)

I have also appended below the charts of a small selection of finance stocks (CIMB, PBBank & AMMB); construction stocks (IJM, Gamuda & YTL); building material stock (LMCEMT); property stock (SPSetia); and auto stock (TChong) which have also shown clear sign of reversal. This is a small selection because other stocks have not exhibited clear-cut reversal. These coupled with the weakness in 2nd & 3rd liner stocks, are signs that the market may not be able to stage a decent bear rally, as expected earlier.


Chart 2: CIMB's monthly chart as at Sept 2, 2011 (Source: Tradesignum)



Chart 3: PBBank's monthly chart as at Sept 2, 2011 (Source: Tradesignum)



Chart 4: AMMB's monthly chart as at Sept 2, 2011 (Source: Tradesignum)



Chart 5: Ganuda's monthly chart as at Sept 2, 2011 (Source: Tradesignum)



Chart 6: IJM's monthly chart as at Sept 2, 2011 (Source: Tradesignum)



Chart 7: YTL's monthly chart as at Sept 2, 2011 (Source: Tradesignum)



Chart 8: LMCEMT's monthly chart as at Sept 2, 2011 (Source: Tradesignum)



Chart 9: SPSetia's monthly chart as at Sept 2, 2011 (Source: Tradesignum)



Chart 10: TChong's monthly chart as at Sept 2, 2011 (Source: Tradesignum)
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7 comments:

  1. IvanThursday, September 15, 2011 2:50:00 PM

    Thanks Alex for the posting. Shall we short the FKLI ?

    ReplyDelete
  2. Alex LuThursday, September 15, 2011 3:05:00 PM

    Hi Ivan

    Shorting the FKLI looks like a good trade.

    ReplyDelete
  3. IvanThursday, September 15, 2011 3:16:00 PM

    But the issue is I awlays apply cut lost. .end end burnt my brokerage ..and the market goes my way . . after i cut. . huhu :(

    ReplyDelete
  4. sookpengThursday, September 15, 2011 3:41:00 PM

    Alex,
    Sunway is trading at 2.02 now. High volume traded since late Aug that coincides with the price drop. Are you aware of any activities that may explain this ? The Surise merger did not seem to add value to Sunway as the price did not go up much after merger. Any comment ?

    ReplyDelete
  5. Alex LuThursday, September 15, 2011 3:47:00 PM

    Hi Ivan

    ha ha

    What you want is low-lying food. For the past 1 year (until recently), I keep hearing investors talking about their mistakes in not buying in early 2009. I believe I will soon hear people talking about their mistakes in not selling in the middle of 2011. Our instinct & intuition failed us. The worst time to buy stocks could be when we are carefree about risk and conversely the best time to buy stock may be when our head is ringing with worries, like 2008. But it is not that easy, isn't it? You & I are worried now. Then we should be buying, right? Why aren't we? See my point?

    At the end of the day, you would agree that we make money in investment for taking risk. If you accept that point, and you exercise careful discretion- don't take unnecessary risk- then your investing experience may improve.

    ReplyDelete
  6. IvanThursday, September 15, 2011 4:04:00 PM

    Thanks bro for the sharing ^_^ and input

    ReplyDelete
  7. DJ MaxThursday, September 15, 2011 5:09:00 PM

    Nice chart on there.. Good one Alex.

    ReplyDelete