Saturday, May 16, 2009

Singapore Stock Market a Bear Market Rally!

Key points from article written by Daryl Guppy this week:

  1. It is not a pretty picture.

  2. The trend line starting from the November 2007 high and touching the May 2008 high defines how high the market has to rise before we can say the downtrend has ended.

  3. The value is around 2300. That’s a big jump, and a strong rally from the trading band breakout at 1900.

  4. The long term Guppy Multiple Moving Average (GMMA ) indicator also confirms the analysis. The long term GMMA provides a resistance barrier. The lower edge of this barrier is near 1900. The upper edge of the long term GMMA is near 2250. This is a wide barrier. As the market moves through this area, it must be able to retain trend strength. The wider the GMMA bands, the more difficult it is to maintain the momentum of penetration.

  5. This, and the position of the trend line suggest there is a low probability of rapid trend change. It suggests there remains bearish pressure.

  6. Of course the rally from 1900 to 2300 is eminently tradable as rally.

  7. It is a higher risk proposition if traders take this as an investment opportunity into the early stages of a longer term trend change.

  8. The weekly chart allows us to more easily define the potential trading brand. Support is located near 1450 and resistance near 1900. This is a strongly developed trading band.

  9. The trading band development suggests there is a higher probability the Singapore market will continue to develop a rally towards the trading band breakout targets. This will also provide good trading opportunities.

  10. These rally style moves may have much higher values in individual stocks.

  11. The key in trading in this environment is to treat a decline in momentum as an exit signal, rather than as an entry signal at a point of temporary weakness. In these conditions, temporary weakness can rapidly develop into substantial weakness, destroying profits rapidly.

Rallies offer excellent short to medium term trading opportunities if the trader does not forget to exit. A strong rally that continues for several weeks is not by itself evidence of a new long term uptrend.

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