MONITORING ECONOMIC CRISIS - XIV

MONITORING ECONOMIC CRISIS - XIV

(Week II, December 2007) BEAR MARKET RALLY REACHES PEAK Topics This time: TO (NOT) policies STATE - US TO (NOT) policies STATE - INDONESIAREVIEW STOCK MARKET (CALM BEFORE THE STORM) Targetting DEAD CAT BOUNCE SECTOR OF GOLD AND SILVER DIRECTION BEHIND THE DOLLAR WILL?


REFLECTION


TO (NOT) policies STATE - US
Policy dibahasa Indonesiakan into wisdom. Usually that makes wisdom is that the government, often also " management companies ". Anyway dealing with for menbuat wisdom is that the position "above", but not God. Although it is often not at all wise discretion. Sometimes silly.Also strange is not it? That's politics. Bush made ​​the wisdom to deal with the subprime crisis by creating new rules. The debtor will obtain credit waivers such as freezing the implementation of floating rate of interest teaser for 5 years. The eligible are as follows: 1. Borrowers owe the teaser rate period of 36 months or less 2. Mortgage loan signed between Jan. 1 2005 to 31 July 2007 and the change of teaser interest to floating interest between Jan. 1 2008 to 31 July 20103. The borrower is never overdue for more than 30 consecutive days or cumulative days in arrears of not more than 60 days 4. Debt Ratio: Home Values ​​greater than 97% 5. FICO Score should be less than 660 and not increased by more than 10% during the credit has 6. Debtor judged unable to pay the mortgage is higher. Who wants to be helped by the (in) this wisdom? I think that is the creditors, owners of capital, bank, Goldman Sachs, Paulson Henk. Why is the finance minister Henk Paulson US? If we see points 3 and 6, show that the debtor is able to pay the loan on which interest is today. Then points 4 shows that if the debtor is "helped", it will benefit the bank or creditor. Most current asset value (homes) have gone down and the value is lower than the debt. Banks and lenders will be a big loss if it receives collateral whose value has been below the value of its debt. Perhaps it reminds you of the monetary crisis in Indonesia, where the collateral value has fallen below the value of the debt of the conglomerate when done menyerahan / foreclosure of collateral. Genesis in the US is now equal to the incidence of financial crisis in Indonesia. The role of the debtor in the US is currently held by the prospective owner of the house and in the future krismon Indonesia was once the debtor conglomerate. End of the subprime crisis in the US is unpredictable, which is similar to the end of the financial crisis in Indonesia. Many banks are broken, need assistance and currency liquiditi crashing. The first impact: the bank collapsed, the symptoms are already visible. The number of banks closed in 2007 began to appear, after two years of net (Table-1).

