Technical rebound

The world market rebounded strongly on Friday, thanks to the concerted effort by the six central banks and the U.S. government on the bailing out of AIG, the largest insurer, and the market responded strongly. However, that may not be the end of the U.S. financial crisis yet, as how many more big trouble case are there is still to be uncovered. For the DJIA, It is just a technical rebound for the time being, and back to its sideway consolidation zone of 11,000 - 11,800. It need to be able to break above the 12,000 mark before any meaningful trend change and bull run can take place.
As for the KLCI, the index has tested its downside targets and rebounded from the lower trend channel support strongly, forming a long lower shadow doji star reversal pattern. This reversal pattern was confirm on Friday by a bullish candlestick. The bullishness may continue, however, the overhead resistance will be seen at the 1038, 1050 and the 1070 levels.

Technically, this is just a technical rebound which could be shortlive, and maybe view as a good opportunity to get out. The down trend of the KLCI has not change until the CI can work its way to break above 1100 level.

As it was mentioned before, there are always opportunities during a crisis. Those who have followed the market closely and understood the market signals of smart-money accumulation would have made some quick profit on many counters.

Anyway, trade carefully with your stop loss always in place, you'll be alright. In trading, it is not how much one can make per trade, it is how consistent and how long you can last in the game that counts.

On track

One month ago on 20th Aug'08 I posted the chart (on the left) and the possible target of KLCI, and I mentioned that "Based on the chart pattern formation and the projection, a likely bottom may be around the 1014 to 990 level, which is actually not that far away now. A major panic that cause by the success of the Anwar's 916 plan can easily push the index down by few tens of points." Today, on the 17092008, Anwar's plan has not materialized, however, KLCI already move on track to its target level.

KLCI closed at 1002.99 dragged down by banking and plantation stocks. It is now on the verge of breaking the 1000 mark, a major psychological support level. Based on the trend channel projection and the horizontal support level, the KLCI may continue to head towards the downside target of 980, 970 and 950.



The DJIA is really looking bad with all the trouble going on in its financial sector, it broke the important psychological support of 11,000 and even pierced right through the 10,800 support level to close at 10609. Based on the same projection technique, the downside target of DJIA will be at the level of 10180 and 9740.

Back to the beginning

Took a break from writing to observe the market. Situations have not change very much. Since my last posting, KLCI has not moved anywhere, it was trapped between the recent low of 1064 and the high of 1100.50 registered on 29 Aug '08 on budget announcement. It losses steam very fast, as mentioned before that was just a technical rebound. Foreign fund continue to sell down on blue chip shares has dragged down the KLCI, we are just at the edge of retesting the 1064 low, if this is breached, which is likely to happen, will see another round of selling that would bring the CI down to 1048 level. The government is trying hard to prevent Anwar's 916 plan from happening, but would that stopped the CI from sliding down? The fear factor is dominating the market, many are just selling to stand sideline. Volume has remained very-very low in the 300 million shares region, showing a lack of interest from the retailers, however, the smart-money or the big-boys are happily collecting from the fearful sellers.

The charts of all other major bourses show that the market has come back to where it begun. The chart of DJIA and S&P500 of the U.S market shows that they are in a sideway market, one day up and one day down. For the time being the DJIA support at the 11,000 is crucial, and the ultimate support will be 10,698. If the is breach, the whole world will have another knee-jerk, and DJIA will go back to where it begun, the is the 10,000 level.

Taking a breather

(Click to enlarge image)
Since the last posting, the KLCI has plunged further by another 50 points to a low of 1064.58, led by heavy weights such as SIME, IOICorp, Commerz, Maybank, KNM, etc. This shows that the foreign funds are dumping the local stocks in view of the uncertainties lingering the local scene. As mentioned before, the KLCI came down to test the critical psychological support at 1100, no defense were seen there and the next level of support at 1189 were also broken easily. This shows that the foreign fund just want to cash out and local fund was just happy enough to let share price come down to collect at low level.

The falls of KLCI eased off slightly at the 1065 level, and the KLCI rebounded slightly today in line with other bourses in the region. Daily volume traded over the last few days was miserable at about 300 plus million shares a day.

