Sunday, May 06, 2007

New High...but where are the crowds?

KLCI index hit new high. But the volume is low. Remisiers are complaining. Tactician is not impress. Why like this?

Okay, this is my theory.

You see, the unit trust industry in Malaysia has seen strong growth. How much money was manage by the industry in 1994 and now? I don't have the figure but it is surely manifold.

Now, due to the risk management policy, these unit trust must invest in so called companies with fundamentals. There are not hedge fund. So that is why you see blue chips and fundamental companies go up. You can't expect losing money companies to go up also. That is why the 3rd and lower liners are still laying like dead fish. Furthermore, the most recent February sell down really spook the retailers. Anyway, do you still remember while we were at 950, the push was done with low volume and everyone was also complaining.

So, more money are chasing quality stock and less money are left to play speculative ones.

If I look at the chart, I will be cautious but will still buy if a stock have good setup. From my uptrend lists, I detect that the lower liners are starting to move now. So, most probably we shall see some play on lower liners if the blues can just hang on to their gain.

For me, I'm still looking to play other covered warrants. My filter gives me the following uptrend stock with covered warrant:
AirAsia, AMMB, Astro, Bursa, Commerz, Digi, Maxis, Misc, Mplant, PBBank, Plus, TM, YTL

I'm in Commerz and TM. Still looking for the perfect setup to enter the rest.

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