Downtrend in process

Today was another red day for the STI. Most counters were not spared and plunged heavily. However, there is always hope in this plunge as a lot of counters which are overvalued are starting to look cheaper and it's a great time to pick up counters. There is nothing technical about this. Times of crisis are always a good time to pick up fundamentally strong counters and even if one knows nuts about fundamental or technical analysis, there are still profits to be made.

Well, this blog is about technical analysis so i gonna give some my analysis on the current situation technically.

1. Today's volume is still very heavy for the counters in my watchlist. This shows that the selling momentum has not ceased yet thus this downtrend is far from over.

2. There were 3 days of intensive selling so i believe a technical rebound is on the way thus one may short on the day of technical rebound.

3. For price action wise, most counters broke their August lows and this is ominous to me. Most counters did not even attempt to test their August lows as a support level.

Personally, I do not try to pick a market bottom as the probability of me getting it correct is very low. It is much better to go long after the bottom has been confirmed technically. A bottom is probably near when,

1. The volume is getting lighter; Sellers are decreasing and there are signs of accumulation

2. Indices forming a higher high and a higher low.

A bottom is also considered to be over when market capitulation occurs. This is confirmed technically when the candlestick shows a hammer or a doji with a very long tail. U can take a look at the old STI for the August correction and this was what happened but i believe capitulation is a rare event.