Market was filled with gloom and doom. The listing of Perwaja today was at a wrong timing, where the share was opened at 2.80, -0.10 below the IPO price, the share was sold down to a low of 2.34 before closing at 2.48, -0.42.

The question on everybody's mind is where is the bottom? Seriously, the bottom is not found yet. Based on the chart pattern formation and the projection, a likely bottom may be around the 1014 to 990 level, which is actually not that far away now. A major panic that cause by the success of the Anwar's 916 plan can easily push the index down by few tens of points. What to do then? Get ready your ammunitions, as great opportunities are always found during a crisis, do your homework well so that you know what to catch.

At the mean time the KLCI may have some rebound, however, any rebound is going to be short live, as players will sell into strength to cash out. This is not the time to buy for long term yet as the bottom is not seen yet, one can only trade very short term for technical rebound provided you can read the market well, and catch the rebound right on dot. Otherwise stay sideline.





Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.

Continued weakness

Since the last update a week ago, nothing very exciting happen, except for the Beijing Olympic Games 2008 which open on Friday 080808. Somehow the Chinese loves the figure "8".

Bursa Malaysia is experiencing continued weakness with the KLCI sliding down to close at 1118.78 yesterday on very thin volume of 292 million shares traded. Plantation stocks continued to weigh down on CI with IOICorp closing below 5.00 at 4.82. The CI has come to close at a very crucial support level now, as this was a strong support level previously. A break of this support may see the CI sliding further to test the critical psychological support of 1100. The low volume indicates that the buying interest is very weak, hence, the market may continue its current trend.

Our government has formed a national economic committee to strategize on measures to boost the economy, and hopefully the coming budget can help to inject some life into the market.

Technical rebound and a deciding moment

The KLSE saw some active buying yesterday with the CI surged up 12.34 points to 1154.09 and volume rose to 785 million shares. This volume coupled with many active 3rd liners counters rising indicated that the retail players jump in actively after a 2 months down trend since 20th May from the 1302 level. However, one need to exercise caution when trading under the present scenarios. I would say that the market is at present only experiencing a technical rebound after an almost continuous fall for 2 months under all kind of negative factors, be it economically or politically.

Technically one can see from the chart that the CI was deeply oversold and fall beyond the lower LR channel, a pull back or rebound is expected. As mentioned previously, CI has to go above the 1160 level in order to stay within the long term uptrend channel. At the moment, the overhead resistance is at 1157 which was the low registered on 10 Mac 08. The downtrend line and the 30 days MA are also pointing at the same level which make the 1160 level difficult to cross at the moment. The CI may pull back a little before it gathers enough strength to break the resistance at 1160. A small inverted head and shoulder was formed, and the CI break through the neckline yesterday, this indicates that if CI is able to break through the 1160 level, it may have a chance to test the 1200 level indicated by the brown dotted line. This is a deciding moment in which if CI can't hold well and head south again (with more surprises surfacing), then we may even see it going to the 1080 level.

Hopefully the coming budget 2009 can inject some life into the market which it badly needed. Do keep track on this blog for trading opportunities.

Technical Rebound

Last few days have been very much like a roller-coaster ride in the KLSE. The CI first found a support around 1120 and rebounded to 1153, the there comes more surprising news and pressed the CI down. Last Friday, the CI took a further beating when the foreign funds sell down major plantation stocks like SIME, IOICorp, KLK etc. The way KLK falls was really scarry, down by Rm2.60 to a low of 12.60 from 15.20 in 2 days before recovering slightly to 13.70 yesterday. This tells us that during a bear trend, no matter how fundamentally strong is the stock, it will still come down under market force. So, never fight the force, flow along with it, that is what trend trading is all about.

Yesterday, the CI rebounded slightly to closed at 1109.57, just slightly above the critical psychological support of 1100. It is very important for the CI to stay above this level, otherwise the downside level mentioned in last post will come true. The immediate overhead resistant is at 1120, for the short term down trend to reverse, the CI must be able to go above 1160 level. However, under current economic situation worldwide, with the high oil price and the many political sendiwara taking place in our country, the CI is lightly to consolidate within a range of 1090 to 1120 to build a base before any uptrend rally can take place.

