Trading Room – Mon 29 Oct 2018
The market selldown has seen Bursa Malaysia and the global markets falling more than 10%-30% from their highs and the situation is worse for the mid and small-cap stocks. Notwithstanding the fact that we have exited much earlier as guided by the Master Algorithm, we do understand the fears of the common traders as they are spooked by negative media news and persistent falling share prices across the board.
It is also a hard time for value investors and fundamental analysts in justifying their consistent high fair value for stocks whose share prices are being sold down every day way below their “fair value”.
Falling prices attracts more selling like margin calls and force selling and it could be a vicious cycle.
What if it turns out to be a real bear market? Will it get worse and should you despair?
At first glance, it may seem ironic and even preposterous.
Can bulls prosper in a full-blown bear market?
The answer is a definite yes. It’s a fallacy that smart bulls cannot prosper in a bear market, far from it actually.
Change your strategy and the way you look at the market in a bear market and you will find that the market always favours the niche elite traders holding the trading edge regardless of the market conditions.
In fact, there are plenty of opportunities for both sides (the bulls and the bears) to make money in a bear market as highlighted numerous times in our mPower Algorithm reports.
The bulls can exit at high prices and buy back at much cheaper prices, initiate protection for their portfolio through short instruments and derivatives (where the regulations permit), average ONLY at key critical levels (if they chose to hold on to their portfolio), trade and rebalance regularly while holding long depreciating positions as the market falls, and much, much more.
Hence, it’s a myth that long (buy) traders are stuck with losses in a bear market. In fact, there are so much more opportunities to make above-average and supernormal profits in a bear market as volatility rises due to fear and share prices become very cheap.
Hence, common traders should not despair in a bear market as the opportunities are abound.
What is of paramount importance is to ACT at the exact critical price level and time ONLY and let the selldown takes its course at other times.
As for the bears, it’s obviously a good time to avoid or short stocks (where the regulations permit) as prices tend to move very fast and violently in a bear environment as investors (human) fears and panic take over and decisions may not be rational over the short term.
Using the mPower Master Algorithm that tracks millions of market data daily, traders can get a gauge of the daily market trading outlook through our proprietary algorithm-calculated buying and selling power in the market.
Even understanding and armed only with this broadest outlook of the market would have save a lot of traders anguish under the current market selldown and is published by us daily at Focus Malaysia for the benefit of all fellow traders in the market.
That said, as highlighted above, a bear market can actually be a wonderful opportunity for smart traders and investors.
We intend to guide our fellow elite traders to navigate and prosper in the current turbulent and weak market and prosper where and when others fear to move.
Shift your strategies and mindset as the market environment changes. Follow us for daily and intra-day updates here as we use both human and machine skills to navigate the market and thrive.