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Technical lessons from biggest Singapore stock market fall in 2013

Asiasons, Blumont, Liongold and an infamous day for Singapore stock market

3 companies listed on the Singapore Exchange involved in commodity investing fell sharply on 04 October 2013. Together they wiped off S$5.1 billion market capitalisation in one day. The three companies are:

  1. Asiasons Capital Group Limited
  2. Blumont Group Limited
  3. Liongold Corp Ltd.

 

From ChannelNewsAsia, SGX allows trading in Asiasons, Blumont, LionGold to resume

Blumont tumbled 56.4 per cent to 88 cents per share before trading was halted on Friday morning, slashing S$2.9 billion from its market capitalisation…

Shares in gold miner LionGold and its biggest shareholder, Asiasons, plummeted 42.1 per cent and 61.5 per cent to 87.5 cents and S$1.04, respectively, on Friday. That wiped off S$585 million from the market cap of Liongold and S$1.6 billion from that of Asiasons.

Singapore stocks fall 2013

These three stocks plunging so much at same time is unusual

 

What to do when stocks fall like these?

 

Were there any chart patterns, price action that gave a hint before this happened?

Price action at the top of Asiasons and Liongold could be considered somewhat (points 1 and 2) bearish reversal patterns. Asiasons’ price action could be read as a double top formation although it does not have the typical M symmetry involved. Nevertheless when price fell below previous low indicated by the short horizontal line, an investor could take it as a sell cue. Again, the signal provided by both have missing elements and are far from good signals.

There was no indication from Blumont at all.

 

What does high trading volume say about the fall?

price fall with high volumeOn its way down, price of all three stocks fell with high volume (3, 4, 5). Trading volume was significantly many times that of the usual daily trading volume. This is an ominous sign. I wrote about this in an article contribution to ShareInvestor Magazine back in August 2009 ‘High volume exposed: 4 killer scenarios stock market traders should care about‘.

 

Runaway gaps litter the charts; how strong?

Whatever signs that high trading volume did not emphasise enough, the presence of runaway gaps (6 – 10) in the price of all three should be strong reminder of the intensity of selling in these stocks.

 

What to do when stock prices fall like this?

catching a falling knife

Catching a falling knife really hurts

No one should try to catch bottom or to average down an existing position. That would be clearly catching a falling knife. Remember that cheap can get cheaper. Zero is cheapest. Because all three stocks did not show clearly signs that price will break down like this, this incident is very good example of why investors and traders should always exercise a stop-loss order.

And lastly, if there is any compelling reason to buy at all, then price must action must justify the decision by printing a bullish reversal pattern.

 

singapore stocks plunge

Stock plunges like these are not unique but these three outdo those that came before

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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