Table-1 (Source from FDIC) (click to enlarge) The above table shows that the banks closed in the US since 2000. In the know in 2002, on the eve of the recession the number of banks peaked cap. And since 2005, no bank is closed until 2006. And in 2007 began to appear again. Is this a sign of the onset of the initial round of the wave of banks in the US were closed again. Currently only subprime mortgages, following failure to pay / renege on car loans are almost certain real-estate developer who went bankrupt also will renege on the debt. Not wrong if we assume that the above list will grow rapidly future ahead 2-4. Fuss if no bank is bankrupt, closed, then people will withdraw their money from the bank. By investors, banks will be required to buy back the bond mortgage loans (mortgage bond) at nominal prices. Liquidity crisis, deflation, who knows what else. Domino effect in the economic sector. Paulson and Bush tried to help the banks to prevent pengemplangan mortgage loans, not to help mortgage borrowers. If the value of the collateral falls below the value of its debt, for better debtor declared bankruptcy, handing collateral, out of home and living by renting a house. Let the creditors to swallow losses with eyes bulging. Creditors are also guilty of giving loans to people who can not afford to pay. But this right is not desired Paulson. And in this case Paulson that before so US finance minister on July 10, 2006, headed Goldman Sachs also culpable. Under Paulson, Goldman Sachs makes inserting subprime debt into packages of securities and diligent sell everywhere. (Despite its name, securities, if taxable subprime cases, become worthless). I'm not willing to bet that Paulson can be taken to court. Where there could penggede to court. But who knows? TO (NOT) policies STATE - INDONESIA In Indonesia, the government wants to do (in) wisdom to raise premium prices. Lie-fib occurs. As usual, the issue of class differences proffered, and wrong again. It's my spiel sitirkan Wapes of AFP entitled: Restrictions to save subsidy of Rp 6 trillion ( http://www.suarakarya-online.com/news.html?id=187968 ) : "We do not want to hurt the little people, not harm the motorcycle, does not harm the motorcycle, not harming a taxi, do not harm public transportation, and so forth," said the vice president. " Yes, if you ride mercy, volvo, already pay," he said. That premium hike is reasonable to compel the owners of luxury cars use fuel that is not subsidized. Comments sane: "Mr. Vice President, people who have luxury cars, BMW, Mercedes, Volvo, money is not an obstacle anymore.They already do not wear anymore premium, even those many who do not believe in Pertamax, Pertamax Plus or Fastron. They have more confidence in Shell or Petronas, especially oil Syntium 5000 ". Not a promotion. Please try to use fuel oil Syntium 5000 with super shell, you will know the difference. Back to the matter of removal of subsidies on gasoline, so ....., which will be affected is the group known as the group is not harmed, motorcycle, bike and public transport , Then, this impact will spread to the price of basic commodities and other materials due to rising transportation costs, the next domino effect hitting other sectors. The crisis of fuel in Indonesia will continue due to (not) policy of oil and gas investment in Indonesia is still as it is now. Many regions of production sharing contracts offered in recent years, and are rarely major players such as ExxonMobil, ConocoPhillips, BP, participated. Most small players and speculators who do not have money to meet its exploration commitments.The purpose of these speculators only to master the concession area (work area), and then sold again. Black-listed for the PPP (Production Sharing Contractors). Besarpun many players make blunders. Belanak field is planned to produce 85,000 bbl / day, only capable of 15,000 bbl / day, while investment reached $ 1 billion and swollen due to problems of mercury which is not alleged or is hidden. BP's Tangguh LNG project, which is too long deferred, eventually the road as well. Probably not very profitable because the price of LNG to China is low and a lot of competition, especially from Qatar. Structural fiscal in Indonesian oil and gas sector is not attractive, for those who understand and want to run the oil and gas business for the long term.For those who do not understand, such as the small players who do not have enough skilled staff, they get stuck in to the business of exploration and exploitation (E & P) of oil and gas. The main issue facing is the system of taxation rules and overlapping between the Ministry of Energy and Natural Resources (EMR) with the Ministry of Finance (Tax). For example, according to the Oil and Gas Production Sharing Contract, upstream oil and gas industry are exempt from all taxes except income tax, tax on interest, royalties and dividends. Meanwhile, import duties, VAT, and others were released. In practice, how? BP Migas who signed a contract with KPS, acting as government representatives. BP Migas chairman is directly responsible to the president. For those who like compare-madankan, it can be said that the position of BP Migas aligned with the Department, either Dept. Finance (with a range of customs / tax) or Dept.EMR. In practice, the head of BP Migas overshadowed by the minister, the result when the government breached contractual agreements PPP (cq. Directorate General of Taxes) BP Migas did not dare do anything. For example regarding import duties, the PPP must pay. Back when his day-BPKKA prihal Pertamina imported goods is set in the master-list Pertamina and are not subject to customs duties. Because Pertamina has become a limited company, the duty-free import rule seems lost. KPS also have to pay import duties of all the tools (rig for example) that will be hired and brought in from abroad. Cost duty is larger than than the rent itself. What is not crazy? Indeed, if the stuff in-reexport again, the money would go back (sometimes in the form of money but it can be credited to the tax in the future) but the point KPS should provide additional capital to cover things that were not taken into account. For companies that are still in the exploratory phase, where there is no revenue, cash flow is still red, it is extremely burdensome. There's more to credit increasingly difficult to raise funds. That is why, according to estimates sane person that SBY targets for oil production 1.0350 million bbl / day would have been impossible. Next time we will discuss about the profanity legislation in the oil and gas sector. In essence, already many laws, overlapping each other, collide and must be subtracted.In other words, no longer need the laws and institutions of the lawmakers. Any news on Media Indonesia on Monday, December 10, 2007 and entitled "International Anti-Corruption Day, Day of Most Concern". This article in the anti-corruption framework (http://www.mediaindonesia.com/ ), and the degree of corruption in Indonesia. Ter position held by the top ranks of the police with a score of 4.2. Position II is the Parliament (DPR) and the judiciary with a score of 4.1. And III to the position held by a political party with a score of 4.0. On site EOWI (People Sane Economy and Investment) since its foundation we have already mentioned: There is a small swindler, imposter, politicians and Cut Zahara Fonna. Do not be surprised if we encourage you suppose theft, kerampokan, do not have to go to the police, because you will spend even more. Also, do not cooperate with the police on security issues, the better the security. And select an empty chair when the polls. Do you want to choose people from group III corrupt number to increase to corrupt number II and make you poorer or impoverished? Home care benefit of a legislator is Rp 13 million / month (Media Indonesia: Starting in January, the House of Representatives 'washed' allowances house Rp13 million,http://www.mediaindonesia.com/ ). That is more than 13 times the minimum wage in Jakarta. I think the trend of the future, no more corruption in the House, but enriching themselves legally. Same way with this and that adding benefits, and all legal backed by legislation. LHA those who make the laws anyway. Do not bother corruption, is not it? Therefore, I ask for popularizing the Movement Select Empty seats for the 2009 election you come to the polls and coblos lot of candidates so that your vote does not apply. That is the meaning Select Empty Chairs. You participate to choose an empty seat. REVIEW MARKET SHARE (CALM BEFORE THE STORM) Within 2 weeks the market rebounded (Chart 1). RSI has reached the 60s. The VIX index also declined (Chart 2), the market is quiet. Although there is strong resistance at 13700 for the Dow Industrial, the possibility of this level can be broken for the next Level 13.800 and 13.950. Santa Clause rally there may be, maybe not. The Fed will reduce interest rates on December 11, 2007. The market will probably greet him emotionally. If these emotional things happen, then the drug the Fed can work up to 2 months, and the market will be bullish or sideways for 2 months, in December 2007 until February 2008, as happened a few months ago. In terms of annual habit, it seems this time span is quite plausible. So for those who want to do the shorting, should pay attention to this.

