End Stage of Pull Back

DUWI · 1 End Stage of Pull Back Thu Nov 22, 2012 1:15 am

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To lend some technical perspective to the recent market behaviour - it appears that the All Share Price Index is near its final stage of correction/pull-back from the high of approximately 6005 points witnessed on 28 September. The pull-back (throw-back) has amounted to roughly two thirds (2/3rds) of the rally from 4945 to 6005 i.e. 6005-4945 = 1060*2/3 = 706 points. That is, 6005-706= 5299. According to technical analysis, due to reasons that cannot be explained, (much like the Golden Ratio of Phi or 1.6180... found in nature - such as the ratio of the length of your arm divided by the length from your elbow to the tip of your fingers is 1.618), market reversal movements occur in phases of one third or two thirds of previous rallies or downturns. 5299 is very close to the major support level indicated by the 200 Day Moving Average, which as of today is at 5312, just 13 points off the level indicated by the two thirds level of correction.

The likely market bottom is also indicated by other technical indicators such as the Relative Strength and Stochastics. You can check this at the Bloomberg website.

From a fundamental point of view also, the market seems to be priced attractively on prospective 2013March P/E of around 11-12 times while policy interest rates are also likely to be cut in January 2013 following a peak in inflation in October 2012.

Slstock · 2 Re: End Stage of Pull Back Thu Nov 22, 2012 7:03 am

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Thanks. Your tehchnical perspective and facts mentioned make a lot of sense to me.

http://forum.srilankaequity.com/t24531p25-market-situation

But only thing is the bearish and fearful crowd need to stop selling or a turn around on buying of several caps need to start coming to make their mind change to stop or hold selling. Volume wise the domestic selling is not much through . So that is a start

smallville · 3 Re: End Stage of Pull Back Thu Nov 22, 2012 7:52 am

smallville

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Should actually watch the ASI in 5300-5400 range for a long awaited reversal.. If not then we'll have to wait till January being optimist Wink

Arena · 4 Re: End Stage of Pull Back Thu Nov 22, 2012 9:40 am

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Yes. Fundamentally CSE will be a good pick up to 6500 mark. That is my conclusion. It came from 4800 to 5900............so coming back to 5400 is not a big deal for a investor.

Lets wait and see.

sirdude · 5 Re: End Stage of Pull Back Thu Nov 22, 2012 10:53 am

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will not happen !!!

traderathome · 6 Re: End Stage of Pull Back Thu Nov 22, 2012 11:13 am

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sirdude wrote:will not happen !!!

dont get it......you mean 6000 will not reach..... Rolling Eyes

are you talking in technical sense or Shocked

can you elaborate more please....

Appreciate it...

Regards
TAH

Whitebull · 7 Re: End Stage of Pull Back Thu Nov 22, 2012 11:52 am

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DUWI wrote:To lend some technical perspective to the recent market behaviour - it appears that the All Share Price Index is near its final stage of correction/pull-back from the high of approximately 6005 points witnessed on 28 September. The pull-back (throw-back) has amounted to roughly two thirds (2/3rds) of the rally from 4945 to 6005 i.e. 6005-4945 = 1060*2/3 = 706 points. That is, 6005-706= 5299. According to technical analysis, due to reasons that cannot be explained, (much like the Golden Ratio of Phi or 1.6180... found in nature - such as the ratio of the length of your arm divided by the length from your elbow to the tip of your fingers is 1.618), market reversal movements occur in phases of one third or two thirds of previous rallies or downturns. 5299 is very close to the major support level indicated by the 200 Day Moving Average, which as of today is at 5312, just 13 points off the level indicated by the two thirds level of correction.

The likely market bottom is also indicated by other technical indicators such as the Relative Strength and Stochastics. You can check this at the Bloomberg website.

From a fundamental point of view also, the market seems to be priced attractively on prospective 2013March P/E of around 11-12 times while policy interest rates are also likely to be cut in January 2013 following a peak in inflation in October 2012.

Actually these Fibonacci retracements are application of nature's some beauty in to the human psychology.As we are also part of nature it makes some sense to apply nature's some physical beauty in to human psychology......But human behaviour is so unpredictable that it can even destroy or distract nature's beauty.....

DUWI · 8 Re: End Stage of Pull Back Thu Nov 22, 2012 12:14 pm

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Investment Management and Investment Analysis are arts, as much as they are sciences. This is because, as Whitebull points out, they deal with human emotion. Even the best minds can loose their way as highlighted by the collapse of Long Term Capital Management (LTCM) in 1998. This was a hedge fund set-up and managed by Nobel Economics prize winners. Just goes to show that no one can be greater than the market i.e. the collective actions of all market participants. As they say - IN MARKETS, WHAT MATTERS IS NOT WHAT YOU THINK IS CORRECT, BUT WHAT OTHERS THINK IS CORRECT. But as we are all part of nature, nature plays a big role in markets.

traderathome · 9 Re: End Stage of Pull Back Thu Nov 22, 2012 12:18 pm

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well said duwi cheers

K.Haputantri · 10 Re: End Stage of Pull Back Thu Nov 22, 2012 3:06 pm

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An interesting hightech stuff & very usefull discussion. Thanks guys.

gamaya · 11 Re: End Stage of Pull Back Fri Nov 23, 2012 9:17 am

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Plus points are foreigners were buying up to 6000. And they continue to buy, altough not aggressively. ....which they never are.

