Things To Take Note In Current Market Reboud

Recent market rebound definitely strikes many investors' interest to jump back into the market. 

If you are still thinking about it, then you should finish this blog first to have an idea of the recent market rebound & what to avoid.

For those of you who always refer to KLCI to determine whether the market is good or bad, please take note that KLCI consists of only 30 component stocks. It doesn’t represent the total market. Usually, we don’t use the market indices to determine the market condition due to lack of insight of the big boys' intentions & often lag (you will only notice when the market has already gone bad). Is the same to FBMSCAP & FBMACE, because these indices consist of a number of selected stocks over 1000 plus stocks in the market. 

But for explanation purposes, we have to refer to index movement to show everyone which boards are usually the main mover of the market and we can base on the big boys in these indices to find out the market conditions. 

From the above indices chart comparison, you will find KLCI often has rigid movement compared to SCAP (Green) & ACE (Red). You might say because of the fundamentals or financially they are stronger. Yes & no, because there are good fundamentals stocks in smaller cap also. 

The main reason is that the share issue is lesser and more preferable to the retail investors (who always look for cheap stocks). So it is easier for the big boys to offload or mark up prices to attract buyers. (Different size of big boys in bigger cap stocks) 

That’s the reason why we only need to look at how big boys are operating in the market to decide whether the market will be bad or good. Like the current index rebound shown from the chart, we can see the main index moves are KLCI, EMAS, & SCAP but not the ACE market. 

But this doesn’t mean that you can move into any stocks in these indices. Because from our analysis we find not all stocks that move up in the KLCI are supported with high demand from the big boys (Price & volume data before rebound and during the rebound). 

We find a number of stocks in the index are moving like the chart below which shows that some big boys have started moving in months back. The volume is building up from every low. Do take note, big-cap stocks accumulate differently compared to smaller cap stocks. So the big boys will have to accumulate within a price range which results in a short term price up. Often will have a cool-down period to test the market for any more selling pressure coming back in before the price goes up.

Some stocks' prices are moving higher but without significant big boys demand building up, like the example below. Rather the price is up when every investor stays aside. Then the price is down when the market shows some confidence to the investors. These are the stocks that you should be aware and stay aside, they might be using market rebound opportunity to attract buyers in for distributions. (Part of the reason why investors & traders who read news or follow signals are often late into the market.)

Therefore not all stocks on the mainboard are going for a rebound. So don’t invest with your preference but invest by following the market. 

For smaller cap stocks you have to be careful with stocks that have price movements like the example below.

These are the stocks that markup the price fast before the market turns bad and attract buyers to distribute and price will go down slowly when the market is good. Because investors will only have confidence entering into such stocks in the good market and investors will feel safer to enter into such stocks at a lower price & expect the price to move higher. In actual fact, these kinds of price movements are big boys distributing with once in a while price hikes with volume to gain investors and traders confidence to buy their shares. (Often supported with good news or rumours.)

These are the stocks you need to be extra careful of if you are considering moving back into the market. But that doesn’t mean that stocks without such prices & volume movements are safe to move in. So do your study and understand how big boys operate in the market to gain knowledge of which kind of stocks we can move in. 

Hope this article will help you to avoid distributing stocks in the market and reduce the chances of losing. If you want to know more about big boys and identify accumulation, you may look at the link below to find out more.

Understanding big boys :

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This blog is for sharing our point of view about the market movement and stocks only. The opinions and information herein are based on available data believed to be reliable and shall not be construed as an offer, invitation or solicitation to buy or sell any securities. Round & Surge and/or its associated persons do not warrant, represent, and/or guarantee the accuracy of any opinions and information herein in any manner whatsoever. No reliance upon any parts thereof by anyone shall give rise to any claim whatsoever against Round & Surge. It is not advice or recommendation to buy or sell any financial instrument. Viewers and readers are responsible for your own trading decision. The author of this blog is not liable for any losses incurred from any investment or trading.