Blue chips? Potato chips? or... ?

Also my article posted in www.talkandshare.com


Erm, this may be a little late cos was a little busy last few days, but still can use this for future reference... :)

Before i proceed, it is better if you have read this posting first...
http://www.talkandshare.com/index.php/ Technical-Analysis/378-Volatility-Vs- Severe-acute-distribution-Crash......- P.html
i think it is important to know wat kind of market movement it was before you proceed further.... Lets say, you have identitified it to be a volatile market... now wat?

Many of you will be asking wat counters should we buy next when the KLCI moves back up... One of the best method would be to use TA... if tat happens to be not at your finger tips yet.... well, you could still buy with the risk reward ratio method.... or also called, calculated risk... hehe....

why i say it is important to identitify the market sentiment first? well, this is so tat you can make sure you have the rewards favouring you... in the posting on volatile market, i mentioned tat the market movement will be down then back up.... so when it makes a dip down, you will expect it to move back up in a volatile market... so, here is the part tat u can use to pick your stocks....
when we say the market dips, we generally means the KLCI dips... a point to take note about the KLCI is tat, it does not represent the whole market, it does not represent every single counter out there... KLCI is calculated ­base­d on some calculations of the index ­link­ed counters.... so, wat is the significant here?

Well, when the KLCI dips, wat we can say is tat it shows most of the index ­link­ed counters would have diped... so, if the KLCI is moving back up or is showing recovery... it also literally means those index counters are also following... and since they have made a dip and is moving back up (correction), you can also say tat they are on a bargain price, so your risk will be reduced and the rewards will be increased... so, this is when the risk reward ratio will be favoring you...

Btw, since a lot of these index ­link­ed counters also happens to be blue chips, tat is why after the market dips in the volatile market, the blue chips will be the ones tat is climbing first... :)
but of course there are other reasons such as FA, investors will also pick them up at bargain prices... :P

So, to use this risk reward ratio properly, you should make sure of a few things:
1) make sure it is a volatile market and NOT a crashing market or recession...
2) the market is moving back up or recovering...
3) try to identitify index ­link­ed counters tat was battered due to the panic selldown and not due to its internal fundamental problems...
4) if money is on your side, you may look into blue chips tat are index ­link­ed and was hit by panic sell.... :)

So, Blue Chips anyone? :)

Regards & good luck!