As the market is deeply oversold, where the CI actually falls continuous for almost two months nows, it might be an opportunity for the medium term player to pickup some quality stocks. There are also some stocks that refuse to come down with the CI and even buck the down trend, these can be a very short term trading opportunity. Whatever, you like to do, placing a stop loss is very, very important to help preserve your capital, as you might be wrong again.

Bleak outlook

The regional market including KLSE plummeted yesterday following the Dow's fall on Monday, a result of the continuing financial crisis in the US. This round it involves the two mortgage giants Fannie Mae and Freddie Mac. Locally, the political uncertainty is a little settle with the PM's announcement of his handover plan.

Technically, the CI is not looking good. It has gone into a bear trend. Fibonacci retracement of the recent up wave points to a extended target of 1116 (127.2 % extension) which is where we are very close to right now, the down move may only complete at the 161.8% extension which point to 1066 if the 1100 psychological support is broken. A 200% extension will bring the CI down to 1007 level (green line). Base on the major head and shoulder pattern neckline breakdown, the medium term target is 990 (brown line). Based on the linear regression channel, in order for the CI to still stay within its long term uptrend, it must find its way to stay at least above the 1160 mark.

That is just the broad picture of the CI's future outlook base on technical studies, which looks bleak. However, one must remember that not all companies are affected by the current financial trouble of US, there are still sectors and counters that may buck the down trend, this will need one to do some serious homework to find them.

Roller-coaster ride

The bearish sentiments still prevail in the market. KLSE yesterday opened with a slight dip due to overnight Dow's small loss. It then rebounded on speculative buying especially on Gamuda and KPS, CI bounded to the intra-day high of 1136, and profit taking sets in. In the afternoon session, CI took a dip due to heavy selling on plantation heavy weights like SIME, KLK and IOICorp, many that posted gain the morning session turn red. KLCI finished the day at 1121.25, near the low of 1120.31. Volume increased to 450 million shares traded, with market breadth at 258 gainers to 344 losers. The increase in market volume indicates selling by the foreign fund especially on blue chips.

The Support now at 1120 is critical, if this is broken, we may see the CI plunging towards 1102. The other leading indicator is the CI future, FKLI for July has already gone done to the low of 1083 and closed at 1090, running at 31 points discount to the cash market.

The market will turn irrational, when major support like 1100 is broken, this will draw another round of irrational selling. However, as it always is, at the selling climax, it is always the market bottom. Hold your belt tight for the roller-coaster ride and get ready your bucket for the quality stocks at deep discount.

Bearish sentiments, bearish trend

Since the last posting, the market has been through many changes. Oil price keep making new highs which lead to greater worries on inflation, locally political uncertainties has worsen the situation which lead investors into selling.

Yesterday the KLCI has came down to test the 1157 level which was the low registered on 10Mac08, the CI saw no defense at the level and went straight to test the psychological support at 1150 and registered a new low at 1149, late bargain hunting help to bring the CI to close at 1153. The question now is how low will the CI goes? Technically speaking, the KLCI has entered a bear trend, it will continue to go lower to test the support at 1141, 1130 and 1105. The best strategy now is to hold cash.

Market goes through different phases just like the the four seasons, we are perhaps going into the winter now, this is perhaps the time to hibernate, but as a trained investor, we should be diligently doing our homework while others are hibernating as opportunities are always found in a crisis. Look at the relative strength of the counter relative to CI, look at signs of substantial shareholder's accumulation can perhaps give ones a clue as to where the opportunities are.

Consolidation

The market turned very quiet the last few days, volume dropped to an average of just over 300 million shares. The KLCI is hovering around 1230 level, as mentioned is previous post the market sentiment is still bearish, and is entering into a consolidation phase with a downward bias. The high oil price plus political uncertainty is the current main concern of the market. CI may still move between
1215 to 1240 with a southward inclination. If 1215 is again breach, CI may again visit the 1190 territory.