Chart 1 (click to enlarge)

Chart 2 (click to enlarge) Yen Carry Traders seem to still have room for banging Yen index to the lower limit of the corridor bullish Yen index (Chart 3). Approximately 2 weeks there is still time to bullish.

Chart 3 (click to enlarge) For me, during this quiet period, I will begin to collect and maintain a short position (for a while) a long position. In the long position, should not be too long to hold financials, properties and emerging markets. I myself have disposed of all long positions in the financial sector. Passable with the option, can profit 30% -50% in just 2 weeks. While a long position on gold and silver sector, I dare to hold much longer. Gammon Lake (GRS), Metalline (MMG), Aluminum China (ACH) and Seabridge (SA), I still hold. I will add the position of precious metals and mining sectors. Targetting DEAD CAT BOUNCE There are three things that make the stock go up:






1. Economy
2. The performance of the company
3. Emotion market for stocks below, such as the transport sector in the US - IYT, with the economy slowing, transportation services will be reduced preoccupations deliver the goods.Revenue will decrease, so does the profit. So fundamentally bearish, bullish emotional. So just wait for when the influence of doping Ben Bernanke exhausted. That's when the party starts again. To take a short position for the stocks / ETFs below, I will wait after the announcement of the Fed rate cut. I do not like surprises. If the market reaction is overdone and the market rallied strongly, then all the analysis below is not valid and should be reviewed again. IYT today, on Monday, December 10, 2007, closed at 88. Resistance at level 90 which is relatively strong. During the two weeks is up 12%. RSI is still overbought. But it should be remembered that this is not a bull market currently. So IYT ​​could reverse direction, so I will start collecting a short position at level 88-91, then waiting to see if IYT will continue to rise. Suppose there are signs of exhaustion IYT then a short position will be added. I doubt that IYT rate can reach 90. In Rebounce October alone, IYT could not follow in the footsteps Industrial Dow or the S & P500. So it's hard to say that IYT rate can reach 90. My favorite is the June $ 90 put. What I do not like work directly in IYT currently MACD indicator is still showing bullish direction and has not been confirmed to enter in a short position. Therefore, you should wait after the announcement of the Fed interest rate and observed again. Chart 4 (click to enlarge) Next is a home improvement retailer Lowe's shares (LOW). Since last October I was short with the option $ 27.5 January 09 put. But I loose when the market was oversold last 2 weeks. I thought it was time to go back to the short position is similar, $ January 25 09 put. Date December 11, 07 and then, this option closed at $ 3.70. I choose Jan '09 as expiry datenya since the expiry dat July 08 and Jan 09 is not much difference. Same case with IYT, which I do not like to work directly in the LOW presently is the MACD indicators still show the direction of bullish and has not been confirmed for entry at position short. Therefore, you should wait after the announcement of the Fed interest rate and observed again. Chart 5 (click to enlarge) The same applies to the Consumer Discretionary ETF XLY (Chart 6). $ 36 January 09 put option on the day Monday, December 11 and closed at $ 3.50. As IYT and LOW, which I do not like work directly in XLY today is MACD indicators still show the direction of bullish and has not been confirmed to enter in a short position. Therefore, you should wait after the announcement of the Fed interest rate and observed again.

