Millionaire Trend Trader: FBM KLCI - formation of Hammer candlestick

Tuesday, July 20, 2010

FBM KLCI - formation of Hammer candlestick

Stocks on Bursa Malaysia ended mixed yesterday with key heavyweights mostly in correction mood while second and third liners chalk up gains. The FBM KLCI ended 3.30 points or 0.25% lower at 1,333.35 after fluctuating within the negative territory throughout the day. Sentiment was weighed down by the 261 points fall of the Dow. Gainers led losers by 327 to 324 while 269 counters were unchanged. Volume rose to 848 million shares worth RM1.330 billion, from 793 million shares worth RM1.196 billion registered on last Friday.

The FBM KLCI opened 2.73 points lower at 1333.92 and traded in the negative territory throughout the day, with sentiments weighed down by the 261 points sharp drop of the Dow last Friday. The key index lost 8.67 points when it hit the intra-day low of 1327.98 but rebounded gradually to close near the opening level, forming a hammer candlestick on the daily chart. The formation of hammer candlestick indicates buying support and a possible bottom during correction. Immediate overhead resistance zone is at 1335 to 1350, while the support zone remained at 1300 to 1320.

MACD continued to move higher but tapering off, while the histogram continued to turn shorter, indicates the waning of the upward momentum. RSI(14) at 59 has moved lower into the mildly bullish zone, while Stochastic at 84.7 continued to stay in the overbought zone and has crossed below its slow stochastic line. Signals from the indicators point towards a correction mode of the FBM KLCI.

Currently, the FBM KLCI is undergoing short term correction after the recent run up from 1294 and the short term trend remained up. Medium term trend is likely to be range-bound, while the long term trend is still up with the upward momentum gradually waning off.

In view of a lack of market moving impetus, the FBM KLCI is likely to continue tracking the performance of regional benchmark indexes. Overnight, the Dow closed +56.53 points or +0.56% higher at 10,154.43. Today, the FBM KLCI is likely to trade within a range of 1323 to 1340.

This week's expected range: 1300 – 1360
Today’s expected range: 1323 – 1340

Resistance: 1335, 1338, 1340
Support: 1323, 1326, 1330

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Tuesday, July 20, 2010

FBM KLCI - formation of Hammer candlestick

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