Contrarian view on 'Sell in May'
Yesterday, 3/5 marked the first trading day in May and it looked to be a bad opening. Could it be a hint that 'Sell in May and go away' effect has started to take its effect?
We can search the statistic data for the stock market performance in May, but I'm not going to analyse this data here. However, using last year, 2010 as a reference, the month of May was a down month. If we looked back before May, ie Jan to Apr 2010, market performance was good, so it could be explained that correction happened in May to June 2010 was just an excuse for profit taking after a good market run-up. Looking at 2011, the market in Jan was slightly down, Feb - deeper down correction, Mar and Apr were about flat to slightly up. So if May is going to be a down month, it could be a good opportunity to buy on dip - to anticipate a recovery in June. If the market starts to stable early, we may see market starts to reverse up in mid of May.
There are many counters worth looking at now. Blue chips are the first batch to consider buying. But you have to buy with the mindset buying because of the value; not expecting to buy and hope for short term rebound.
Stocks that I'm looking at are like property, eg Capitaland, OUE etc. Other counters like F&N, Cosco. (Surprisingly, today penny counters show their resilient strength and buck the downtrend, eg Dyna-mac, Gallant etc).
Except F&N ( which I think this counter is very resilient and only pull back slightly ), the rest are at bargain prices now.
If you wish to use TA to guide you for an entry price, you may be disappointed now as most of the charts show bearish trend and will ask you not to enter now. So, use FA to guide your entry decision. Accumulate slowly. I'm waiting for OUE to go XD (12 May) before consider buying. Capitaland will go XD on 9 May.
For a safer play, we may use volume analysis to guide us to see when market is going to rebound in a more sustainable pace. STI has been trending in low volume about 1 to 1.5 bil. Wait for it to break 1.5 bil. But I would guess when STI volume breaks above 1.5 bil, stock prices may have move up to certain level and you will miss the near bottom prices. So, if you wish to invest, just buy when your desired bargain prices hit you and ignore all the noises from TA and news. If you wish to trade the market, all those tools like TA, volume and noises are important and you have to follow the market trend.
So which style suit you? Give and take.
Be decisive, Be patient, Don’t be greedy, Don't be stubborn
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Wednesday 4 May 2011
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