chart 6

GOLD AND SILVER SECTOR
Sector gold stocks Gold Bugs (Chart 7) appears're taking a breather for the next rally (if any). At least not for a long position I dare a little linger for the sector. After over 1.5 years is the consolidation phase, we can expect that this sector will experience a period of comparable length bullish. In a previous article I mentioned a few stocks such as Gammon Lake (GRS), Seabridge (SA) and Metalline (MMG). These shares have experienced a correction in. This means that the stock transfer from the hands of investors who faint of heart to the heart of a lion quite a lot. To take stock of the hands of investors again take the lion takes courage to make a bid, so the potential is also expected to rebound quite promising. Technically, these stocks have upside potential: GFI, KCG, EXK, Azk. I'm not too concerned about the fundamentals, because the rise in gold of $ 650 / oz to $ 800 / oz for quite a while not to talk about the fundamentals. Chart 7 (click to enlarge) DOLLAR MAU BEHIND THE DIRECTION?Economist edition of December 1, 2007 and then, bercover front of nyungsepnya dollar (see Figure 1). No one called Cover Page Reversal Indicator. This means that if an issue, in this case the fall in the dollar, already becoming the topic of the magazine and into the cover of a magazine then it is a sign of impending change of direction. In this case the dollar will strengthen. The reason that the journalist was the last one to know the news. I doubt that the US dollar will strengthen. Fundamentally does not support. That is until now not many other central banks that participate aggressively lower interest rates. Iran even has officially refused to accept payment in US dollars. Technically possibly can. But the Chart-8 does not show something special to rebound significantly to the US dollar. If the US dollar index can break 80 then Rebounce could last into bullish phase. If the US dollar continues to weaken and penetrate to the bottom level 70, then it is likely nyungsep keeps getting bigger.

Figure 1 (click to enlarge)

Chart 8 (click to enlarge)


REFLECTION
Devotional time is short. Indonesia has conducted the first general elections were the most democratic. It is seated Indonesia as the third largest country in the world, after India, US.What are the implications? The word of social science experts-political: " Powers growing niche to corrupt ." The consequences of logical: " More people with power, lead to more corruption "If power tends to corrupt, so many people who have power mean more corruption. That picture of democracy, the Parliament, the President and the current government have been democratically from the group institutions that corrupt number III (political parties), the election was organized KPU (General Election Commission) whose chairperson is now curled up in jail for corruption, do you expect the result is not an institution that corrupt? for the upcoming 2009 elections, do you still want to choose to give power to the people of the group / the most corrupt institutions to III - political parties, so that they become the most corrupt II - parliament? I decided to choose an empty seat. Do you also? Up here for this week. Take care of your health savings and your investments carefully.

