STI down 3.6% on heavy selling! Be fearful? Get ready and be greedy!

Today, almost all of the counters in my watchlist registered a loss. Almost? Yes, although none of the counters registered an increase in share price, one counter closed unchanged. That honour goes to AIMS AMP Capital Industrial REIT.  This demonstrates the relative resilience of the REIT's unit price. Given the bloodbath seen in the stock market today, this is impressive.

The action in the stock market was so exciting that I actually wrote two blog posts in the late morning today. There was a lot of fear to the point of being petrifying. However, if we have already planned for a scenario like this, just execute the plan and there is really nothing to fear.  What? Nothing to fear? Yes, why fear opportunities to collect on the cheap?

In my opinion, the only people who would fear a sharp decline in the stock market are people who are fully invested in the stock market and who

1. Borrow money to invest.

OR

2. Use money which they need for other purposes in the near future to invest.

If we are 50% invested or less and if we are not using borrowed funds or funds we need in the near future, I do not see why we should panic. Stay calm and rational.

As revealed in my two earlier blog posts today, I bought more units of Sabana REIT at 92c and more shares of CapitaMalls Asia at $1.265. Could prices go lower next week? They could, of course. Who can be sure?

Looking at CapitaMalls Asia's chart, we see a huge gap down at the start. Price hit a low of $1.25 before closing at where it started the session at $1.28. That is a nice long legged doji and a bullish one too. It is a bullish reversal signal.

In case you are whooping for joy, remember that signals could fail. If we see price opening higher than $1.28 in the next session, the signal is most probably confirmed and we could see price closing the gap at $1.325. Otherwise, be prepared for possibly more downside.

Sabana REIT's unit price also gapped down in the morning but by the end of the session, it closed at 92c, the same price it started the day at, forming a dragonfly doji in the process.

Volume was relatively high and yet volatility was very low as we saw units changing hands at 92c and 91.5c only. This says something about support for the REIT. If its unit price should retest the 90c low, I will probably buy many more units.

Stay calm and get your warchests ready. There could be many more buying opportunities if the selling persists. Good luck.

Related posts:
A sea of red! Have a plan and execute it!
CapitaMalls Asia: Bought more at 161.8% Fibo line.

STI sinks 3.6% to 2,994.78 at closing
Friday, 05 August 2011

© 2011 - The Edge Singapore

CapitaMalls Asia: Bought more at 161.8% Fibo line.

Just two sessions ago, I bought shares of CapitaMalls Asia at $1.335. Then, I commented on the very high volume behind the long black candle and wondered if price could go lower.

I used Fibo lines to estimate where the stronger supports would be in case of further selling and $1.265 is where the 161.8% Fibo line approximates.

My overnight buy order at $1.265 was filled this morning as price gapped down following the drastic overnight sell off in the US and European stock markets.

$1.265 is beyond the lower boundary of the MA envelope and if volume remains relatively low at the end of the day, things would look more benign.

Panic and sell now? No.