Technical rebound

Last week, our KLCI gained 69.35 points week-on-week to close at 1258.41. Volume has begun to pick up to the level of 900 million shares. Technically speaking, the run up of the KLCI is only a technical rebound or correction to the sell down two weeks ago. CI has been artificially push up at the last minute on Thursday and Friday to close high, which is not a very healthy sign.

For the coming week, KLCI may challenge the resistance at 1280 points to close the gap, however, profit taking activities and external factors may cause the CI to correct downward first. CI may find support at 1230 and 1205 levels.

On the broad picture, KLCI must break 1280 and stay above it in order to turn strong in the short term. On the medium term it is still weak, KLCI may go sideway and trade in a consolidation range of 1200 -1300 before it resume its uptrend. A good example is to take a look at how the DJIA consolidate in the last 2 months, that may probably give us a clue to how our KLCI will consolidate.

This is a good opportunity to pick up fundamentally sound stocks, as most of them had already corrected substantially from their peak.

Trading - a learning journey that never ends

Last weekend was a really busy weekend for me. The Asia Trader & Investor Convention (ATIC) was held in KLCC, it featured many good speakers from overseas, particularly Australia. I attended seven seminars and workshops in two days, the schedule was so pack that I hardly have time for a proper lunch. However, I feel great, as the food for the brain is more important than the food for the stomach in the last two days. I learned a great deal of good knowledge, even though some of them are quite basic, however, it is the basic that is very important in the field of trading.

Many a times one tend to forget the basics and start making mistakes and lose money. One of the common emphasis by all the Gurus is money and risk management. Trading is a journey, it is not how much u made in one trade, it is the consistent performance over a long period that is more important. The message is that, one must learn how to survive first, protect ourself so not to be destroyed by the market before talking about making money from the market. Hence, a combination of knowledge in chart reading (technical analysis), trading skill, money management and trading psychology are essential for success in the field of trading. Another important point is that all these gurus have lost big money before, but they continued to learn, from Mr. Market as well as from all other successful traders in the world. Trading is a learning journey that never ends.

Back to our KLSE, after the volatile week, the KLCI may goes into a sideway trading range with the CI trading between 1157 to 1250. For the immediate term, the performance of DJIA will have a great influence on the direction of the CI until there are more positive development in our scene.


Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.

Political tsunami, stock earthquke, opportunity in disguised.

8/March/2008 marked a very important date in the history of democracy of Malaysia after 50 years of independence. On this day, the Malaysians witnessed what was described as the political tsunami in Malaysia where the ruling party was first time in the history of Malaysia denied 2/3 majority, and saw five states falling to the oppositions. Of course on the following Monday, 10/3/08 the KLSE also experienced a very strong earthquake that sent the KLCI -130 points down (-10%) to 1166, which triggered the circuit-breaker for the first time in the history of KLSE. The market was suspended from trading for one hour. When market re-open, the KLCI plunged further down to 1157 which saw the selling climax in term of volume. As seen on the KLCI chart, the low of 1157 has seen the completion of the target when the neckline of the Head-and-shoulder chart pattern was broken (indicated by the pink color line).

The market rebounded on Tuesday to close at 1206. On Wednesday, the market gapped-up 36 points on opening in response to DJIA's 416 points gain overnight, however, the bear immediately surfaced and sell down the market, and KLCI closed the week at 1194.84, down 101.49 points week-on-week.

The question on everybody's mind now would be "has the KLCI seen the worst?", really no one knows. From the chart, it has completed the Head-and-shoulder's target, however, it may retest the low of 1157, if that was not defended, then KLCI may further test the support at 1140. The market may see strong support at the 1128-1140 level. How far down the CI may goes will depend on the performance of the DJIA in the near term. The KLCI is now just doing a catch up with the DJIA and the rest of regional markets which have started their down trend move since mid October 2007.

The chart of DJIA shows strong support at the current level of 11,600 -12,000. From the charts, one can see that regional index like the HSI is following the DJIA closely, both indices are showing consolidations at the current level. If the support level of DJIA at 11,600 cannot hold, then DJIA may see further downside to 10,700. In that case, we may see the KLCI tumbling down to the 1130 or even 1090 level.



During a down market, it is full of fear and investors always act irrationally, this may be opportunity in disguise, and the best time to buy quality stocks at discount. However, do not try to catch a falling stocks, it is like catching a falling knife. Let the price settle first, we may not buy at the lowest, it is better to see the bottom first.



Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.

The Bear in action

Since I came back from my trip to Huangshan the market has not been performing well. Short term players has been selling ahead of the national election on 8 Mac 2008. The overall market trend has turned bearish with a broke down on the neckline of the Head-and- Shoulder chart pattern. Daily volume traded has shrunk to an average of 600 million shares which indicates lack of interest in the market. On the moving averages, the short term 30 days MA is pointing south, and the CI is closed below the long term 240 days MA indicating strong bearishness. In view of that, the CI may move further down to test the 1300 psychological support, if breach, it may visit the important the 61.8% Fibonacci retracement level at 1287.

The general direction of the KLCI will be very much influence by the performance of the DJIA, which is probably in the base forming stage. The 12,000 mark is a critical support for the DJIA, if breach, DJIA may plunge another 360 points down to the 11640 level.

Despite the bearish market sentiment, there are a few counters that are showing support by the market, perhaps one can look at them from longer term perspective, they are Proton, Maybulk, BJLand, BJcorp.

Disclaimer: The above is not a recommendation to buy or sell, all suggestions mentioned are purely for academic study purposes for our trend trader club members only, and the author may have personal interest and position in some of the examples mentioned. Any losses incurred if you were to trade base on the study examples above is solely your own responsibility. Do consult your dealer before taking any action.