I’ve been getting some emails from people who failed to capitalise on the recent run up. Just like the downtrend went further and faster than anyone anticipated, this bounce has also gone further and faster than anticipated. A lot of traders have therefore been outflanked and outpositioned by this recent move. My condolences if you were one of those who sold in early June and did not get back in through fear only to see things bounce back up before you made your decision to get back in. If you’re one of those people, DO NOT ATTEMPT TO CHASE THIS RALLY.
Sure, things could go even higher but in the long run, the probability is that you will lose money if you start the chase now. Remember that most trends are started by sharks or ’smart money’ who offload it to ‘lambs’ after the majority of the gains have already been made; and a great trader once told me that 80% of any rise gets captured by sharks first and then only the last 20% gets caught by the public. Therefore the question you need to ask yourself is whether you are being set up by shark activity. In my opinion many factors are allowing the sharks to create the perfect set up to inflate prices so that they can load things off at a profit: 1) Earnings season is upon is, which means that many companies are taking this opportunity to window dress 2) Stock prices have plunged dramatically to drive pretty much the majority of buyers out of the market and 3) Markets are enjoying a rebound across the globe, led by the US on perceptions of Fed activity. Although there is no limit to greed, the sharks understand that there is a limit to fear so the point came in mid June to call a bottom.
It does not take a wizard to see the number of white candles on the KLSE charts so just ask yourself whether you’re willing to dive in now after the last 9 out of 11 days have been up. Even if I were bullish I would at least wait until we found a pause before buying in. The only activity I would be happy to engage in right now would be to sell. Other than that, I would handcuff my hands to my chair and sit this one out. There are better opportunitites out there to chase than his one.
Just my 2 cents!
