Technical Analysis – 25th Feb 2009

Hello all, just a quick note before I get off work. It has been a very busy day for me so I haven’t been looking much though.

In general, a good opening ,but a very weak closing.

I think we could have 2 scenarios. Rebound/consolidation as a wave 2. It may rebound, or it may go sideways. Or, a very short tech rebound before a continuation of wave 1 (down wave).

Waves 1 and 2 generally lasts a couple weeks each and we will only know what happened when we look backwards. Dow is in wave 5, but STI is not. It should be wave 1 which may explain the difference in price movement. On the upside, I do expect 1680 to be tops. Jay feels the 1650 region is more likely. On the downward side, 1580 is proving to be quite strong for now, but, assuming we have wave 2, the subsequent wave 3 should take us below 1580. If you remember wave 3s, they are very strong. Wave 2s are technically also very strong and powerful but it could also be a simple and short rebound, and we have not seen either yet. It is possible we are consolidating for the next move down as wave 1 continues, or we could trend sideways between 1580-1650 for an extended period. We will have to watch.

For now I did not add in any positions yet and am staying out for most of it cause I am not sure if it will head sideways, or will there be movement. The strategy to play in this scenario is a breakout scenario where if support cracks, everyone’s gonna head in.

Watch out if you begin to hear a lot of buy calls from analysts and banks, which may suggest distribution (them offloading to retail investors by issuing buy calls). Generally you will see a rebound but thereafter head sideways, when it breaks below it will be fierce cause retailers will realise they got conned and join in with the dumping.  That’s market psychology for you.

I am eying offshores and commodities at the moment, waiting for the right timing to enter.

I am gonna be very busy for the rest of the week so I’ll do what I can up here if there’s any meaningful movement.

Trade safe, stay safe!