Notice SGX rose from $7.4 to $10.2 without any obvious reactions for meaningful trading ranges? This is usually a sign of extreme speculation, which can end badly for those who arrive late, or those who get in early but continue to build on their positions, and for momentum players. Trading ranges are healthy and important, in that they allow the market participants to “catch their breath” and reevaluate value before proceeding onward.
Trading ranges create what are akin to “market memory.” Once a market begins to fall (or rise in the converse), previous trading ranges area will often provide some level of support (or resistance), serving to slow price down as market participants assess whether this area of previously accepted value is still relevant.
Without this trading ranges, there is no structure to support a market. Once a market begins to fall, for example, the trading ranges act like elevator stops - they may not completely stop the fall, but they will usually provide a pause in the downward auction that offers enough time for you to exit a trade, or at least judge where you are in the larger decline.
Look at the Kim Eng chart, does it offer some clue for a trading opportunity on the downside?
Ronald K
