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LSX bear market presents a buying opportunity
Tuesday's Lao LSX continued a four day ‘bearish' plunge downwards - but the fall is on insignificant trading volumes.
The stock price variance seems to be set at the opening of trading - indicating a lack of strong buyer or seller movement.
The index may have taken a tumble but there are no economic, nor volume indicators to support that there is a sell off. A bearish trend occurs when the values fall by more than 15 percent and a bull run when the values increase by 15 percent over a period of time.
Although the volumes are low, adjustments to the share price affect the index and the stock's market capitalisation.
Local novices have taken the opportunity to profit take reasonably good gains. Most investors, believe it or not, are passive investors who fear selling stocks to take profit, but there are some local investors for whom the Lao LSX has already made some handsome gains.
However those who sold their stocks last week should view the current 4 day bear market trend as an opportunity to buy back before the current downward trend ends.
So what's the strategy you may ask?
Day Traders are opportunistic speculative investors who try to pick the market every day. Well published statistics show over 90 percent or more of day traders eventually lose their money. A better investor strategy is not to day trade – instead buy for the long term.
The best strategy is to do your research before investing, then invest on market metrics and trade the stocks you own. This may mean you buy and sell the same stock sometimes up to six or more times a year.
Your strategy should be to buy for the long term, hold your stock with a '15 percent Trailing Stop Loss' and buy back when your original stock moves back up through the moving average. If you adopt this strategy your ‘stop loss' will kick in and you will profit and be ready to pounce and buy back in once the signals on the moving average increase and price turns around.
This is where the LSX is currently heading - the fall cannot be sustained for ever and eventually a market levelling out or reversal will occur.
However we can't accurately predict if this will take place in the next few weeks, days or months. Local investors should note world economic data and financials affecting international bourses are not impacting on EDL Gen or the BCEL share price.
You can lose a lot of money if you trade on low volume trends. Markets we remind readers can be finicky and are always prone to be cyclic (go up or down at anytime). There is no economic data to support the current bearish trend which can only be attributed to local investors recognising that there is profit to be taken.
Local investors who missed out on the initial share offering should take note of the current market trend - even though the price has risen since the LSX began trading, it has now fallen to an acceptable price to consider buying. The next few trading sessions should see some local investors entering the market or begin to consider strategies with their broker.
vientiane times
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