MONITORING ECONOMIC CRISIS - XIII

MONITORING ECONOMIC CRISIS - XIII

(Week I, December 2007) BEAR MARKET RALLY - RALLY oversold Topics This time REVIEW STOCK MARKET - RALLY oversold CHARACTERISTICS BEAR MARKET GOLD, SILVER AND MATERIAL COMMODITIES REFLECTION

STOCK MARKET REVIEW - oversold RALLY

In the last week I've been warned to be on market conditions have been extremely oversold, especially the sector financially. " There is a possibility the market will Rebounce for the sales of national (Black Friday) in the US on Friday November 23 2007 after Thanks Giving Day, seems crowded enlivened by buyers storming stores . " " I'll use the time now until the end of the year to throw a short position because the market is already quite bearish (see Chart 1, in this article) and start collecting stocks of gold that will probably end the correction period Nutshell. Investors are bullish already approaching the level in August 2007. It is better braced contrarian stance . "

Chart 1 Bull Position Percentage S & P 500 last week

When I saw the reverse flow, occurs Rebounce and posting in the Forum KlubSaham.Com, there is a colleague asked: "Why he said a recession?",

The US is already / before the recession. Said already and ahead, depends what way you measure it. What we see today (about the market Rebounce) is oversold rally or a bear market rally. The explanation is as follows: In the last week the index bull's percentage shares of the S & P reached the level of 36% (Chart-1 from last week's article). More extreme for the financial sector (Chart 2). Level achieved was 16%. These extreme levels usually unstable. Pressure / stress in the market is already too strong. Almost all the players bear market. Bull is already at the minimum level. So the chances of market participants who crossed from the bull camp to bear camp has been very small. As a result, the tendency is potential crossings of the bear camp is higher than the crossings into the bear camp. Potentially reduce the number of bear and bull amount could potentially grow to more. Little change (increase) bull percentage index, will make stock prices soared. The market will take the fight back to reduce stress. And it came to pass Rebounce.

Chart 2 Rally like this is very emotional and is not supported by a sane mind at all. For example on Tuesday, November 27, 2007, the Dow industrial average rose more than 300 points. On the day that Citigroup rose 6.5% despite the previous day there was news that Citigroup would cut jobs as many as 45000 people. Number 45000 people was great. In other words, Citigroup will shrink operations.

On that day, November 27, there is news that Citigroup will acquire $ 7.5 billion cash injection from Abu it must be remembered that the operation Citigroup will shrink. Whether this could be a justification rally. Not only that, almost all sectors have rallied that day. What relation to other sectors with Citigroup? Rally for sympathizing? Therefore, this kind of a rally called oversold rally. Nothing to do with market fundamentals. The rally will continue, possibly as bull percentage above 50% before declining market back on track. My target this time the Dow Industrial will encounter strong resistance at the level of 13600 - 13700. There is a 50 day MA, some of the peaks, and the 62% Fib retracement Bolliger top band at the level 13600 - 13700. Suppose this level can be achieved, I will throw position long and short positions back into stocks for the retail, financial and real estate. Mechanistically, the continuation of this rally until it reaches the level of 13600-13700 supported the positive sentiment of the Fed rate cut on December 11 to come. In my opinion, the Fed's rate cut will not affect the main trend of the period bear today.

chart 3

Fundamentally, the market will continue bearish, until these bad credit problems get solutions and bold investor lending. Today many debt that has accumulated in the bank can not be sold to investors due to low investor confidence in the bank. Consequently solvency of banks fell.Help liquidity by the central bank did not help. Look at the case BLBI in Indonesia. Japan is already 17 years still had not moved from its banking crisis. US should let the banks and financial institutions went bankrupt as a punishment for sin made ​​by himself, which is a sin to pass credit to customers who can not afford to pay. CHARACTERISTICS OF THE BEAR MARKET To face a battle in the bear market, we must know the terrain. Although every bear market has its own characteristics, they have also similarities. Therefore it helps us learn the case of a bear market period. If we examine the bear market years of 2000 - 2003, the main trend and there is no up and down dramatically (Chart 4). Chart-4 is a weekly chart stock index Dow Industrial Average. You could say there is six times the market free fall like a waterfall, and after arriving in bottomnya, without further ado, immediately followed by a rally.

chart 4

Whenever the market freefall, volatility rose and the stock index reached the final level before reversalnya always lower than the previous low point-ter (lower low). And when the rebound, peak (the highest level) index stock price is always lower than the previous peak. The market can be said to be overbought when the RSI (14 wk) reached a level slightly above 50. The frequency of RSI (14wk) are under level 50. To determine oversold, RSI (14 wk) at a level lower than 40. Figures such as RSI (14 wk) lower than 40, to oversold; RSI (14 wk) higher than 53 for overbought, and so should be seen as an empirical figures. These figures could be changed for a different bear market. At least, this study can help us to set up a trading strategy. Determine when, when to decrease or increase the short position; and also when to reduce / increase long positions. During the years 2000- 2003 bear market, I was relatively successful trading. The next question: " What the Fed can affect the market ?" He replied: " No ".

