Tuesday

Markets Recover: China Leads The Way

Post a Comment March 3, 2009 – 4:55 am |   | Permalink |  Print This Post |

Could this be the day where it makes an intraday reversal? - TheInflationist -

ASX 200 made a miraculous recovery from minus 2.4% to 3230. We unloaded half our holdings in our personal portfolio at 3225, and look to reestablish our long at 3185-3190. Unexpectedly, China H-Shares are now in positive territory. All our positions opened last night are flashing green, including our USD/AUD (and Euro/AUD in our personal portfolio - the high of the night was 1.99978, shy of our 2.0 mark). We reassessed our positions, the charts and are comfortable for now at least to hold on. The markets are so oversold that even if it was meant to head lower, it needs to go up first. This is ideal to take any position - unfortunately few have the patience to wait, us included.

Looking at the chart morphology, there is a small chance that last night’s low may not hold (Sorry folks, we wish could be 100% right too). So, profit protection is compulsory (we will set ours at our entry point). We also will take $5/pt profit at 6940 if it gets there later tonight. Be mindful that the market seldom moves in one direction from preopen to close. Looking at June/July period again, it may have a few days sideways or 200 points lower to hit 6500.

Recall our earlier post on 23 February 2009 when the Dow was at 7155:

The morphology of the chart suggest a further sharp drop to reach terminal velocity, then stabilize, and suffer further subsequent decay of 50-100 points. Perhaps a fall to 6950 sharply, then a more gradual decay to 6850 to complete the downward complex. At that level, all bulls should have died.

We are slightly off the mark, but the general prediction have been right. Could last nights drop be the sharp drop we expected, followed by a gradual decline phase of 200 points to hit another virgin round number ie 6500? We received an email from a reader providing “contructive feedback” commenting that we have been revising our targets and “changing our minds” very often. That is the nature of trading. The target moves, and we get continuous data daily to guide our next trade plan. The trick is to stay ahead of the markets ie to get in at extremes, take profit, and be protected if and when markets move against you. There is no pride in trading, and always have a contingency plan and to admit that you are wrong. So long as you make more right calls than wrong ones, you should be ahead.

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