Indonesian Stock Market — Index Buying Surge, Will the Trend Continue?

Alwan Alkautsar, RSA®, FMVA®
3 min readMar 27, 2020

On Thursday, March 26, 2020. There was a surprise in the Indonesian Stock Exchange as the Index price soared from 3937.63 to 4338.90. A 10% jump in one trading day! The volume traded that day was 8.11B, almost doubled from 4.57B in the previous day.

The phenomenon raises the question among the market player, is the index finally hits its rock bottom and will eventually reverse upwards? Or will it continue its bearish trend?

Let’s look into the chart.

Figure 1

IHSG (Indonesian Stock Exchange/IDX), has probably had the worst YTD since almost, years ago. Up until Monday (23/3), the index has fallen 36,67% since the beginning of the year. As we all know, the sentiment behind all of this is COVID-19. The coronavirus has brought such a negative sentiment to the stock market around the world, including in Indonesia.

The Technical side — Trend Projection

In Figure 1, we can see that there’s a surprise on Wednesday. A 10% jump in one trading day! With the increase, a morning star candlestick formation formed. This candlestick formation is a reliable indicator of a trend reversal, and this is why we can start to pull a line to make a Fibonacci retracement to work out our potential support/resistance level.

If the bullish trend were to continue, the first level to test is at 4600 or at 38.2% level of the FIB retracement. If the level breached, then the 4600 price level will become the support and the next level to test is 4800 or at the 50% level. If it’s also breached, then the next level to test is at 61.8% level or at 5020, and if that level is also breached, we will have to see the upcoming indicator to predict the next price movement.

Though if the price keeps failing to hit the targeted price level, there’s a good possibility the bearish trend will continue.

//Note: it’s important to remember the three essential levels of FIB Retracements, 38.2%, 50%, and 61.8% as the price often react on these levels//

Furthermore, it’s important to remember also to mind the volume of each trading day. The higher the volume, the higher the possibility for the index to continue its bullish trend. On the other hand, a low trading volume may lead to a red candlestick on the next trading day.

The Fundamentals — Cheap Stocks!

The falling price of IHSG also caused many companies market capitalization to fall below its book value. For investors, this might be a huge opportunity to buy more shares at a relatively low price. However, there is more stuff to be factored in the equation.

Many investors worried the coronavirus would affect the companies performance as the virus has affected many businesses around the world. Thus, lead to the company’s inability to score the targeted profit.

Fundamentally speaking, this would be an excellent time for investors to start buying shares while many are below its book value. Though, it would be a good idea to spread the portfolio to multiple sectors to minimize the risk. As an addition, be careful. Read the news and mind what sentiment might affect the index price.

In my opinion, I don’t have a clear idea of which direction the price is going. But if the technical conditions met, and more of the good news is coming, I can say that I’m pretty confident the stock market will recover and start its bullish trend.

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Alwan Alkautsar, RSA®, FMVA®

🚀 Product Manager | 📈 Stock & Forex Trader with a Dash of Algo | 🎾 Weekend Warrior on the Tennis Court