Missed the boat, Chase the boat, or Leave the boat

The KLCI had recorded it's historical high on 1645 a few days ago, and it has shown some correction for last 3 days. Some other Southeast Asia developing countries also recorded historical high lately on this strong run.

 Not sure if it is time to enter on this correction, or it's time to leave the market.

On the OPTIMISTIC side, it can be explained by this theory: The market is on a bull run, the up trend is confirmed and intact. We should ride on the trend, and any sign of correction is a good opportunity for entry.  Furthermore, since it has broke the resistance of historical high lately which provides us signal that the momentum is strong and backed by strong buying sentiment. Always remember to follow the trend, "The Trend is your Friend". This is good sign to enter the market.

Then there's another way to look at it. From 2003-2007 we enjoyed a great bull run lasted for 4 years. Then since 2009 till now 2012 we also enjoyed a nice uptrend. Assuming base on theory above, now will be good time to enter to ride on the bull, we can breakdown the years as below, on hindsight:

(Pls note that I am just talking about general market and KLCI, not any particular counter)


Last Run: 


2003: Better better better better time to enter, Valuation more more more attractive
2004: Better better better time to enter, Valuation more more attractive
2005: Better better time to enter, Valuation more attractive
2006: Better time to enter, Valuation attractive
2007: Good time to enter, Valuation not expensive
2008: !@#$%^&*?

This Run:

2009: Better better better time to enter, Valuation more more attractive
2010: Better better time to enter, Valuation more attractive
2011: Better time to enter, Valuation attractive
2012: "Good time to enter, Valuation not expensive"
2013: Could be "Good time to enter, Valuation not expensive" again.
2014: Could be "Good time to enter, Valuation not expensive" again.
and so on.............

If the bull run will keep on continue, last much longer than previous one, and "It will be different this time" for sure I am happy to jump in with big positions now, bottom line is I sell at the right time and right price.
The music will keep on playing and no one knows which day it will stop.

I don't know when the music will stop, but if now we blindfold ourselves and randomly pick a stock out of 1000 counters without any FA and TA study, we still stand a chance to pick a counter that will appreciate 15-20% within a week, which will prove the first OPTIMISTIC theory is correct. Of course it can happen another way round. That's why skill in Enter (buy) and Exit (sell) are equally important. 

FA or TA?

There are a lot of arguments on whether Fundamental Analysis (FA) or Technical Analysis (TA) is the "correct" method to be used to make money in stock market. TA fans will claim that FA method is very risky and stock price movement is solely triggered by buy sell behavior which has nothing to do with the underlying business performance. FA fans will claim that it is impossible to predict near term price fluctuation, while using charts and indicators to make trade decision is nothing different from gambling.

This is just like in football world where some fans will fancy attacking football with silky skills and slick passing like Barcelona and Spain national team, while another side of fans would fancy football based on solid defense, shear discipline and strong physical like Chelsea and Germany football team.

In fact, regardless of FA or TA, it is proven there are people who had been very successful in stock market applying either FA or TA, or combining both. That say, we should not argue which method is better since both of them proved to work because it already tell us that as long as either TA or FA are executed intelligently you can make good money.

Back to sports, both attacking+skill and defensive+strength football teams had won major trophies and championships, and nowadays top football teams had evolved into an all rounded approach in emphasizing both offense and defense.

So the most important thing is to choose a method that suit you most or you are most comfortable with, and at the same time respect other methods that proved to work well.