Sunday, June 11, 2006

Trading with volume

Over the last few days, i read up on volume which is the oxygen to the stock market. The heavier the volume, the more commited the traders are. Blow off is the last surge at the last stage of a trend. As we know we are now in a bearish phase of the stock market and that many people are looking for bottom and reversals to go long. Blow off is one such sign. Where after it happens, the stock retested the lows on a lower volume offering excellent chance to catch reversal.

Remember how we rally very strongly during the first few months of 2006? Then, every other day market rallies strongly and people were calling me names, "even monkeys make money during a bull market" they were right. Not because i'm a monkey!! But the buying sentiment is really strong and everyone jumped onto the bandwagon until a point where there were no more buyers left to continue this run. A trend feeds on itself where bulls keep buying and bears keep selling. During a bullish phase, the bulls buy at the sell queue, the bears have to buy back higher to cover position thus aiding the rally. This is a self sustained trend. The same is now happening. The bears are bold enough to sell to the buyers at the bidding queue during a bearish phase, the bulls are selling lower to cut loss and ease their pain.

Some will argue that the economic view is still strong. Stock market is more than just economies. It is about human emotions and is often sentiments driven. Hence to me, I prefer respect the sentiment driven factor and trade with my eyes wide open amidst a growing economy for I know, the stock market is at least 6 months ahead of economy.

I tried successfully ambushing the bears at support levels for Hongguo last week. I sold for quick profits. It doesn't make sense for me to swim against the downtrend. Also, I notice the market has the knack of performing a one day wonder rally to trap people. Really is hai si lang!(hokkien for dragging people into trouble)

(In my trading class, there were a few non chinese, i apologise for my Singlish used in this blog and the lesson. But if it will drive accross my points in local context, i will continue to use it and give you the English equivalent. haha!)

With my focus on the world cup, it will be great if we can help each other out. I invite you to key in the stock you think is interesting in the shout box above daily from 5pm to 8pm. The stock with the highest count will be charted and posted up on my blog. Let's work together and tua tua huat!!! :D (hokkien for prosperity!)