We see Chart below. Stock markets began to show symptoms bearish in early 2000. The Fed began cutting interest rates in January 2001. During the year the interest rate the Fed trimmed aggressive from 6.5% to 1.75% in December 2001.

chart 5

When viewed as aggressive although during 2001 the Fed cut rates to 1.75%, then continued until becoming 1% in 2003, the stock market remains bearish. The decline in interest rates the Fed did not help. By looking at the history of seven years ago, perhaps we can understand where the myth (a rate cut by the Fed could reverse of the bear market to a bull market) and what is reality. It can thus be planned better strategy. There is a saying: "Bulls make money, Bears make money, Pigs get Slaughtered." This means that in the period of a bear market or a bull market (what else bear market), should not be too long to hold long or short positions ,Should know when from out of position. If not, his fate like a pig in a slaughterhouse. Every person who jumped into the stock market should understand the risks it will face if he is not ready. That bear losses, GOLD, SILVER AND RESOURCE COMMODITY seems that Silver and gold is not in line with the stock market. Last week, when the stock market rally, gold and silver experienced a correction (Chart-6 to Chart 8). And at the end of last week gold and silver hit sector support. So have a chance to rebound. Expected to rebound this time is a continuation of the rally that took place since July 2007. Gold can be bolted to the level of $ 1000 / oz. Chart 6












chart 7



chart 8

Mechanistically emotional, the Fed rate cut on December 11, 2007 that will come, it will trigger a gold rally back. I believe the Fed will cut rates again. At least 25 basis points. Maybe it could be, although I doubt this. The ECB is also likely to follow in the footsteps of the Fed, because the Euro is already so strong that European goods becoming uncompetitive, and also to help liquidity in Europe are affected by the credit crunch. Although I am not too sure that the chances of the ECB to cut rates large enough, I should faktorkan in seeing the situation in the next few months. What I'm less certain is the impact of the Fed rate cut. Whether to have a negative impact on the equity markets, or positive. Because the Fed's rate cut will make the US dollar weakened, including against the Japanese Yen. This will make the carry trader shriveled balls. Strengthening yen carry traders will make the debt go up in value. Therefore, I think the stock's technical analysis becomes an important barometer to determine the direction of the market. For the gold sector, I've been collecting Gammon Resources (GRS), Seabridge (SA), Metalline Mining (MMG). There are still some stocks of gold and silver and optionnya would call my collection next week. Especially for call option I think Barrick and Newmont with expiry date in June-July 2008 is good enough for their collection. In the commodity sector appears to have been no symptoms bearish. For copper, for example, the correction is characterized by a lower low and a lower high (Chart 8). Likewise, aluminum (Chart 9) show early symptoms of a bear market. In these circumstances, holding a long position for the long term is koyol. Can roast losses.

chart 9

Either copper or aluminum is a global economic indicators. Since both of these materials are widely used for the construction of infrastructure, buildings (houses / buildings), vehicles, and heavy equipment. If the economy slows, infrastructure development, construction or capital goods recedes, the demand for base metals like copper and aluminum also receded. So the conclusion that the world economic slowdown and toward recession, supported by the data base metal markets. We can put a short-term long positions on shares such as copper and Freeport (FCX). This is temporary, because dilatar-background by oversold Rebounce not fundamental. I am currently holding Aluminum Corp. of China (ACH), with the basic ideas Rebounce oversold stocks in China and Hong Kong. Consideration should be given to withdraw from the aluminum stock is if it is enough to make a profit.




chart 10

Materials other commodities, namely oil, still do not show symptoms bearish for the main trend. However, it appears ready for a correction (Chart 11). I do not know whether the oil stocks will go correction or join other stocks being rally?

