27 March 2021
Dear Fellow Investor,
On Friday the Dow Jones closed at an all time high while the Nasdaq continued to lag closing 8 % below its high. This shows a shift from over priced technology favorites to lower priced value shares. This is significant because US markets are driving world markets and effect our investments in Asian shares.
I am waiting for a shift in Malaysia to recovery plays in banks, autos, healthcare and consumer goods. Technology shares have been the best performing sector this year up 17.6 % this year while most other sectors have lagged. There is still momentum in the technology sector but will not add at the present and will hold. Semiconductor demand is driving the world and our technology shares are key players in this space. As economies open up from the pandemic demand will only increase.
Some of you are actively trading and have asked me should I buy Top Glove which has dropped over 50 % from its high. It is a quality company and is a good investment at the current price but that does not mean it is a good trade. I would wait for an accumulation on relatively higher volume and wait for price to break out of the accumulation. In this way you are following the smart money. The same goes for the other sectors.
Every day I track the KLSE sectors for price and volume breakouts. This tells me where the money is flowing. Suppose the consumer sector is exhibiting volume breakouts then I will scan the sector for the best opportunity. In early November 2020 Heineken rose from RM 19 to 21 on massive volume and wide price spreads. This happened as the government was easing lockdowns and allowing the breweries to re open. Since Heineken is a solid well managed company, this was a low risk opportunity to invest or trade. Because of the shift into recovery this business had the wind in its sails. The massive volume showed that smart money was pushing through supply and marking the price higher.
The same thing happened with OCBC in Singapore. On 4 November 2020, massive volume and a wide price spread pushed the price to SGD 8.80. Smart money was behind this move as they know that Singapore was getting the pandemic under control . Other Singapore banks also broke out on high volume on this day confirming that banks were back in favor.
Although I am an investor and focus on high quality shares this technique works for all shares including 2nd board, syndicate or ACE shares. I use tradevsa.com to identify the strong sector and then I drill down to find shares in this sector.
In the weeks ahead as recovery unfolds there should be trading opportunities in the KLSE and Asian markets.
Take care
Bill
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