Buy or Sell Now

Buy or sell now? Buy or sell now? If there is 1 word that can be used to describe the equity markets now – CONSTIPATED ! It had been a very range bound trading recently. Those who had buy low and sell high would have benefitted a lot. But market is coming to a crossroad where it has to decide whether it is going to burst up/down and continue to trend. I suspect the Non Farm Payroll news on 3 June (Fri) will provide a catalyst for the market to finally break out from its sideway momentum.

Buy or Sell Now – Market outlook on S&P500 and Singapore Straits Times Index

There are some peculiar signs that i observed while trading the S&P500 e mini. Take a look at the chart

S&P500

S&P was coming down in a beautiful downtrend channel. At the 1st round (of false break), it looks like sinking further down to start a nice run down, but it reversed! And formed a bullish inverse head and shoulder. The recovery was prompt (and expected). Usually when u have a false break, the market will start to go the other way in a pretty fast and furious manner. At the 2nd false break point, it did break out of the downtrend channel, but instead of continuing to trend upwards, it formed a double tops and crashed back into the channel. Now, it is not often to witness 2 consecutive false breaks in fast succession, but it does tell a story; market is still undecided to move which way, but we can be sure by the time it does, the move will be tremendous.

Looking at the Singapore Straits Times Index, it looks to be holding and waiting for a clear signal to move.

STI

On 1 June, STI broke out of a symmetrical price formation which is a bullish stance. However, reacting to the overnight drop in the US market due to poor jobs and economy growth news, the STI plunged and gap back into the triangle. On the last candlestick, we can see it gap down and recovered towards closing to touch the top trend line of the triangle at around 3160. Now, 3 June (fri) can be a very crucial day for the coming weeks of trading. If STI does not break out of 3160 AND CLOSES above that level, then the breakout on 1 Jun is probably a false break. It may then has the tendency to move down to test the bottom trend line which is around 3100-3110. It will then probably dropped to test the pyschological support of 3000 if the current 3100 support is breached, but i am not too concerned about target yet, I am more focus on which is the REAL direction market is going to head to.

Buy or Sell Now – stock in focus: Cosco

I spotted something that may be pretty tradable from Cosco.

Cosco

Cosco had been falling, and during the past week, it had consolidated into a price formation of a symmetrical triangle too! Today it actually gap down (and out of the triangle). If market continues to stay in a bearish mode, I will want to grab a chance to short at 1.93-1.94 and from there ride all the way down till 1.80 for a short term trade. Stop-Loss will be at 1.98, representing a decent risk-reward ratio of 1 : 2.5 . However, a lot will depend if STI is going to stay above 3160. The equation is simple : stay above 3160 = long only, below 3160 = short.

It is going to be a choppy ride ahead. I am more inclined to the bear side. Besides shorts on Olam and City Development, I am waiting for signal to add Cosco to my collections. Buy or sell now, well the answer is obvious.