ASI has moved in to correction territory

As the World Markets are taking a hit and the media is reporting that many markets are in a correction. The ASI dropped below 10% as well. According to the definition of a correction the value of a stock or an Index falls bellow 10%. Now that it has happened in our market let's see how long this correction is going to be there.

Update 5 - Commercial Bank Plc - Buy when others fear, and blood is on the street

Since my last update on the 10th of January '20, Strategy I am following on Commercial Bank Plc is still open. Its customary dividend payment was announced on the 31st of Jan, and went XD on the 12th instant. At which point we held a volume of 115,000 shares. Dividend was Rs.3/=. One good thing that happened to this dividend is that it was free from Withholding Tax, as such received a payment of Rs. 345,000/=. With this the Dividend Adjusted Average Cost is now at Rs.91.41, with 150,000 shares in hand and the Investment is Rs.13,711,691.20. On the 20th of this month they announced the final dividend of Rs.2/= by way of shares, and the XD date is yet to be announced. I have done an amendment to the Buy Rule due to the Dividend Adjustment and the Stock accumulation will take place at or below 91.80 which was the Dividend Adjusted Average Price on the XD date.

As far as as Fundamentals of the Bank are concerned, the prices that it is trading at are real bargains, but only those brave hearts would want to accumulate even at lesser intervals than what is covered in this Strategy.

My intention of covering this counter based on this strategy was all to prove that it is NOT EASY to make money in the Stock Market but NOT HARD, provided you follow a strategy with Confidence. If we doubt and not certain that this stock will give us the desired returns, then you can not continue with a strategy at all. As far as I am concerned the credentials of this Bank is stupendous for the Prices that its trading at, right now. Therefore I will keep up to this strategy till I achieve the desired returns.

ASI - Do not loose this opportunity!!!

If you happened to read my last short note on the ASI, you would remember that I mentioned that there is a chance of the ASI recovering. The RSI had to move above 50 points and, the index line had to move above 9EMA. Both of these were seen happening. The aggression in the hourly RSI is still too much. Hence we may see the Index wanting to test the Resistance area between 6001 and 6027 with the RSI testing the overbought area above 70 points. This may happen during the early part of the week. However as we are nearing the month end the index may be at the mercy of  bears. As such it will be interesting to see how the Bulls are going to over power the bears throughout the week. December Earnings are trickling in and the message that the results are going to give will certainly help the market momentum in the short term, whilst the medium to long term trend is filled with positive sentiments due to the bold measures the GOSL has initiated. As such the short term market is very important for those who want to collect. Do not loose this opportunity.

ASI - Next week is critical. Watch for the RSI and the EMA 9 on the Hourly chart

The short term trend is bearish in the ASI. The RSI on the weekly chart broke below 50 since Sept'19. There is a chance for the ASI to recover in the next week for which the RSI has to break above 50 points and the index line should rise above the EMA 9 on the hourly chart. Lets hope that will happen during the week.

ASI took a hit. now what?

It was not something we Sri lankans expected that happened on the 8th of Jan'20. Index  came down by 2.16% which wasn't seen even in the Iranian Market who were directly effected. Iran was down 1.4%. Index closed the week on a positive note, but the momentum is still not strong. It will try to pierce through 6000 points in the week to come, but how it will sustain is something to be watched. RSI which was bearish during the previous week retraced further this week. That needs to rise over 50 points. One important factor for a continued upward momentum will be positive fundamentals in the December Quarter which will start to trickle in from the 3rd week of this month. Till then the Market will fluctuate on sentiments.

ASI hourly chart on the 3rd of Jan'20

ASI hourly chart on the 9th of Jan'20

Update 4 - Commercial Bank Plc - Buy when others fear, and when blood is on the street

Price action in Commercial Bank is still bleeding. We have completed 35 days and 22 Market days in this strategy of Stock Accumulation. We have accumulated 60,000 shares at an average of 97.27 in the process. The sudden pessimism in the overall market due to the quietness seen as we are passing through the new year has brought a lot of uneasiness into the market. This pessimism is good for those who would want to keep accumulating any stock that they are following. But certainly not ideal for those who would want short term volatility. Therefore this negative period in the overall sentiment of the market is ideal for the strategy we are covering in this post. The market noise surrounding this counter is all bearish, hence this strategy is not for noise traders. If you are one of them do not read this article. The present low for the counter is 92.00 on the 8th of Jan'20. That was the day after Iran sent missiles to US Bases in Iraq. Markets world over fell but the Colombo Stock Market was one of the worst performers with a fall of 2.4%, whilst the US futures and all the Middle Eastern Markets  including Iran closed above that. COMB compared to the ASI didn't fall that much, but took a hit. The quietness prevailing in the market was the biggest cause for the Panic Button. Chart given below explains the story further.

If you are interested to read the previous post you can access it here....

ASI - Present Status as at 03.01.2020

Before giving my write up for the present status, I'd like to post the images with regards to the  hourly chart which I started following since 15th of December 2019.

My 1st Image

Date : 15.12.2019
Narration : ASI was successfully defended at 6050. But the strength of the Bulls are at check!!!
Image:

2nd Image

Date: 18.12.2019

Narration: RSI on the ASI shows a Bullish Divergence on the Hourly Chart.

Image:

3rd Image

Date: 20.12.2019

Narration: ASI - Hourly Chart has a bullish formation, but how many naysayers are out there due to the SME Moratorium

Image:

4th Image

Date: 27.12.2019

Narration: ASI successfully defended 6050. Rose above 6100!!!

Image:

Now to the present status

You can see in the 4th image a zone coloured in Pink. That is the resistance zone that was expected to be cleared and form as a base for the trend extension to test higher highs further on. That zone is between 6122 and 6185, but 6100 is the support that is needed to be defended at present. That area of resistance was tested within a matter of 4 market days during the week that we ended. Weekly high was 6175.76 and trended down to test 6100 points. ASI closed the week at 6111.28. The aggression on the RSI had to cool off. That's exactly what happened during the week. It propelled to hit a high of 87 points (which is the previous high, as you can see in the chart), had to see bears taking control of the momentum HENCE. Bears were successful in bringing the RSI down below 50 points to close at 47 points. The momentum is key at present. We can see that the top counters in the market are consolidating after testing the recent highs. The activity is confined to a few counters with stories than any substance. This has made traders to gather in numbers to trade a few counters. If these traders aren't used to money management, they will certainly experience what they do not want to experience. Trading with lot sizes that can be easily stopped is a must in the present trend than ever before. Policy Makers and Market Participants have high hopes for the Economy and the Market in 2020. That's a chance (Risk) you need to take in the market. After all if you don't take risks no need to get into the Stock Market. You will succeed only if you have knowledge, experience and confidence to manage that Risk. Else PLEASE stay away and park your precious cash in lower risk assets.

Present image is given below:

For those who are interested in having a look at the Daily, Weekly and Monthly Charts, I give them below:

Daily Chart as at 03.01.2020

Weekly Chart as at 03.01.2020

Monthly Chart as at 03.01.2020