We have to accept the market is in the bad condition. The market is not exciting at all. If you remember my previous post, "we need to respect the market, do not trade against the market trend". Most of the stocks will follow the market trend. Technical analysis will not work well in the down trend market. However technical analysis can help us to minimize the risk in the down trend market. It can help us to decide where we should take profit or cut loss to exit the market. So I hope that you can do the same, maximize the gain and minimize the risk.
What should you do during this time?
1. Maximize your cash. Your exposal in the market should be less than 30%.
2. Wait for the market to correct further, sideline first.
3. Do not average down. Most people like to do averaging down.
4. Do more home work and get ready for the market to rebound.
5. Observe the local and global market trend and economic data everyday.
6. Login in to my Blog to check the daily updates.
From now onward, I have to pick the counters very careful. I will only pick the counters with higher chances. I am still looking for 2 types of trends and a candlesticks formation.
1. Continuation trend like:
Break out from ascending triangle, symmetrical triangle, descending triangle, wedges, trend line and etc.
2. Bullish reversal pattern like:
Inverse head & shoulder, rounded bottom, cup&handle, double-bottom and triple-bottom. These patterns are not easy to find now. But if the market continue to correct, we might be able to find some. They are very reliable.
3. Reliable bullish reversal candlesticks formation like:
Bullish engulfing, hammer, morning star, bullish kicker and etc.
Put these stocks in your watch list for the time being, I will check tonight and see any other potential stocks which will run soon. Now there are many stocks suddenly pop-up from a consolidation phase since many months ago. Frankly speaking we are not able to catch them because there is no signal at all, like increase in volume and etc. Normally the volume only a few lots to a few hundred lots daily during the consolidation phase. In another word we called it a "collection phase". Now is the time for the “Smart Money” to distribute to you. Did you notice JAYCORP and AEM?
Watch List doesn’t mean it can buy now. All depend on the real time market action. When we buy a stock using technical analysis, we don't "eat the head and tail". We are not greedy, we only want the center part. If got a chance I will explain that in future.
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