Are We There Yet?

The KLSE Composite Index went down 34 points today to 1,280. The drop of 2.6% was quite suprising as the regional markets were quite stable the whole day. For the records, the year high todate was 1,525 and we started the year 2008 with 1,445.

Market watchers were offering many opinions to the hugh selldown such as:-

1) Foreign Funds were selling ahead of the 12th general election's outcome on March 8

2) Funds taking profit on Plantation stocks in view of frothy valuation of the crude palm oil futures

3) The other overused "market excuses" of weakening US economy, high crude oil price, subprime problem, recession to stagflation, and

4) Technical Correction etc

The question now, is it time to buy?

My Take:-

The KLCI is currently sitting on a support level of 1,280 . The RSI reading is at 47 which is oversold. This level also represent the 38.2% reading of the Fibonacci Retracement. For the traders, I strongly believe there would be a technical rebound at this level and as such, you may buy some stocks which are badly beaten. However any profits on the way up should be taken immediately.

Assuming, further correction is forthcoming, the Fibonacci Retracement of 50% shows support at 1,210. Although we would love to catch stocks that are at its lowest and sell them at the highest, I suggest a BUY at levels between 1,200 to 1,270 subject to further analysis of individual stock's price and fundamentals.