JCI (IHSG) Recovery, a Bear Trap or Start of A New Bull Run?

As predicted, JCI recovered nicely today registering a 6.97% gain. But for some local technical analysts, this was just a bear trap or maybe a dead cat bounce event. They will not be fooled with the bounce, they said. They maybe right, but currently, I prefer to use Dow (DJIA) as my leading indicator. If the dow goes up, quite often, JCI will follow suit. Though the correlation is not perfect, it’s pretty good enough to reap pretty good gains. The correlation between the two markets will further weaken once the market is no longer in the panic mode. So beware!

At any rate, long term value investors pretty much don’t care about technical indicators. What they care most is the intrinsic value of the stock they want to buy. If the stock is selling at significant discount to its intrinsic value, they’ll buy the stock. And, despite the market’s rebound, there are still many stocks selling at far below their intrinsic values. Hence, for this kind of investors, they probably will still be buying.

If you plan to invest in Indonesian stocks as part of your emerging market portfolio, I’d recommend you to stick with the blue chips such as TLKM, UNVR, ASII, BBRI, BBCA, BDMN. Why? Because going forward, I do expect the market to remain turbulent for a while do to the factors mentioned in previous posts. And, with the market’s flight to quality phenomenon, it’s best that you stick with quality stocks. Those stocks mentioned above are definitely good quality stocks, fundamentally.


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