Our market was undergoing a very tight range of sideway for 1 to 2 months already. I’m sure all the trend traders was very suffering in this period whereas it seem like a heaven for those investors who like to buy low sell high. I always believe history will repeat itself because human are the one trading the markets and it is very hard for us to change our behavior. As a result, I try to check back our historical daily chart to look for a particular months which was trading in a tight range as what our market experiences now. Based on my finding, I had found out there are a period in history which our market was trading within a tight range before it meets a trend, so let’s examine it and found out when the market is going to end it sideways.
From May 2007 to Aug 2007, our cash market was trading in a range between the low 1235 and high 1292. As you can see from the chart, from May till mid of June, the market move in extremely range bound until it trying to hit the high of 1292 in the 3rd week of June. The market has a very strong resistance at 1290 level but as well as strong support at the 50 days SMA. At the month end of July, the market was having a very strong tendency moving upward because the candle stick was trading around 1280-1290 level and it waiting for a break up. Unfortunately, few days later, the 50 days SMA was violated and the market was crashing down to the lowest of 1142. It is very clearly SMA 50 serve as a very good indicator to determine the beginning of trend in this example. So let’s us go back and see is it there are any similarity between history and what happen to our market now.
From April 2010 until now, our market was moving in much more tight range compare to case above. I will always remember this period, because I’m 1 of the victim in the market and whenever the market hit 40++, there will be long signal: whereas hit 30++ there will be a sell signal, end up I always buy at the high and sell at the low. I admit myself I fail to conquer the market during this period cause myself as a trend trader, I understand the consequences of trading as a scalper, so I choose to stay out from the market after 8 or 9 times of consecutive losses. The only people that able to survive in this market is when hit above 40, they sell, hit below 30 then buy. By doing so, they are making a lot of fortune in this market. Bear in mind that, it is impossible for a market keep trading in sideway forever, trend should come in 1 day, it just a matter of soon or later. If we connect current market with what happen in 2007, we can see there is a similarity. No doubt 1350 will be our market resistance while 50 days SMA will serve our market support. So today our cash market was breaking the support 50 days SMA at 1328 and the market was closed at 1308. In this case, the strongest support was taken out already, so I will strongly suggest go for short at high rather to long at the low. Will history going to repeat itself as what happen in year 2007, let’s wait and see.
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