Is there a 2nd chance to join in the rally?

Fundamentally, nothing has changed in the past 3 weeks since the markets rallied strongly. Eric Fishwick, CLSA head of economic research (he warned in 2008 that Singapore government estimates of growth of 4% to 6% were too optimistic, and as it turned out, GDP growth for 2008 was only 1.1%) remarked "from end of 3Q2008, global trade has collapsed, and at present, there is very little evidence that a bottom is in sight." He also doubted that governments in Asia will be effective in solving the looming "growth crisis" as a mountain of debt in the US forces the latter to tighten its belt and save more. Apart from China and Singapore, most Asian governments have appalling records in driving fiscal stimulus. With respect to the current rally, he suggested that investors may be getting too excited about the supposed improvement in the global economic picture, and it is unlikely that this is the beginning of a sustainable pick-up in growth. He added "Anyone banking on Asian governments' successfully implementing fiscal policy is being extremely optimistic and downplaying experience and the current political situation". He continued "Even if Asian economies are close to an inflection point, it is still unclear whether they will then move into recovery mode or simply wobble along in a fragile state. "It's part of a cycle that is far from complete."

Ananthan-Nageswaran, Julius Baer's chief investment officer, also said "it wouold be some time before Asian policymakers accept that tough reality (that currency devaluations across Asia to prime the region's sputtering export machine will be unsustainable). We haven't reached the bottom. The recent run-up in global equity markets is nothing more than a trading rally." He added "Based on years of history, I don't think the market bottoms when everybody is looking for it to do so."

However, should I trade based on fundamentals, or based on what I see in the charts? Daryl Guppy remarked "Trade what you see on the chart, not what you believe." He and I certainly see tha same thing on the chart, that markets are priming for a move upwards, even though it is unsustainable. The moving averages tell the story, as has been the case with Sino. Prices have broken above the weeklies (showing a long-term uptrend, as has not been seen for a long time now.) Daryl recommended trading the index CFDs, but I think trading Sino, a China stock is even better.

It is a shame that I was scared out of Sino earlier. Just shows my immaturity in trading (therefore, I am not ready for full-time trading yet). But, is there a second chance for me to join in the rally, even if this will eventually peter out? Should i rush in tomorrow to buy Sino again?

It depends on how long I think the rally will last. Most indices have already made 20+% gains in the past 3 short weeks. Can they go higher? Surely, even if they go higher, they will need a breather first, and that will perhaps offer me an opportunity. But then, how to then differentiate if it is just a correction or a reversal? I believe at this juncture I have a few options.

Option A:
To buy Sino at market (price now 5.77) tomorrow. But the price is a good 0.77 above nearest MA. This would make a bad entry, and cause me unnecessary panic later.


Option B:
To buy Sino when it falls back nearer to 10-day MA of 5.00, on hopes that it refuels for a second wave up. This predicates on the belief that firstly, Sino price is going to correct soon (it may not), and secondly, the rally gets its second wind.

Option C:
To sit out for the rest of the rally, till it reverses course, then short the S&P or DJIA. But extremely costly in terms of opportunity.


I think Option A is not a wise option, since it makes me a market-chaser, which I don't want to become. But I remain extremely confident of what Sino chart is trying to tell me, but just not so confident on the rest of the market (fear that they will reverse course soon). However, going by looking at the charts, I think compared to the Nov-Jan rally (the moving averages were falling then), this rally is a more powerful one (meaning, it will last longer). Since it started only in March, I would suppose it can have another 2 - 3 months, before it turns, therefore, still some time to play it. Even Daryl acknowledged " It's probably better to describe me as a very young calf, but it's not strong bullish pressure."

Therefore, I would go with Option B, and assume that the market can continue to power ahead after a breather. I would be looking to reenter Sino nearer to the 10-MA line. Therefore, my new strategy constitutes:

1.Buy Sino-Ocean, on a bullish candle, near the 10-day MA line. Must not be more than 20 pips away.

2. Set stop loss below 50-day MA.

3. Buy 2 lots, as I will be risking only the profit earned from Sino. ( I have identified this to be the main factor why I am not fulfilling my trade potential, see next article.)

4. If above conditions not able to be met, then abandon plan, and get ready to use Option C.