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Dead Cat Bouncing??

Posted by Share Synthesis Labels: ,

For the past month, stocks have been doing quite well. While it seems like it has hit the bottom, I believe that it is still too early to decide because this might be a retracement from the big selldown in stocks.


As I mentioned in the previous posts, I have adopted a longer term perspective of trading. I shall break down the general trending in stocks.

Short Term (12 days to 25 days)
It seems that it has reached the oversold region if you look at the MACD, ADX of the general STI component stock.

This is perfectly normal as we have been seeing a rally for the past month. However, whether it will hit oversold region and test previous lows remain to be seen.

Medium Term (5 weeks to 12 weeks)
Some stocks have exhitbited healthy mid term trends. These stocks (OKP, Raffles MG, China Fish, Wilmar) have lows higher than their previous lows, which are characteristics of an uptrend. Ultimately, these are the counters that I will be watching closely to see if they are to hit the start of the long term trend

Long Term (12 weeks to 26 weeks)
As stated in the previous posts, this indicator while limits trades, will be very irresponsive to changes and it is the initial indicators that bear the most risk when entering a long term trade. However, while some of the stocks show characteristics of a long term recovery, the fact that it coincides with a short term oversold means that there might be room for correction and risk of downside is therefore high.

Verdict
While there are opportunities, there still lies risks that are quite apparent. The fact that the start of the long term trends of some stocks coincides with the potential peak of some of the short and middle term trends shows that downside risk in the short term is still present. Based on general trends, I would suggest that we should hold and enter our positions at those which shows strong long term trends at prices which is near to previous long term low. This would minimize downside risk.

Reproduced with permission from http://nenixdreams.blogspot.com 



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