Today STI gapped down by a really huge amount. Can literally see one huge hole with blood gapping out in the chart. The market attempted to push the price back as it can be seen with a small white candle and high volume but i feel that the gap is way too wide. Currently it is supported on the 100d EMA and i expect it to at least rally back to the 50d EMA and less likely, perhaps to the resistive trendline. It's a very classic scenario where the general public is still quite optimistic and sees the plunge as a opportunity to load in on more counters since stocks will definitely be cheaper to buy at this price as this can be seen as a climb back to the 50d EMA or the resistive trendline. But this rally will fail to break it's resistance since by now, the 'smart money' would have left or probably have left the market long ago and leave the public hanging to their plunging stocks.
Well if it plunge even further den this, the market is definitely looking way too pessimistic. Well putting into what i have learn so far and using a bit of unorthodox method, i can forecast an important area of support. The next support area below this will be a 100% retracement of this current intermediate trend and by Dow theory, this may confirm the end of this trend since this trend fails to make a higher high and a higher low.
Some reasons i believe this support area will be crucial :
1. 3288 was a level of support before in this trend. Can be seen by the 1st retracement of this uptrend.
2. 3312 coincides with a fibonacci retracement of 50% which is a crucial support level seen on many charts.
3. 3300 coincides with the 200d MA which is a important moving average to determine whether the major trend is up or down. Of course, i did something unorthodox by extrapolating the 200d MA with a straight line and u can see there is a straight thin red line which was drawn by me. :D It makes sense since the 200d MA hardly fluctuate.
Thus i conclude around the region of 3300 will be an important support area. I am assuming that the time period for this to happen will take around 1 month plus. Not sure what can happen since i am not God but just something for me to apply my knowledge unto the current situation now.
Friday, July 27, 2007
Bloodshed
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