Despite the gloomy atmosphere, there are some stocks that are against the general market trend, Takaful is one of them. However, one need to be more cautious trading under the current environment.


Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.

Bearish sentiment

The market sentiment was bearish since entering June. The announcement of price hike in petrol on 040608 has caused a big fear in the market, and resulted in a sell down on last Thursday. The dumb money (panic sellers) was really irrational and push the CI all the way down to 1214, however, the smart money came in quietly to buy and manage to bring the CI up to close at 1223.56 (Thursday 050608). On Friday, the CI turned very bullish, moved by TENAGA,which saw the largest single day gain of Rm1.70, and closed the gap at 1248.57. On Monday, 090608, the CI again suffered another round of bashing due to DJIA closing down 394 points last Friday. However, the candlestick of CI actually shows an up day despite the fact that CI was down 17.59 points. This indicates that the big boys (smart money) was actually accumulating the blue chips at this level. Similar candlestick formations are seen in many of the blue chip counters.

The market sentiment is generally bearish, the moving averages of very short, short, medium and long term are all pointing south indicating down trend. Since CI had already broken all the key short term support at 1250, 1241 and 1233, the immediate support at 1215 is critical. If this is not defended, we may see CI revisiting 1180. For the immediate term, we expect CI to move in a narrow range of 1215 - 1250.

However, one don't need to be overly bearish, there are still counters such as KPS, Kencana and a few others that are moving in divergence to the down trend, if you do your home work, you'll be able to find them.


Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.

CI heading south

On Monday, 020608 the CI was for most of the day holding around 1266 to 1268 point, but a last minute sell down push the CI down to close at 1262.49 (-13.61, -1.07%). Volume was very thin at 390 million shares. This indicates weakness and lack of participations in the market. As mentioned in previous post, the CI may slides further south to test the support at 1250, 1242 and 1233. The immediate 60 MA support is at 1255.

Last few days the market focus has been on those Property and Construction companies that have exposure in Vietnam, e.g . Gamuda, SPSetia, BJLand. Taking Gamuda as an example, from the lodgment to Bursa on changes of substantial shareholders, one can see that in actual fact the substantial shareholders has been selling their shares since 20May08, the big boys were doing it quietly at that period, however, the close on last Thursday which break the important psychological support at 3.00 was an indication of the selling down by the big boys. Hence, it is important to track the movements of the big boys. As there is no indication of bottom yet, Gamuda may move further down to test the downside target of 2.10. Don't try to buy low, any up move now is just a technical rebound, a chance for those who still hold the shares to sell. One will have to wait for a trend change before considering buying Gamuda.


Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.

Corrections

Previous week was a bad week for the KLSE, it started the week on last Tuesday with a negative response to Tun Dr.Mahathir's exit from UMNO and continued with more corrections on the KLCI. The KLCI closed the week at 1274.78 near the weekly low, down 26 points w-o-w forming a bearish engulfing candle pattern on the weekly chart. This week, the KLCI is expected to continue testing its immediate support at 1271 and a critical support at 1264. If 1264 is breached, then CI may visit 1250, which is the 38.2% Fibonacci retracement level of the recent up wave.

A new record high of crude oil price of USD135 has put more inflationary pressure on the US economy, hence, the downward correction of the DJIA to close near the week low at 12,479.63 forming a bearish engulfing candle on the weekly chart.

For the KLCI, the continue high price of the crude oil may have positive effect on our plantation stocks, hence, may cushion off the downward pressure on the CI slightly. Plantation and oil and gas stocks such as Ioicorp, KLK, Swkplnt, Dialog, Kencana, Sapcres, Tgoff may continue to attract attentions of the investors.



Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.

1300 - A strong resistance

Monday, 190508 our ex-PM Tun Dr. Mahathir threw a bomb, declaring his exit from UMNO. This of course will cause some panic in the market. On Tuesday, Bursa Malaysia opened with a small dip on the CI, and going sideways for the whole morning session. The CI started to plunge just before lunch break at 1215. The afternoon session saw the CI plunging further to 1285.20(-15 points) after opening bell of the second session, and a technical rebound actually lift the CI off low to close at 1287.43 (-13.43 points). Volume was slightly higher at 652 million shares.