The BOC debenture issue of 6 billion is nearly fully subscribed.
BTW is this open for foreigners also?
Also this would have sucked up considerable liquidity from market..

kalum · 12 Re: End Stage of Pull Back Fri Nov 23, 2012 10:09 am

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Thanks DUWI. That make sense, something I really didnt aware about nature forces against human actions / emotions. We also hope 5300 will be a good support. Tanks for this post.

But i have few doubts in the way.

SL market is purely not running on technical, It has control over few people. (we like or not)
Foreign interference to SL politics are directly effecting foreign funds. We have to anticipate more torches along diaspora bullshit in the near future. If Government ministries keep on acting in the way they show in last occasion, we may in serious trouble in next year.
This downtrend is not natural. At least i am believing so. Only reason was market over brought situation, but all the facts were positive when down turn began. When few started, we have many "so call investors" to follow it.
So like, We cant think about natural up trend too. There has to be some invisible hands to market to come at least it's desirable stage.
Many good shares are trading very low than they should have. But time comes, we may see mega rallies on shares. But to have mega rallies, first Market should at least turn in to investor believable stage.
I'm pretty sure the current prices we see are the lowest prices within next 5 years provided the fact country economy and politically stable, and heading to the development in current phase.
Market initial down trend was expected when it hit's 7000+
But down turn to 4500+ was not expected.
So like the recent appreciate is long waited and last revived bonus.
6000 - current depreciation is not expected again.
As of the companies strength and present situation, the CSE should have well desired state on ASI 7000 at present. however it is moving the way it should have.
Sorry if my thoughts are messed up. This is what i think,
Lets wait and see.

DUWI · 13 Re: End Stage of Pull Back Fri Nov 23, 2012 2:40 pm

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Share prices will ultimately reflect fundamentals and investors/savers take this view in markets and in investing in equities. This is called "reversion to mean". This is where the "science" of investment management/analysis comes into play.

On the other hand, the market exists and trading in shares occur on a daily basis when such investors'/savers' believe/perceive that market prices have deviated from fundamental values of the companies that they have invested in or want to invest in. Investors/savers, then become traders as they divest or add to their positions. Determining the beliefs/perceptions of investors/savers is the "arts" part of investment management/analysis and is the hardest thing to do. One way to do this is through technical analysis, which of course is not a perfect solution.

The above process happens daily and makes the market. That is why human emotions/beliefs/perceptions play a big role in the market.

Local retailers at the moment probably lack confidence in acting decisively in the market, primarily I think due to the IPO fiascos of 2011, which caused huge losses in savings/wealth. This situation was exacerbated due to the rapid increase in interest rates in the latter part of 2011 and early 2012. There is a direct negative correlation between the direction of interest rates and the performance of share prices.

In addition, there is a marked lack of good quality leading investment information and research from the Stock Brokers. It is the Stock Brokers who have first hand/primary access to corporate managements and thus provide guidance to the market (investors) on the fundamentals of companies. However, this process has broken down completely, leading to investors being unable to make investment decisions with confidence.

Further, local institutional investors seem to have got their priorities mixed up.

However, it seems that foreign institutional investors and local high networth investors are more optimistic and have been net buyers over the past few months.

kalum · 14 Re: End Stage of Pull Back Fri Nov 23, 2012 4:46 pm

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Where can we access the details of daily trades, I mean which have been invests in which share? As i see, i didn't noticed much moment as HNWI invests in local market over past year. f it is appending, it is a good factor. we can be winners in near future Smile

gamaya · 15 Re: End Stage of Pull Back Sun Nov 25, 2012 8:39 pm

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Again on the positive side,

1. If the foreigners keep on buying, our so called hnwi would would have to step in, otherwise all the good counters would be in foreign hands eventually.

2. As 95% or more company ownership is by less than 5% of individuals, they would not like too much if prices go down too much, Their portfolio value would also be vastly affected. Also it would be hard for them to go in to IPOs, rights issues etc.

On the negative side, well, lot of people are giving reasons for that, so I wan't go in to that.

ranferdi · 16 Re: End Stage of Pull Back Mon Nov 26, 2012 1:25 pm

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gamaya wrote:Again on the positive side,

1. If the foreigners keep on buying, our so called hnwi would would have to step in, otherwise all the good counters would be in foreign hands eventually.

2. As 95% or more company ownership is by less than 5% of individuals, they would not like too much if prices go down too much, Their portfolio value would also be vastly affected. Also it would be hard for them to go in to IPOs, rights issues etc.

On the negative side, well, lot of people are giving reasons for that, so I wan't go in to that.

It's a waste at these price levels Locals keep selling and the Shares that are valuable transferred into the hands of Foreigners. I really wonder who wants this and who are the beneficiaries of this game. Thought the Government seems to be wanting to prop up the market they are also not capable of doing so. I even do not believe of a Market revival if the Government do not reduce BAnk interest rates.