Personal Market View - Low Volume Continue Haunts Traders/brokers

Low Volume Continue Haunts Traders/brokers
by ckchoy

It has been a while (at least a month) where markets have been trading in low vol be it in Asia markets or US markets.
For Straits Times Index, the average volume has been in the range of 1 to 1.5 billion which is not a healthy range. For a healthy market, its volume should sustain above 2 billion. And for a happy market, its volume usually can sustain above 2.5 billion.
What does low vol mean? How does it affect the markets? What should we do? And what are the
strategies that we can apply to make use of this situation?
Usually during a low volume sentiment, market will be stuck in range bound. So don't be too greedy and don't be too reluctant to sell when seeing your stock is rising. Similarly, don't be too panic when seeing your stock is dropping.

Traders do not like low volume, because it usually brings down the chances for them to make money through speculation( short term investment ). This can be explained because low volume means that less follow-up price action to further push up and push down the prices be it a break-out play, MACD cut above, RSI or so on. This results TA's accuracy is reduced significantly.

However, statistic shows usually low vol market provides chances for true investors to enter the market. Especially prices become cheaper and cheaper. Some may argue don't catch the falling knife, I agree, this is especially important for short term traders to follow this rule. For true investors, they may view this is as a bottom fish opportunities (rather than viewed as catching the falling knife). However, there is no sure thing in the market. I will adopt buy-cut-buy strategy(refer to Buy-cut-buy vs buy-and-hold strategy
) to protect my capital and ensure a higher winning probability.

IndoAgri - reversal to downtrend after hitting 2.97 high on 4/1/2011.
There were 3 small rebounds on 31/1(2.48 to 2.66), 23/2(2.2 to 2.41) and 14/3(2.14 to 2.36). After the rebound, it resumed its downtrend. It can be noticed that the 3 rebounds are in the lower low and lower high trend -> which is a bearish trend for a trader's point of view.
However, it does not mean we should avoid the stock. For true investors who like to bottom fish, this may be a choice. However, I will adopt buy-cut-buy strategy(refer to Buy-cut-buy vs buy-and-hold strategy
).

Capitaland - reversal to downtrend after hitting 4.22 high on 7/10/2010. It marked a bottom at 3.08 on 17/3/2011 and from there it started to rebound. 3.08 could be the bottom for Capitaland. For those who wish to enter after a stock hit bottom, Capitaland could be a choice.

Of course there are many other stocks in my list. For details you can give me a call or drop me a mail and I will try to answer your questions within my knowledge and day-to-day market monitoring experience.