Many asked, "what is the impact of Dr.Mahathir's decision to quit UMNO has on the share market?" I personally think not much, except for a some panic among the usually panicky retailers who will get panic over any issues. The big boys usually make used of this human weakness to slaughter the retailers. The market will go where it wants to go.

Technically speaking, the KLCI is really hitting a strong resistance at 1300 points. Last Friday's close at 1300.67 was a weak one, a last minute job, as the volume was low. If one were to study the chart of the DJIA and other markets that opened on Monday (we were closed for WESAK day holiday), the DJIA already formed a top reversal candle pattern on Monday and a double top chart pattern at 13133. So, the DJIA is expected to reverse for the short term, and it did. The rest of the regional markets were also down, so we were merely following, and Tun's action was only an excuse for the big boys to push down the market after a two weeks rise on the Bursa Malaysia. Chart wise, the KLCI is also forming a double top at 1302.

With the current development, the KLCI is expected to consolidate first for the short term, it may move within the range of 1250-1300. There are still some counters that are quietly moving up, one will need to put in some hard work to do your studies to find them.

To all my Buddhist friends, I wish U a belated Happy Wesak day, and may we all pray for the victims of the Sichuan and Myanmar disasters. Ami Tuo Fo.

Detached and Profitable

Why do you trade? Is it for the profits? Do you need to win? Many novice traders have difficulty achieving the ideal, objective and rational mindset. They may take trading losses, and subsequent drawdowns, personally. They see these setbacks as a hit to their ego, attaching personal significance and symbolic meaning to just an everyday fact of trading. Losses should be expected, and it's vital that you don't take them personally.

Certainty, it's natural for a person to feel upset and disappointed upon experiencing a severe drawdown. Financially, a great deal of money has been lost, and even if one were to return to profitability after a drawdown, from a purely mathematically standpoint, it will take some time to build one's trading capital back up. It's reasonable to feel a little disappointed, but it isn't useful to take it extremely personally, or let it impact your self-worth.

How does one control emotions and stay objective? It’s useful to remind yourself that many factors associated with profitability are not about you. A large part of trading profitably requires using a trading strategy that is capable of producing a profit. Sometimes it takes ingenuity to find such a strategy, but many times it is a serendipitous event. And there are those times when it's a matter of learning about a profitable approach from others. But in the end, it's just a matter of odds. It's just like rolling a die or flipping a coin (in some ways). One expects to make a profit over a large number of trades, but in the short term, even a winning strategy is bound to have a string of losers. That's just the nature of probability theory. A small number of flips is less than an infinite number, so it's quite likely to get a string of a 50 heads out of 50 tosses. So why make it so personal? Why put your ego on the line with each trade? Why gloat when you are lucky enough to have the odds work in your favor and sulk when the odds go against you?

When it comes to trading, you've got to unlearn what you've learned your whole life. It isn't all about you; it may just be the odds working against you. In other fields, probability plays little if any role. You put in effort, make sure you meet the expectations of the folks who pay you, and you're a success. In the traditional work environment, it makes sense to put a little ego and pride into your work. Your effort and talent often have a direct payoff. But with trading, the odds can still go against you, no matter how much work you put in. You need to consider that "success" can sometimes (but not completely) be a matter of odds. That's hard to accept for most people because it means that when you are a winning trader, to some extent, it may be a matter of the odds randomly working in your favor. That takes some of the glory out of it, doesn't it? But on the other hand, it helps you cope with a severe drawdown. If you are a skilled trader who really has mastered the markets, you can feel assured that, if you are trading at peak performance, the odds will soon move back in your favor, and you will again see consistent profits. Taking a detached, unemotional approach may take some of the glory out of trading, but on the other hand, it will help you stay unemotional, take precautions, such as careful risk management, and stay focused on the process of reading the markets, implementing winning trading strategies, and trading profitably.

The Problem

Many traders take setbacks personally and think it is a reflection of their self-worth. They put pressure on themselves to succeed and tend to choke under the psychological pressure. It’s vital to cultivate the proper, objective mental edge, however.

