It’s not easy for Malaysian Stock Exchange’s Composite Index to reach 1,500 level, let alone 1,600 but it appears reaching 1,600 is not something that is impossible now. And if you believe in simple technical reading, since middle of Aug 2007’s correction, the bull didn’t look back judging from the linear regression lines. Simply puts, the lines are drawn by technical analysts to see if the trend goes according to the pattern – within the range. And if you believe in the trend, then it seems the KLCI is due for correction but looking at the volumes, the Composite Index needs to go higher before it can comes down for a rest.

Dow Jones plunged over 246 points last Friday but heck, who cares, most of you might ask. Malaysia does not need the pointers from U.S., what more with the writing on the wall that Ben Bernanke is almost definitely will cut the interest rate again. So logically foreign funds could be scrambling (or already rushed in?) to park their money elsewhere such as Asia in general and Malaysia in particular. At least that’s what the PM, Abdullah Badawi believed when he was asked if the current sudden bull was due to pre-election rally.

Badawi believed the foreign funds are begging to have their money into local stocks because he succeeded in promoting the country as an investment haven. Remember what happened when he opened his big mouth in early 2007 and subsequently the stock market plunged more than 100 points in only days? And he did it again in 2008. Let’s hope his mouth is not cursed this time around. It probably won’t simply because the general election is here for real – at least the perception is such. This time it won’t take long to test the rumor that the election would probably be held three to four weeks after the Chinese New Year festival (falls on Feb 7th) and during the school holiday (Mar 7th to 16th). So March 2008 is the month to watch out.

And to take advantage of the current rally, stocks investors should start strategizing what to do at the current scenario. Most of the technical indicators such as RSI, Stochastic and MACD points to overbought level and consolidation is about to happen. Nevertheless with slightly more than two months to go before the peak of the election comes into play, any correction (if there’s any) should be short-lived. Therefore if your stocks are in the profitable territory, there’s no harm to lock in the profit. If your stocks just started to move such as Mah Sing Group Berhad (KLSE: MAHSING, stock-code 8583) and E&O Property Development Berhad (KLSE: E&OPROP, stock-code 3468), you might wish to hold on since the cyclic for property stocks could starts after the plantation stocks are peaking.

In fact if your previous fundamental stocks that went through the distribution phase have bottom down, there’s no law to prevent you from accumulating in stages. How risky could it be if these fundamental stocks didn’t move when since the KLCI jumped more than 100 points? Let’s face the reality. The government couldn’t jack-up the stocks market up by 20 points on daily basis. They can’t afford to have the stocks plunge by 100 points back to below 1,400 either. Hence most probably the KLCI would find a temporarily resting place somewhere above 1,450 at the worst case scenario – unless of course U.S. suddenly attack Iran.

In short, it’s time to liquidate your portfolio to have a healthy balance of cash against stocks on hand. Only with sufficient cash you could bargain hunt should there be some innocent sheeps wandering around. Bull and Bear makes money, Pig gets slaughtered! So readers, what’s your strategy now that the KLCI is above 1,500? Do you have an exit plan?

Other Articles That May Interest You …

• Have the Chinese New Year and Election Rally started?
• 2008 Election Polls – USA and Malaysia
• What to do during US Economy Slowdown?
• Six more months of good time before Election?

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January 13th, 2008 by financetwitter

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