Charts can be misleading

Koon Yew Yin 20 Sept 2020

Due to Covid 19 pandemic, the demand for gloves far exceeds supply. As a result, all the glove makers have been increasing their selling prices to make more profit which is reflected in their share prices. All the glove stocks have shot up a few hundred percent in the last 6 months and on their way up, the prices fluctuated wildly and sharply. 

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As I have often said, no stock can go up continuously for whatever reason. After some time, the price must correct itself. Recently the share prices of most glove stocks fluctuated sharply and expertchartists were misled.

When a share price shoots up like a rocket, expert chartists would rush to buy aggressively because of the super bullish buy signal. Unfortunately, all of a sudden, the price dropped like a bomb and expert chartists lost their pants. 

When the chart is showing a super bullish signal like rocket, it does not tell you that it will drop like a bomb the next day. 

I recall the prices for Supermax and Top Glove shot to reach their highest peak prices on 4th and 5th September because investors rushed to buy before the X dates for bonus shares entitlement. Chartists bought aggressively. As I have limited funds. Unless I sell, I will not have money to buy when the price is cheaper. The best time to sell is when the share prices of Supermax and Top Glove were at their peaks. 

Unlike Investment Banks, I have limited funds and I am not in a hurry to buy. I can easily spend all my funds within minutes if I want to buy. So, I can wait patiently to buy and sell based on fundamentals and the right timing.

By the way, I wish to point out that most Investment Banks cannot even beat the stock market index. If you Google you can confirm this fact. For example, the Covid 19 pandemic is affecting everybody’s movement, businesses and all listed companies with the exception of medical gloves and medical products for the virus prevention. As a result, all the Investment Banks have been losing money because they have many kinds of stocks in each of their portfolios. They have to cut loss and use their sale proceeds to buy glove stocks. That is why a few dishonest Investment Banks have been sending out misleading signals to push the share prices up and down so that they could buy at cheaper prices. 

My sole purpose of writing this article is to point out the danger of buying and selling of shares based only on price charts and ignore the basic fundamental principles. Moreover, most investors are greedy to buy some more when the share prices were peaking. 

To be able to make more money, investors must know human nature and how to use charts wisely. 

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