Mental Edge Strategies

First, use reliable strategies that have a high probability of success. Second, minimize risk so that you can more easily convince yourself to take it easy. (Don’t trade with scared money, and make sure that you can easily live with the worst case scenario.) Third, think in probabilities: Remind yourself that your strategy is reliable and that over a large number of trades, you will profit overall. Fourth, don’t put your self-esteem on the line with your money: Your net financial worth has no bearing on your self-worth. No matter what happens, you have value as a person.

There’s no need to let losses and setbacks interfere with your sense of well being. Stay detached, focused, and logical. The proper mental edge will increase your odds of financial success.

By Michael S. Shopshire, PhD, Mental Edge

Market turning positive

(Click to enlarge chart)
Despite the fact that the previous week was a down week for the DJIA, our KLCI walk a different way. The KLCI weekly chart formed a bullish harami candle, indicating hidden buying strength.

On Friday, the DJIA was down 121 points, but it did not really affect our market yesterday, the CI was down only for five minutes and it recovered very quickly into the positive territory and was going sideway most of the day, and a last five minutes work brought the CI to close at the highest level of the day. Volume traded remained low in the 500 million shares region. Most retailers are still having fear, and the big boys are slowly accumulating quality stock.
The strong plantation and steel sectors has help to move the CI up.
With these two sectors remain strong, it is expected that CI may move forward to re-test the 1300 resistance. If it can break and remain above the level, the next target will be the 1340 long term resistance.



As for the DJIA, it has been on a gradual uptrend since March 11, the short term is positive and the medium term MA has also turn upwards indicating the worst of the sub-prime issue is probably over. 12,760 is an important resistance turn support level.




Back to our local front, many of the lower liners are also beginning to turn active, indicating the big players has accumulated enough for the short term and is getting ready to push up for unloading, as long as one can read the big boys movement through the chart, we can benefit from their actions.

Some of the stocks to watch: Kencana, Sapcres, Lion, Huaan, Evergrn, Zelan, Masteel, Kinstel, Pmetal......

Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.

Sideway trend

There's an old saying, "Comes May, sell your stocks and go for your holiday." Since entering 2nd May, Bursa has been in a profit taking and consolidation mood. As mentioned in previous post, the KLCI was expected to come down to close the gap at 1267, and it did.

Yesterday, the KLCI was basically in a sideway and yo-yo mode, strong support was seen at 1271 level, the low of Friday 2/5/08, and eventually the CI closed at 1274 forming a Doji. The appearance of a Doji after three consecutive down days marked the slow down of the selling pressure, and a possible reversal. Trend wise, the short term is still up and the medium term is sideway with an upward bias, the CI is expected to trade within a narrow range of 1260 to 1300 for the immediate term with an upside target of 1340 in the medium term. Overall volume traded for the last few session was low, at the region of about 500 million shares only, this clearly shows a lack of interests, however, there are some stocks that are quietly inching up. So, scan through the charts diligently and you may find stocks that offer good trading opportunities.

Some of the stocks to watch, AMMB, IGB, MRCB, Kencana, Sapcres, KPS, MAS.....

Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.

Got Inspiration?

Many seasoned, profitable traders truly enjoy trading; they have a passion for understanding and mastering the markets. As one trader put it, "I find the game itself interesting. I enjoy watching how stocks react to news. It's always amazing to me how you can see small movements snowball into large herd mentality sorts of movements. A minor piece of news starts some selling, and then all of a sudden, there's more selling and more selling, and then there's a huge avalanche of selling. And it all started with just a minor piece of news...I find that very interesting." Another seasoned trader said, "I like the freedom trading gives you, the ability to earn a living while not having to have employees, the mental challenge, and the constantly changing environment." There are many reasons to pursue trading, and money is usually not the only reason. At the same time, even a thrilling activity like trading can become commonplace, and when you're in a slump, you can feel like giving up. At times like these, it is vital to find the inspiration you need to overcome obstacles and win.

