KPS is pulling down fast: That is why I need to trust my instincts

KPS (5843) is Kumpulan Perangsang Selangor Berhad, a company that is linked to SPLASH, a consortium that is formed to supply water in Selangor. Now it raises many questions due to accusations leveled by the then ex MB of Selangor towards the current MB about the unfavorable deal for the state government.

This things affect shares performance of KPS and the bad news that comes quite  often is not good for the company's image. That is why I treated this company with caution even though the FA shows the company accounts and performance were not too bad. Just take a look at the company's profile and performances as at 31/03/2017. Please follow the link as below:

http://www.malaysiastock.biz/Corporate-Infomation.aspx?securityCode=5843

So, when a trader mentioned on 21/03/2017 about the potential of buying the shares of this company, I took it with a pinch of salt. But I decided to study the price chart anyway to see how people would be seduced to buy the shares and later regret it, Take a look at the chart as below:

KPS daily chart at 9:57am on 31/03/2017.

On 21/03/2017 the shares opened at 1.490 and closed at 1.670. The high was 1.74. The price increase to the high of 25 sen was unusually big for a company like KPS. This was an increase of 16.7% in a day which was unusual for KPS. So this was regarded as something new, and people saw this as an opportunity to jump into the bandwagon to profit quickly. But I sensed that it was a trap. So I just leaved the counter and looked elsewhere but today I decided to have a peek. I realized that my instinct was right and just now at 2:53pm the price went as low as 1.35. And to add further to the misfortunes, the trading volume is going down too. Looking at the chart, the pulling down would continue further next week.

Imagine people who had bought during the frenzy would have knock their heads to the wall. However all was not lost if they've decided to keep the shares until the time came for them to at least break even, But judging from the price movements so far, I think it would take time. If they've decided to dispose their shares, the losses would not be colossal anyway. But I hope they would be patient and wait a little longer. You know, patience is a virtue and is much needed in this kind of trades.

So trust your instincts and don't be impulsive and greedy. Let your sound judgement control your decisions whether to buy or sell.

Additional note: 

This is known as blow-off top as mentioned in the article at www.guppytraders.com. It is an interesting phenomenon.

The blow-off top is a buying climax. It develops as the end of a prolonged uptrend. It signals a change in the nature of the trend and shows a buying frenzy. It has three features. 

The first is a dramatic increase in volume. This is a clear and unambiguous volume spike
The second is a dramatic increase in price. This is a bubble in price. The price activity near the volume spike is fast, and rises well above the previous trend behaviour. It may also include a substantial increase in the intraday volatility of price.
The third is the failure to hold the highs of the day. The blow-off top gaps above the previous days close, and may even rise higher in the first hour of trading. However the rise is defeated with steady selling. The close is well below the open and the close is near the low of the day. Often the range of the price bar is significantly larger than any preceding days.
The fast rise and its failure, shows that buyers have disappeared from the market. Sellers have to offer at lower and lower prices to achieve an exit. The close near the low of the day confirms buying and momentum exhaustion. The surge in volume is created by sellers as they become desperate to get out of the stock. The volumes urge does not come from buyers.