Millionaire Trend Trader: FBM KLCI - further consolidation ahead

Monday, March 14, 2011

FBM KLCI - further consolidation ahead

Stocks on Bursa Malaysia ended sharply lower last Friday on extended selling pressures, triggered by investor concern about the crisis in Libya and the massive earthquake in Japan. The FBM KLCI dropped 21.29 points or 1.4%, to 1,495.62, and week-on-week, the key index fell 26.99 points, or 1.8%, from 1,522.61 the previous Friday. Decliners outnumbered advancers by 678 to 118 while 207 were unchanged. Turnover fell to 1.02 billion shares worth RM1.85 billion from 1.09 billion shares worth RM1.56 billion on Thursday. Weekly volume fell to 5.50 billion shares, valued at RM8.50 billion from 5.84 billion shares valued at RM8.7 billion recorded the previous week.

After registering a huge gain of 2.2% the previous week, the FBM KLCI opened last Monday on a weak note, falling 1.27 points to 1,521.34 due to an apparent profit-taking, spooked by geopolitical uncertainty, and ended Monday at 1,515.74, down 6.87 points. On Tuesday, the FBM KLCI rebounded to close 1.92 points higher at 1,517.66 despite a weaker close on Wall Street overnight. The key index continued to rise another 6.03 points to 1,523.69 on Wednesday, taking cue from strong overseas markets, and increased interest on sectors related to the Economic Transformation Programme (ETP) initiatives. In the absence of compelling news on the horizon, the key index retraced 6.78 points to 1,516.91 on Thursday. On Friday, the FBM KLCI shed a further 21.29 points to 1,495.62 on follow-through liquidation.

On the weekly chart, the FBM KLCI formed a bearish Harami candlestick pattern, which is a reversal pattern, and hence, the key index is likely to continue with its correction and consolidation process this week. In fact, the FBM KLCI has been in the consolidation for the last four to five weeks trading within a range of 1,474 to 1,529, and might continue to do so. The key index is now below its 5, 10 and 20-week moving averages (MA), but was supported by the 30-week MA which is currently at 1,494, and a close below this level on the weekly chart is likely to see the key index sliding further southward.

On the daily chart, the FBM KLCI has again fallen back into its downtrend channel, and closed below the short, medium, and the important 120-day long term MA, signaling a resumption of the downtrend. The critical support level for the FBM KLCI this week will be the 1,474 level. If this level could not be defended, there is a high likelihood that the key index will slip further downward to test the 1,450 support level.

Weekly MACD has resumed its downward slide after a slow down last, as shown by the weekly histogram. Daily MACD has hooked downward after rising for a week, signaling the resumption of the bearish momentum, and confirming our view that the rise of the key index could be just a technical rebound, as mentioned in previous analysis.

Weekly RSI (14) has hooked downward, fell from the previous week’s reading of 57.3 to 51.6, moving into the neutral zone, and reflecting the consolidation. Daily RSI (14) has fell drastically to 41.3 from 50.5, signaling the key index has turned bearish on the daily chart.

Weekly Stochastic has again hooked downward, and is at 27.6, signaling the continuation of the down cycle. Daily Stochastic has crossed below its slow stochastic line and is at 68.5, signaling the end of the short term up cycle triggered by the technical rebound, and the beginning of another down cycle.

Readings from the technical indicators on both the weekly and daily charts are pointing towards a bearish outlook, and hence, the FBM KLCI is likely to continue with its correction and consolidation process.

As the FBM KLCI is currently closing below its short, medium and long term MAs, the trend is down. Immediate overhead resistance zone is at 1,509 to 1,530, while the immediate downside support zone is at 1,489 to 1,474.

Last Friday, the Dow rebounded to gain +59.79 points or +0.50% to close at 12,044.40. This week, the FBM KLCI is likely to further consolidate and may trade within a range of 1,453 to 1,537, and for today it is likely to trade within a range of 1,475 to 1,515.

This week's expected range: 1453 – 1537
Today’s expected range: 1475 – 1515

Resistance: 1499, 1505, 1515
Support: 1475, 1484, 1490

1 comment:

rajabrooke said...: glad to have found a techincal based site on the malaysian mkt-keep up the good work; March 14, 2011 at 9:16 AM

Post a Comment

What's happening now is that the market remains trading at very thin volumes and that can affect prices, even when just a handful of shares are traded. The decision of any fund to pull out from certain stock hits the price. - Carlos Slim

You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets. - Peter Lynch

Vision is perhaps our greatest strength.. it has kept us alive to the power and continuity of thought through the centuries, it makes us peer into the future and lends shape to the unknown.
- Li Ka Shing

Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised. - Warren Buffet

Learning is a never ending journey in the stock market. The very moment you think you have learned enough, you'll fall. - Harrison Ho