Chart-11


REFLECTION 
Most likely in the next 2-5 years the stock market will be in a secular bear market periods.History proves that that the Fed and central banks can not reverse the secular bear market into a bull market with lower interest rates. People may believe. But the reality is not so. In the period bear market, investors have to be a trader. In that sense, know when to put up a long position and when to installer horses short. Opportunities to gain always there. Or if scared, he had to step aside just to be a spectator. Money deposited in savings. No profit or no risk of loss.Only the value of his savings down because central banks will print money could be ascertained if there is no tomorrow. Up here for this week. Take care of your health savings and your investments carefully.

4. Trend, Support-Ressistance, Overbought-Oversold

4. Trend, Support-Ressistance, Overbought-Oversold

In bertradng, advantage can only be obtained when the price moves. Yes. Only when the price moves. Either he's moving up or moving down. Now the tendency of prices moving in a direction that is the trend. Trend is a useful and important part in determining your position in the trade. Due to the position in trading there are only two that buy and sell, then the trend also has only two types of uptrend and downtrend. Indonesian is yes trend up and down trend.

Let's consider the image below:

Just imagine if we did not know how to look for trends in price movements like this. When prices are in down trend you open a buy position and vice versa when the price goes up, you open a sell position. Hegh ... At least you will not be able to sleep soundly in such circumstances because of the position that stuck hehehe.

          

So determine the trend is happening is very important and you should not ignore. Ignore, then your trading will only be a gamble. Underestimate, then the market will kick you until you feel sick for days and sometimes months. Depending its social effect because you lost some money.

Most technical analysis is used to predict the trend and extent to which the trend will last.Several indicators such as Moving Average or Parabolic SAR is also used to know was where did the market is running.

However, there are circumstances where the market does not move up or down the so-called side ways. In such circumstances, opening a position to buy or sell at just spent patience that eventually erode your emotions in trading. The situation usually occurs when a side ways European or American market was closed or was waiting for big news. In such a situation is not much trade occurs causing side ways situation occurs. Well, to avoid the situation.

Support and Ressistance

Other terms you need to know is commonly called the Support and Ressistance. Now let us consider together when a trend is underway. Say an uptrend. Is there a trend that never ends? Certainly not. Each increment will reach its peak and then stop rising and continues to decline. Vice versa, when the price goes down, there will be a time where the decline stopped and the prices go up.

The points where the increases and decreases in the prices stop called point of support and ressistance. The lower limit of the price movement is sometimes referred to as the upper bound Support commonly referred to as ressistance.

Both points are very vital in your trading future. Without knowing these points then we can only follow the trend without knowing that the actual age of the trend is no longer going to be replaced by the opposite trend or side ways situation.

There are many ways to determine a point of support and ressitance. Some traders use indicators to find out. Others use the Fibonacci sequence while the other uses the past history of price movements. I myself do not want to be too dizzy to calculate support ressistance using complex calculations. For me it is complicated enough forex analysis and complex psychology therein. So, why do not we simplify it? Sometimes simple is better.

The easiest way to determine support and ressistance is to determine the lowest and highest price movements in previous days at a certain period, such as one month.Consider the following chart:

The graph above is a graph for GBPUSD on January 14, 2011 with a period of 1 hour.Note that the price goes up, but not beyond the area that has been marked with a blue stripe. When the price moves up to near 1.5885 then as if the price of losing its ability to move up again past that point and vice versa when he moves down, the price can not penetrate the 1.5575 which is the limit terrendahnya. It was called a point of 1.5885 and 1.5575 with ressistance called support.

The second point is actually a reflection of psychological point recognized by market participants simultaneously. As we all know that basically the price movements are determined by law demman and supply (demand and supply). When demand is rising while supply remains the currency will be strengthened, and vice versa when it deals a lot and demand remains the currency will be weakened due to the amount of supply in the market.

Now in a state of price uptrend for example, it will psychologically cause tergulirnya large snowballs and mutually reinforcing. When prices started to creep up then the trader will usually follow the trend that is going on and take a buy position of obstruction. This has led to rising demand that boosted prices continue to rise.

But on the other side of the majority of traders are also anticipating the end of the trend by taking a certain ressistance point. At that point they no longer take action to buy otherwise they will took profit by selling the currency they have purchased before. Well if everybody does so automatically reduced demand and the rise of the currency began to lose strength. As a result, the price back down.

