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Friday, December 5, 2008

What is market capitulation? / 综合指数 2008年 12月 04日 / Composite Index 04/12/2008

What is market capitulation? By Zhuge Liang


By definition, capitulation means to surrender or give up. In financial circles, this term is used to indicate the point in time when investors have decided to give up on trying to recapture lost gains as a result of falling stock prices. Suppose a stock you own has dropped by 10%. There are two options that can be taken: you can wait it out and hope the stock begins to appreciate, or you can realize the loss by selling the stock. If the majority of investors decides to wait it out, then stock price will likely remain relatively stable. However, if the majority of investors decides to capitulate and give up on the stock, then there will be a sharp decline in its price. When this occurrence is significant across the entire market, it is known as market capitulation.

The significance of capitulation lies in its implications. Many market professionals consider it to be a sign of a bottom in prices and consequently a good time to buy stocks. This is because basic economic factors dictate that large sell volumes will drive prices down, while large buy volumes will drive prices up. Since almost everyone who wanted (or felt forced) to sell stock has already done so, only buyers are left - and they are expected to drive the prices up.

The problem with capitulation is that it is very difficult to forecast and identify. There is no magical price at which capitulation takes place. Often, investors will only agree in hindsight as to when the market actually capitulated.
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综合指数 2008年 12月 04日

如图中箭头A所示,由于布林频带进一步收窄12%,所以综合指数再度窄幅波动,这表示综指继续的处于一个横摆巩固的格局。通常这也意味着综指继续的酝酿着一个新的趋势,而这新趋势只在布林频带(Bollinger Middle Band)明显的打开时才出现,换句话说,目前综指仍然是处于一个不明朗的巩固期,直到布林频带再度打开为止。

综指当前的支持水平仍然是800点的胜图自动费氏线,阻力水平则依然是887点的胜图自动费氏线。另一方面,综指也依然是处于T1及T2的下降轨道(Descending Trend Channel)内,所以虽然综指开始出现横摆巩固的格局,不过整体上依然是属于下跌趋势中,除非综指继续横摆或上扬,那综指才能摆脱此下降趋势轨道。

如图中箭头B所示,成交量进一步萎缩28%,使到成交量继续的以低于40天成交量移动平均线(VMA)交易,这显示投资者依然选择以观望的态度面对,等待综指后市进一步的明朗化。

如图中C圈所示,随机指标(Stochastic)在30%的水平急转弯,使到随机指标还是未能上扬突破30%的水平,这显示综指的短期走势也未能确认出现上扬的趋势。无论如何,若随机指标接下来能上扬突破30%,再加上综指突破布林中频带的话,那综指的后市将有望看高一线。

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Composite Index Daily Technical Analysis 04/12/2008


As the KLCI continues its sideways movement with a lower fluctuation, the Bollinger Bands Width contracted another 12% on Thursday, suggesting the consolidation of the KLCI continues. Again, the contraction of the Bollinger Bands Width is also implying that the KLCI is gearing up for a new movement, and therefore, it pays to monitor the Bollinger Bands closely.

Support for the KLCI is still at 800 points while the resistance remains at 887 Fibonacci Retracement. Meanwhile, the T1 and T2 downtrend channel remains intact, suggesting the KLCI is still trending down.

As indicated by B, total market volume declined 28%, and the volume is still below the 40-day VMA level. This shows that the market participation is still low, as most investor are still waiting on the sideways as the market direction is still unclear.

As circled at C, the Stochastic is still situated below 30% level, which is the short term bearish region. If the Stochastic should break above 30% level together with the KLCI breaking above the Bollinger Middle Band, it would be a signal suggesting a chance for the KLCI to regain its strength.

HAPPY BARGAIN HUNTING


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