I had to cut my loss in Dow last night. No good... 7.2k would be a better short. I was too early and tempted by greed. Each time when i build up good profits, i tend to take risk... this is something i must stop doing! Imagine i shorted at 6.8k and have to cover 6.9k thereabts. 100 points loss... ouch! Must be NOL.... keep tugging at my Achilles thus affecting my thinking process. Even with Wednesday's closing, i am still not too sure where the market may be heading.
I painted two scenarios:
a. It was an intra-week rebound. If so, i would expect market to keep falling and the volume to be great. But it is not so. Thursday we didn't close too badly and some of the stocks remained firm. Hence Scenario A may be wrong.
b. This is just a rebound week and next week we will turn down. If it is a rebound week, by Friday we should close white candle on the weekly chart. But next week? How would i know if next week gonna close lower or higher? This i draw conclusion that we are near support.... the 52-week low support on STI, HSI and Nikkei with the exception on Dow. Hence if we are near support and the weekly chart shows a reversal pattern or bullish patterns, high chance next week we may trade higher. Thus, the risk/reward is in my favour. Of course i have to watchout for over head resistance. I must take note of Banks and properties... where are their resistances and how are we trading there. Another level to note will be the resistance levels on the indices. Here we are darn far from it hence the upside is attractive. Furthermore, base on recent reports, news on Citicorp and better-than-forecasted retail sales figures signal glimpse of hope that the economy may have stablised.
I had also covered my UOL short and turned one long on STI. I am betting on scenario B here. I think risk reward favours going long from here. I am especially excited that Dow closed doji after a strong 400 points advance. M asked me, why isn't the doji bearish. I explained, if the doji is at some resistance or support then it is more significant. At 6900s, it is not at resistance.
What about the psychological 7k? It is only a psychological resistance... from the chart, i am eyeing 7200s to be resistance and that is the level i am watching. This is also the reason i rather cut loss on Dow short because i do not want to be squeezed till that level.
With the above scenarios visualised... i formed my opinion on how the market should move. I have started a position in STI long. I wouldn't want to go all agressive as yet. But if i do see higher lows... that is where i seek my confidence and may go for the big kill!
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