Monday, July 02, 2007

Double Top

OK, the A-share index really starting to look like a DT now.

I've closed all my positions and am preparing for a crash. If so - It might come back to the 3000 mark before the Chinese Govt steps in to push it up.

Bold call, I know. And I could be wrong. Daryl says its just a consolidation phase- but maybe he's been in China too long and caught the China bug.

Its simple- what goes up fast- can come down fast. A simple crisis of confidence and everyone starts cashing in their chips. Of course China will eventually rise- I'm sure they were saying the same thing about US in 1930 following that awful stock market crash.

Post note: the China index crawled back up to positive territory at the end of the day - a bullish candlestick - Wall Street closed high on a positive note. But oil prices climbed back to US$71.


lucky tan said...

I will THINK DIFFERENT this time.

A Double Top is a hindsight formation. You will know whether it is a double top or not only after the fact. I believe the Chinese GROSSLY was the Nasdaq during the bubble at 3000 pts. The Nasdaq became more overvalued and top off 5000+pts. Bubbles,,,bubbles when do they pop?...When the air is taken out or some catastrophic event/crisis. There is still plenty of air in the chinese bubble so long as people believe...thanks to the chinese govt spooking chinese investors I believe it will last for a while:

1. The Chinese have very few avenues for investing their funds - property & stocks. The savings rate is higher and the funds to be invested is still growing at an accelerated rate.
2. The Chinese market is largely retail (80%), that means a pull out like the one during the asian crisis is not possible. That at least will rule out some kind of collapse.
3. The Chinese govt is on top of far.

I believe one possible trigger will be fraud. Many bubbles were ended by fraud or with fraud. Just look at the food indusrty scandal in China - things tend to fester and suddenly pop out ugly and big.

Anyway, in the past weeks I've been analysing tech company product pipelines to look for things to invest in. Of course we know of the Apple/iPhone and high profile launches so these are not the things I look out for but 'quieter' but high payback pipeline developments of tech companies.

Based on what I did which took week of combing through various tech companies, patent filings and industry contacts. I came up with one worthwhile investment in a tech company that has been keeping a low profile for quite sometime - Sun Microsystem. There are a number of exciting developments in its pipeline which will be launched by the end of the year. The stock is trading now at US$5. I'm putting about $100K into this one. Hope my homework pay off...if not I don't expect to lose early and be safe.

Lucky Tan....(

Yauming YMC said...

Yeah, of course we will really know a double top - after the fact - but that's like saying hey, look the sky is turning dark - its going to rain- better bring an umbrella etc..

That is a double top formation- whether it materializes into a big correction - is another matter of course. But it certainly is a bearish sign.

You will note that I qualified my statements - with a disclaimer. I don't pretend to be be a prophet. And Charting is NO crystal ball. But it does provide you with indicators.

Due to the liquidity in the market- hey maybe we could see another massive rally- maybe a huge one that will last til 2008. Who knows?

But I've been crunched by the 2007, 2000 and numerous other small crashes. So I say, "Hey - look dark clouds - isn't that a storm brewing up? Better stay indoors today."