Apologies for my superextended absence – doing a Master’s program AND handling a whole bunch of extracurriculars left me no time for serious finance stuff. Besides, it’s my last year as a student and I wanted to concentrate on having fun. But as the academic year ends, most of my other distractions have more or less ended, leaving me with a renewed interest in the markets again. Once my exams end in like a month, I should be ready to blog actively again.
Extended, spectacular, unjustified rise + classic head-and-shoulders + break below 50-day MA = near perfect setup for a market downturn. While I don’t usually advocate the use of technical analysis (I don’t believe in patterns unless they can be tested), the head-and-shoulders is almost unmistakeable in this picture. Think of the investor psychology: bulls have tried to make a new high, failed, they pushed higher and failed again, and finally made a last feeble attempt but were quashed by the bears. It’s also said that the longer the consolidation, the more important it is – this consolidation has been going on for about a month now. Furthermore, the past two days have seen tremendous downward pressure, just the right conditions for a break down.
I’m still a rookie at anticipating market movements (especially calling tops and bottoms), but I’m bearish on the market now. (Actually I’ve been bearish for the past 2 months but kept getting proved wrong) We’ll see if I’m right this time.