Trading Idea for Week of 6 Apr 09

A Look At the Big Picture - DJIA: The Dow has shown signs of recovery. The million dollar question is, "Is it time to buy?". I'm cautiously optimistic. Shortist beware... At best, it will continue recovery; at worst, it will move sideway for another few weeks in search of the next trend direction. We are at a key crossroad, the chart has formed a classical ascending triangle. However, does the market have enough strength to break the resistance line? My guess is perhaps yes, but not this week as the market has been grossly overbought. The volume has been declining as the DJIA rises. This price/volume bearish divergence is a sign of imminent trend change. Hence, some consolidation is expected in order for the bull to gain strength before it charges again. The catalytic news would be the quarterly earnings results of the big banks. Given the implementation of the mark to market accounting rules, the banks could report positive earnings for the quarter. Could this be the catalyst? Maybe yes, maybe no. It depends on how investor perceive the effects of this new rules.


STI: The outlook for STI is more positive than the DJIA. The rise in the ST Index has been supported with good volume. This is a sign of strength of the market. The market could garner enough strength to break above the ascending triangle. I guess many investors at the sideline over the past few weeks were afraid that they may be left behind, and started to buy into the market. However, beware. Whether the trend is sustainable would depend on the performance of the DJIA. Many of the local counters are grossly overbought. A better strategy is to wait for a pull back and buy at key support lines. In an uptrend, the Index will likely be supported by the 20MA line, similarly for the various stock counters. Patience is the name of the game.

My Stock Pick from Indicators Watch:
Nil from Indicator watch.

Disclaimer: My assessment of STI is for fun reading only. It is not an inducement to buy or sell nor an investment advice. By reading this blog, you have agreed that I shall not be responsible for any profits or losses based on the information provided.