Hello guys…
I guess that it was really a long time since I write any full blog post. Well, I apologized for the irregular blog post as I am quite busy with many things in life and that includes my recent exploration on various techniques to further improve my trading skills. Time seems to be short for me. Well, I have some key dates to look out for next year. In fact, it could be major date to be aware of. I am not releasing the information now due to the fact I need to back test my finding to confirm whether my analysis is correct or not. Many of us wonder where and when will the bottom be for the global financial markets? For this post, I will address key levels to watch for in Kuala Lumpur Composite Index (KLCI).
If you follow my blog post, I had highlighted all the major key resistance and support levels for KLCI. Under the post "Upcoming political turmoil…", I had highlighted the following key support / resistance levels.
- 1038 points
- 922 points
- 883 points
- 745 points
Ok, you asked me which one is the bottom? There is no answer to that yet. The things that we trader do is to watch the market behavior at key crucial moment in time and crucial support and resistance levels. One thing we must understand is that market doesn’t moves in a straight line. It just won’t go straight up or straight down. This is one of the market principles that you must understand and remember. So far, if you observe the Malaysia KLCI market, you will notice that at the above mentioned crucial levels, it does rebound back. However, the rally would not last and continue its downtrend move. Keep in mind that we are still in the bearish trend. In fact, the word "bearish trend" is deceiving. It actually must be put in context. There exists at the same time various trend movement in an individual market. There can be a "bullish moves" within a "bearish moves". I will talk more of that some other time. Ok, the one million dollar question is "What we should do with the key levels mentioned above?"
Here is what we should do and it depends a lot on individual trading styles. I promised to talk about trading styles. Give me time to do that. Eventually I will do that. Generally principle is to observe the market behavior and see if it forms a base of support / resistance at the crucial level. Watch to see if it rebound from there. If it does, I list a few things you might want to consider doing assuming that you are a position trader.
- Take profits on half or more of the position size
- Get out from the market completely and wait for the corrective move to end
- Turn completely and trade along with the corrective move
Let me explore further the mentioned actions that are available to us. Taking some profits is highly recommended especially if you have some substantial portfolio size. This action will enable us to lock in some profits while still anticipate further continuation trend movement when the corrective moves end. Beside that, we could actually add to the position size when the corrective moves near its end. This can be highly profitable.
Getting out from the market completely is also a viable action. This will help us to have a clear mind and wait for the next clear signal to trade. Some people prefer this method because they hate to see their profits being eaten up by the corrective moves. However, not many people can do this successfully especially if they are impatient. They might see the market moves up and down and they think the corrective moves already ended and jump back in at the wrong timing. Well, this happens.
The last action is highly discouraged unless the person have the eyes fixed on the market and also able to manage their risks properly. They might also want to trade intraday instead of holding to their portfolio overnight. Another thing is that they might want to trade a much smaller portfolio size that their usual trading volume. Why should he do that? That is because the corrective moves might end suddenly and resume its primary trend movement. Partly is also due to the fact that corrective moves are difficult to judge. Just ask yourself, how many times do we think the market had bottom and new bull market had just started and then suddenly the market turns and trend lower than previous lows? The answer is within this question. Ok. I stop my pen here. Keep in touch.
Oh, by the way, I will really appreciate if you guys come and warm my blog with your comments and questions. You may also throw your temper at me if I had given wrong market call and causes you to loss money. However, the risks are there and you still have to bear your own risks. Put it this way, when you make money, I also don’t get a single cent.
At this moment of time, the KLCI touched a low of 880.81 briefly after forming a small base at 882. Now it rebounded from there to trade at 890. Interesting isn’t it? If you don’t feel interesting, please check my other post to see the wonder of technical analysis. If you do wonder why I only mentioned 1038 points in the blog post title instead of other key levels mentioned in the post, then please drop me a line of comments. I will tell you.
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