Bulls are back!

The US markets declined pretty sharply on 13th December last year but 2 weeks later it hit into a longer term support and started to rebound (just as sharply).  Right now while it is stil lbelow the 200 days moving average, the chance of it recovering above the 200 days MA is looking pretty plausible

Note: 

When prices are above 200 days Moving Average (market is biased toward bullishness)

When prices are below 200 days Moving Average (market is biased towards bearishness)

Our Straits Times Index (STI) has been on the decline since it peaked on 2/5/18, finally hitting bottom at the start of this year.  Due to the long 8 months of sluggish markets, many of the stocks are now looking good for some uspide with bullish reversal patterns.

Straits Times Index

Examples of some charts with bullish reversal patterns (ie odds of the chart sustaining further upside is high).

City Development

Frasers Property

Venture Corp

SATS

Disclaimer: remember that while the odds are high for a stock with bullish reversal pattern to be profitable, it is not guaranteed.  A stop loss is still necessary should the trade not work out.

There are a lot more bullish looking stocks now.  Good luck!

US markets could be rolling over

Since my last post 2 months ago warning that markets could be topping out, there have been pockets of hope as rebounds came just as intensely.  However, the huge volatilities that have plagued markets for most of this year is usually an ominent sign that markets could be toppish.  

Early this month, US and China announced a trade war truce for 3 months and a few days ago, China announced that it is cutting US car tariff to 15% (a whopping reduction from 40%).  All these should bring cheer and optimism to the markets and yet it did not. The warning signs that all is not well are there.  We will need to see a major lift from current levels before we know the worst is over.

The charts of various major markets indices speaks for itself.  Most are poised to roll over. Perhaps only the Chinese and Hong Kong markets (which had been beaten down to low levels now) may not suffer as much and maybe even be finding their footings.  

Will STI follow the East (China and Hong Kong) or the West (US and Europe)? It remains to be seen.  Watch for the critical support level for STI at 3000.  Any breach of this level means it's better to stay safe and stay out for now. (Unless you are an astute short term trader :) )

Straits Times Index

Dow Jones forming a Double Top (potentially bearish)

Nasdaq forming a Head & Shoulders (potentially bearish)

German Dax is already in bear territory

Nikkei 225 - Formed a Double Top (potentially bearish)

Hang Seng Index - Bearish but could be bottoming out

Caution - Markets Could be Topping Out

11 October 2018

The US market has been hanging on the verge for the past 5 days before finally giving way to a whopping 3.15% plunge last night.

A closer look reviewed that the Dow Jones is forming a potentially "Double Top" while the German Dax has formed a "Head & Shoulders", both of which are "bearish" formations.

Where does that leave STI?

STI hit the top on 2 May this year and has been on a slow decline since.  What looked like months of
"consolidation" for which I was looking for possible near term support around 3040 might be in danger of breaching at the moment, a breach of which could bring it towards 3000, if not 2500.  Caution!

The STI is vulnerable to external shocks.  Expect more volatility in the days ahead.

Potentially bearish Double Top forming in DJ and S&P.   Whether the neckline holds remains to be seen.

Dax is on the verge of breaking down the H&S neckline and if it does, then the ball is set in motion for the bear to continue towards the 10000 level at least.

The Markets Had a Big Sell Off, what's next?

The free fall in the markets that started a week ago on Friday (2 Feb 2018) which cumulated to a low on Tues (6 Feb 2019) was a rather huge plunge of 12% for the US markets and 7.5% for STI.

For a fall of this magnitude, I am cautious that the "perma" US uptrend has been disrupted and we can expect volatility ahead. I am still expecting a rally/rebound of blue chips in the coming days and where the next rally ends will give a clearer picture of whether what is happening now is just a much needed correction or a sign that the market is getting toppish.

The market could be finding some support now and I am looking for possible short term upside in the charts below. However, should any of these significant supports be breached, then I will cut and stay out until the dust settles.

(click on the charts for a larger view)



S&P - Finding support at 200 Day Moving Average?

 Straits Times Index

OCBC Bank

 

SATS

On the Flip side, not all stocks are equal.  Some stocks like YZJ have confirmed a bearish Head and Shoulders formation and could be heading lower in the coming days. 

 



 

 YZJ

Disclaimer:

Any view, analysis or opinions expressed here do not constitute an investment advice nor inducement to trade. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested.

 

Cityneon - Inverted Head & Shoulders formation (bullish)

Cityneon could be forming an inverted Head & Shoulders (H&S), a potentially bulllish formation, one of my favourite patterns to trade!  See explanation for this chart pattern here.

I have drawn a slanted as well as a horizontal neckline.  Initial entry is at 0.91 (based on the slanted neckline) and should it be able to go above 1.00 (horizontal neckline), then the inverted Head & Shoulders formation is double confirmed.

Should Cityneon be able to break above 1.00, I will look to take partial profits at 1.08 and then 1.20.   Of course, projected target may not materialise (though the odds are quite good with a H&S formation, but odds aren't guarantees), hence trailing stops are still required on the way up.  

Chart Patterns for Major Trend Reversal

I love trading chart patterns when I see them.  If you are a shorter term trader, you will be looking for candlestick reversal patterns.  Candlestick reversal patterns are useful for astute traders for get in and out of a swing (which may last from minutes to days depending on the timeframe traded).  

However, if you are someone who prefers to look for major developing trends (ie early stages of a bull or bear market), then you should look out for some major reversal chart patterns that formed after an extended up or downtrend.  These patterns usually takes weeks or months to form and confirm.

Here are some some major bottoming or topping patterns that I look out for:

• Head & Shoulders 
• Double or Triple Top/Bottom
• Adam & Eve

1.  Header & Shoulders 

Below is what happened to Dow Jones in 2008 (Subprime crisis).  The warnings were there in its chart pattern months before sub-prime became daily headlines news .  

Sometimes, a chart that has broken below the neckline could "recover" to retest the neckline.  Should it falter here, it is the last chance for investors to get out.

After a major decline in 2008, Dow Jones began to show a bullish reversal H&S by July 2009.  The headlines all over were still extremely gloomy but if you had sported this inverted H&S, you would have seen "opportunity" instead!

What I wrote about DJ in 2009.  It was right on cue.


2. Double Tops or Bottoms

In March 2009, STI retested and bounced off the low that occured in October 2008.  This formed a double bottom (a major one as it was after an extended downtrend and took months to form).  The astute trader could enter as soon as they see a strong rejection of the last low while the conservative traders would wait for a confirmation to form (ie a break above the neckline) before staking.  Still plenty of upside from there.

Double Bottom

 Double Top

3. Adam & Eve 

Adam & Eve Top/Bottom is the modified version of a Double Top/Bottom, with the retest of the 1st top/bottom being a more gradual and rounded formation.  Sometimes the pattern is more apparent on the weekly (rather than daily) chart.