Today is the last weekend before the start of August, a month that is traditionally known as the most treacherous month for the Malaysian stock market. In my monthly-updated Market Pulse column (see link), it is observed that the month of August has seen some of the greater monthly declines historically.
KLCI – what is next?
As mentioned in earlier posting, if it ever breaches the support zone of around 1,728, I personally feel that we may potentially see further downside bias. If it ever breaks the 1,800 resistance point, the index may be on an upside trajectory.
How should one deal with August?
There are numerous options that may be considered…
- Focus on swing trading strategies with appropriate reward-to-risk ratio / risk management strategies
- Bargain hunting for beaten-down value stocks / mid-large cap stocks (for purpose of long term investing)
- Increase cash position (in money market funds)
- Maintain status quo
“Short term volatility is greatest at turning points and diminishes as a trend becomes established.”
As shown below, the current volatility of FBMKLCI continues to remain low. If the volatility increases, this may indicate that a potential trend reversal is imminent.
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