BEST STOCKS:Technical Review 11th May 2009

 

We all have to take risk everyday we live, like it or not. Even going to work is a risk, but it is a risk that we have to take. We drive our car, motorcycle, take public transport, walk, etc. All of them have risk.

Let say you are driving on the PLUS highway. The speed limit is 110km/h. If you drive at or below the speed limit, say at 90 km/h, it is possible for you to get into an accident? Of course you can! Even though you are driving at safe speed, it is still possible. If you drive at 200 km/h, can you get to where you want to be? Of course you can! Provided you don't get into an accident.

The difference here is that at 90 km/h, it is more likely that unfortunately accident happen to you but at 200 km/h, you're the one who went looking for the accident. In stock market words, if you want to buy now, I would say you are driving at 200km/h. The risk is high but you still might get away with it. Obviously the question here is whether you want to take such risk?

Recently I was asked why I gave the warning last week, when it was rather obvious that market strength was still good. After giving my views for few years, I remember being commented for getting the direction correct but sometimes, it was too late. Most of you could hardly do anything. Like in March last year before the election (which was 2 weeks before the election), I was very concern that market was prone to a major correction. By the time it happened there was nothing much you could do.

Still, do not get too concerned with what I said above. The risk of entering market right now is a major correction, not market collapse. This is not the same thing to what happened March last year. I see more upside to market but only after market corrects. The way market is behaving right now is eerily similar to previous behavior, where market can continue to go up until Thursday but Friday and the next day might cancel all the gains that it had in the last 1 week.

Right now I do not know how long this stretch of gains will continue, but I will know when it happens and so will you. Experience will also tell you that when that happens, you could hardly do anything by then. However, I do have the feeling that if KLCI goes straight to 1050-1100 by end of this month, it would not be a good sign. I'm still not sure why so let us see how market goes first.