So the key here is how to determine the point of support and ressistance same point collectively support ressistance market. If we know these points, the trading will be much easier.

And now comes a new question in our minds: Could ressitance point of support and can be penetrated by the price movement? The answer is maybe. It can be tough but it is possible in any.

In circumstances where the buyer and seller win less, of course, prices may continue to rise even though the back has reached the point ressistancenya. In such circumstances, the actual sound of the point of support and ressistance on the market is not uniform and is divided into several groups. One group estimates that the price will not go up until a certain level while the other group believes prices may rise melewari level determined first group. If the second group win, of course, support or ressistance will break.

What will happen when the point of the res soup and impenetrable? The answer is that it will form the point of support and ressistance new. Ressistance pierced point will be the point of support while ressistance point will be re-formed. Consider the following picture:

This is the GBPUSD chart using 1-hour time frame. Visible in the area yangi given circle marks, the price cut through point ressistancenya. As a result, the price moves further away from the ressistance point to form a new ressistance point on the horizontal line of the most atas.Titik ressistance that had been broken now changed into a new point of support and now the price is moving in a new rangenya.

Now the next question that remains is how to know that the price will break point ressistance support her or not. Hahaha, if you get here you have to learn some instruments, especially the type of technical analysis oscillator for menegetahui point overbought or saturated selling. It should also be borne in mind that the fundamental situation occurs. Not easy indeed. Most of the points critical to know whether or not translucency soup and res of experience after years of trading. Yes I really. So it must be recognized that experience is important.

Ok kids up here teaching us soup and res. Easy enough right? (Did I hear anyone exclaim: "Yes, teacher bu ...")

Overbought and Oversold

Ok we enter the next point of technical analysis is a term named as overbought and oversold (overbought-oversold or commonly abbreviated as OB and OS just let me not tired of writing). OB and OS is a situation where prices can no longer continue the trend because it was too expensive or too cheap price so that trends can no longer continue. In contrast to the soup and res is a psychological level that is essentially a mutual agreement is not officially among fellow traders, OB and OS itself is a normal state and a real place in the market (not simply a psychological case).

Supposing a rising trend is happening, then in this state the currency becomes more expensive than usual. If we find a chart of GBPUSD was an uphill climb for example, it means that the GBP is being increasingly expensive value than the USD. Market participants continuously hunt GBP due to expected prices will continue rising, and they still have sufficient capital to carry out acts of purchasing.

However, there will be a point where buyers no longer possible to buy the GBP because the price was too expensive. Not only cases buyer's opinion that the price is too expensive, but more than that is their capital could no longer sufficient to buy the GBP in a certain amount. Now this is called the state of overbought or OB point.

Conversely when the downtrend is going, there will be a point where prices will stop down because the price was too cheap so the seller no longer possible to sell the currency or they would lose. This is called oversold OS.

In the circumstances the price reaches a point OB or OS it is expected that the price will reverse direction and the trend will soon stop. So when moving up and OB point has been reached, then the price will go up trend will be stopped and replaced with a decline in the currency moves. Vice versa when the price goes down and then entered the area of ​​the OS, then the price will move back up and the down trend stopped.

Often OB and OS also occur at points Sup and Res because indeed they are of the same nature which point a counter trend. But not always. Of course, buy and sell decisions would be support at all if prices are not on these extreme points.

Now the question is how to determine the point of OB and OS? The easiest way is to use a type indicators such as RSI or Stochastic Oscillator. These indicators are designed to determine the points OB and OS.

Let's use an example of indicators: ie Stcohastic Oscillator. In Stocastic, OB area occurs when Stochastic is at levels above 80 and OS occurs when Stochastic is at levels below 20. note the following images:

Areas shaded area colored birumerupakan overbought and oversold. You can see it on a rectangular blue one I described. When prices go down, and then touch the saturated area selling then the price back to move up because the price was too cheap to be sold by the seller. The same situation is also happening in the overbought area.

Regarding the use of this more detailed Stochastic we will discuss in the next session of technical analysis. Please be patient.

Now with regard we can estimate When does a trend ended and replaced with the next trend. Thus we can adjust the timing of the opening of positions to be better again.

 

See you at the next lesson.