However, reality proved different as the IHSG set a new record high level at 5,251 points. Last Friday (24/05/13), it ended on 5,155 while starting the month at 5,034 points. In other words, the index gained 121 points, equivalent to 2.45 percent. But foreign investors recorded a net sell of IDR 3.4 trillion (USD $348.72 million) in the first three weeks of May. As such, with one more week to go, it is interesting to question whether the rally will continue or the IHSG will fall back to the level as it was at the start of the month. The latter happened in May 2011 when it formed a doji candlestick.

Witnessing the panic that broke out last Thursday (23/05/13), market participants seem to realize the fragility of the IHSG when negative news is published. When China's manufacturing was reported to have experienced a contraction, indices immediately fell. But, in my opinion, the subsequent panic was exaggerated. Economic data of the US are still sound, which explains the rebound on Friday.

The index is indeed very sensitive to negative news. Therefore, I assume that the potential for another correction in the coming week is very real. Particularly, because technical indicators point in that direction (MACD fell and RSI is going towards the overbought area). However, the property sector received good news as Moody's claims that Indonesian property developers - especially those that are active in the Greater Jakarta area - will show good profits in the next 12 to 18 months (due to robust domestic demand in all segments of the country's property sector). Therefore, the property sector can become the pillar of the IHSG in the last week of May.

The IHSG will most likely continue its volatile nature in the week ahead. The property sector can form the engine of growth, but technically the index is susceptible to another correction. For those looking to buy stocks that contain good fundamentals as well as sound performance, I suggest taking a look at Indonesian property developers.

Daniel Sutyanto is a research analyst at Jakarta-based First Asia Capital