Buy or Sell ?

After several days of strong run up, many started to look at the stock market again. Those with stocks and are pessimistic about the economy will try to sell, whereas those with cash and are worried that they may miss the boat will try to jump in. This is the usual problem facing the not so active medium and long-term investors. For traders this is not a problem, traders usually are active and they trade starting from market top to market bottom and from market bottom back to market top again.


As mentioned in my older posts, KL Composite has completed Waves A-B-C as shown above. It has started its major rebound wave. One possible scenario is as shown below.

Under this scenario KLCI has completed wave 1 and 2 and is currently in wave 3 that can reach 986 (1.618 times of wave 1's magnitude). This wave 3 so far has completed sub-wave i and ii and is currently in sub-wave iii. Next pull back will be sub-wave iv follows by sub-wave v. End of sub-wave v of wave 3 can be a good level to get out or take profit with the intention to buy back at the end of wave 4 pull back.

However this sort of selling and buying back can be quite stressful, if one can tolerate minor fluctuations, it is better to hold the stocks for a longer period until the end of this new major rebound wave that can last for many months before selling.

This scenario of wave count is based on the bullish version of Dow that major wave B has started and Dow can break the immediate resistance of 8250. However, if Dow failed to break 8250 and if it started to turn lower for a diagonal wave 5 formation, KLCI is likely to take the following form.

Wave A-B-C remains the same, wave 1 is still the same whereas wave 2 is different. Starting from 1 the three waves down i-ii-iii formed the sub-wave a of wave 2. The current run-up will form anothe three waves i-ii-iii to form sub-wave b of wave 2 as shown. When Dow started to turn lower for its diagonal wave 5, KLCI will go lower, most likely in five waves to reach 840 again to form sub-wave c and complete the wave 2, which is an excellent entry point for those with cash and do not wish to miss the boat. For those that have been holding stocks from market peak to market bottom, if this is a once in a life time financial crisis that gives you once in a life time opportunity to invest, there is no reason to sell at this level unless the investor has decided to trade or is in need of cash.