Amidst the market correction, what should one do if share prices plunged further after one has bought at a “low” price? The answer is: Sell.
But what if share prices rise again after selling? Just buy them back.
And what if share prices were to fall again? Sell again.
In my opinion, one needs to learn to withstand such pressures. The reason is that the Hang Seng Index has already risen by too much, and no one knows how huge the (upcoming) correction would be.
From my recollection, when the Hang Seng Index (HSI) first broke above 30,000 points last year, it immediately shed 2000-points on a downward correction. But in a matter of two months that followed, the index shot back up by 5000 points before the current correction set in.
Everyone knows that a correction was bound to happen; it was just that no one knew exactly when it would. In other words, people were unsure if the correction would take place after a rise of 3000 points, 4000 points, 5000 points, or 6000 points.
Thus, the best way is to use the moving average as an indicator to guide your decision to buy or to sell.
How Low Is Low and how High Is High?
Remember that one must be disciplined with technical analysis. When buy or sell signals are triggered, do not hesitate to execute. Do not get emotional. Mechanically follow the signals accordingly and even repeatedly if the signals say so. This is to guard against the situation whereby the stock market has yet to bottom out. And the opposite is true like in the previous rally when the stock market went on to climb even when everyone thought it had peaked.
On 6 February 2018, the HSI closed at 30.626 points after two days of panic selling. At this level, it is still higher than the time when people started calling it “too high”. There is clearly no fixed standard for a market’s “high” or “low”.
Not long ago, I sold a part of my Tencent Holdings Ltd (700.HK) shares and recovered all the cost I had put into investing in this stock. Right now, I’m holding on to Tencent shares at “zero cost”. On Tuesday, Tencent’s closing price was still higher than the price I had sold my shares at. Clearly, Tencent’s impressive rally has yet to lose steam.