In systematic studies, researchers have repeatedly discovered that peak performers have a true passion for what they do. Whether it's art, sports, or business, the folks at the top are not primarily motivated by fame, glory, respect, or status. They are driven by the inherent rewards of the creative endeavor itself. But even the most exciting job can become boring at times. Think of the hobbies, activities, and things that you once found exciting but no longer find interesting. It may be a sports car that you couldn't wait to drive but now view as a daily driver, or a favorite, expensive designer outfit that today you see as commonplace as a pair of jeans you bought on sale at Wal-Mart. Unfortunately, the initial shine seems to wear off.
What can you do when you lose your inspiration? It’s vital to rekindle your passion for the game. You may, for example, watch an exciting moving about trading, such as "Wall Street." If only we had so much wealth that we could change the course of a company, and profit it from it? Wow, it's fun just to be a small part of that, right? Or what about the commodities brokers in "Trading Places" who tried to corner the frozen concentrated orange juice market? These are romantic images that can inspire you. That said, if you are like most traders, you no longer see these romantic images as accurate. They may have motivated you when you first started trading the markets, but now that you've had some experience with trading, the tough realities of trading the markets may far outweigh the glorious images of amassing great quantities of wealth. But it's fun to take a break occasionally and daydream. It doesn't hurt as long as you can separate fantasy from reality.

Trading is a tough business. If you lose your passion for trading, all it means is that you are human. If you get bored, it's vital to remind yourself of the advantages of trading: You work for yourself (unless you are an institutional trader). You can work at your own pace, and feel that you have freedom. Remember what it was like to work a 9-to-5 job? Perhaps you don't. Well, that's an idea. "Absence makes the heart grow fonder." Maybe you could arrange to visit a friend for a day at a regular 9-to-5 job. It's not forever. It's just a way to rebuild your passion. Sometimes we forget why we trade. Again, like a thrilling sports car, we start to see the thrilling job of trading as mundane. Drive a compact car for a week and you'll see how great your sports car drives. Work at a regular 9-to-5 job for a few weeks, and you will find your passion for trading quickly. It may sound extreme, but it works. Maybe even after the first day, you'll think, "Oh, now I remember why I became a trader."

It's hard to trade successfully day in and day out. Some traders never lose their passion for the markets, but many forget just how exciting the markets can be. If you lose your passion, don't sit around sulking about how boring life can be. Go out and see how the other-half lives. You'll remember why trading is a great profession. And you will trade with renewed vigor and regain your mental edge.

By Michael S. Shopshire, PhD Mental Edge

Chart following Vs Rumours following

(Click to enlarge chart)
Two weeks ago, a friend came to see me in the office to discuss about "share" matters. I told him that some counters offer good trading opportunities, but he mentioned that he was told to sell everything before Parliament starts, so he would not buy anything. I did not insist, but I told him that trading is about following market trend, not about listening to unfounded rumours or comments. Of course he didn't buy those counters that I mentioned (he would now say aiyah! missed la! as usual). A week later, another guy (somebody high in position in my office) also mentioned that he was told to sell everything before Parliament starts, I laugh again. Today, the Parliament started, I didn't see our market disappearing or plunging to a new low, instead, many counters are doing well, and I have been locking in handsome profits. This is not to boast, but just to tell a fact that, following the chart is always wiser than listening to all kinds of advices from those commentators in the street (everyone has a mouth, they can say anything they like).


The market was very slow and quiet today (Monday, 280408). KLCI was up 7.23 points, in which a last minute effort push the CI up by 3 points. Volume was very thin at 486 million shares traded. This shows the market lacks participations from the majority. Maybe the market is waiting to see any surprises after the Parliament starts. On the weekly chart, our market has actually ran up for three weeks since 7th Apr, and has touched the short term target of 1300, and maybe it is time to take a breather. The 60 days MA is posting some resistance to the CI, however, the short term 30 days MA has started to point northeast indicating short term up trend. The very short term 5 days MA is giving some support to the CI. If the CI is able to break through the 1300 psychological resistance, then it may test the next target area at 1340. On the other hand, if the market continue to stay weak, the CI may come down to close the gap at 1267.

Some of the stocks to watch are: Parkson, Puncak, Kinstel, Zelan, Kencana, Sapcres, Sunway and...


Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.