When people are frightened, they cut their time horizon dramatically, even advisors will say to sell because they see portfolios crumble and they fear people will have nothing left. It's really not rational, but it does happen. - David Dreman

I've found that when the market's going down and you buy funds wisely, at some point in the future you will be happy. You won't get there by reading 'Now is the time to buy.' - Peter Lynch

A military operation involves deception. Even though you are competent, appear to be incompetent. Though effective, appear to be ineffective. - Sun-tzu

Financial markets are supposed to swing like a pendulum: They may fluctuate wildly in response to exogenous shocks, but eventually they are supposed to come to rest at an equilibrium point. - George Soros

If you don't change, reality in the end forces that change upon you. - Stuart Wilde

The investor of today does not profit from yesterday's growth. - Warren Buffet

Analysts have always been overly optimistic.
- David Dreman

We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction. - Bill Gates

A corporation's primary goal is to make money. Government's primary role is to take a big chunk of that money and give it to others. - Larry Ellison

If you believe that some day it's going to happen, some day it probably will happen. You just have to make sure you're there when it's happening, and ideally you're at the front of the parade, and the principle beneficiary of when it happens, but it's not a kind of thing where you just sort of sit back and wait. - Steve Case

I try to learn from the past, but I plan for the future by focusing exclusively on the present. That's where the fun is. - Donald Trump

The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated, disturbances and thus to contain the size and consequences of cyclical imbalances. - Alan Greenspan

The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow. - Rupert Murdoch

The price pattern reminds you that every movement of importance is but a repetition of similar price movements, that just as soon as you can familiarize yourself with the actions of the past, you will be able to anticipate and act correctly and profitably upon forthcoming movements. - Jesse Livermore

In the business world, the rearview mirror is always clearer than the windshield. - Warren Buffett

Be extremely subtle, even to the point of formlessness. Be extremely mysterious, even to the point of soundlessness. Thereby you can be the director of the opponent's fate. - Sun-tzu

Look at market fluctuations as your friend rather than your enemy.. profit from folly rather than participate in it. - Warren Buffett

I hate weekends because there is no stock market. - Rene Rivkin

Before this century is over, the Dow Jones Industrial Average will probably be over one million versus around 10,000 now. So for the long-term, the outlook is tremendously bullish if you buy stocks blindly to keep for a century. - John Templeton

A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well. - Jeff Bezos

Making good decisions is a crucial skill at every level. - Peter Drucker

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. - Warren Buffett

The individual investor should act consistently as an investor and not as a speculator. This means.. that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase. - Benjamin Graham

In this business if you're good, you're right six times out of ten. You're never going to be right nine times out of ten. - Peter Lynch

The financial markets generally are unpredictable. So that one has to have different scenarios.. The idea that you can actually predict what's going to happen contradicts my way of looking at the market. - George Soros

Our favourite holding period is forever. - Warren Buffet

If you buy all the stocks selling at or below two times earnings, you will lose money on half of them because instead of making profits they will actually lose money, but you will only lose a dollar or so a share at most. Then others will be mediocre performers. But the remaining big winners will go up and produce fabulous results and also ensure a good overall result. - John Templeton

When I'm bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don't buy long stocks on a scale down, I buy on a scale up. - Jesse Livermore

I've learned that mistakes can often be as good a teacher as success. - Jack Welch

Well, you know, I was a human being before I became a businessman. - George Soros

Checking the results of a decision against its expectations shows executives what their strengths are, where they need to improve, and where they lack knowledge or information. - Peter Drucker

The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. - Jesse Livermore

Wide diversification is only required when investors do not understand what they are doing. - Warren Buffett

Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception. - George Soros

Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed. - Benjamin Graham

The price pattern reminds you that every movement of importance is but a repetition of similar price movements, that just as soon as you can familiarize yourself with the actions of the past, you will be able to anticipate and act correctly and profitably upon forthcoming movements. - Jesse Livermore

I think you have to learn that there's a company behind every stock, and that there's only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies. - Peter Lynch

Before you can really start setting financial goals, you need to determine where you stand financially. - David Bach

The average man doesnâ€™t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesnâ€™t even wish to have to think. - Jesse Livermore

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years. - Warren Buffett

Suppliers and especially manufacturers have market power because they have information about a product or a service that the customer does not and cannot have, and does not need if he can trust the brand. This explains the profitability of brands. - Peter Drucker

The key to making money in stocks is not to get scared out of them. - Peter Lynch

I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up. - Jesse Livermore

Millionaire Trend Trader

"T+10 interest FREE margin trading account"

Monday, March 14, 2011

FBM KLCI - further consolidation ahead

1 comment:

:: Disclaimer ::