Millionaire Trend Trader: FBM KLCI

Wednesday, November 2, 2011

FBM KLCI - pullback correction

Stocks on Bursa Malaysia ended sharply lower yesterday on profit-taking amid the uncertainty in the short-term market outlook. Investors took their cues from Wall Street's losses due to weak leads from European markets as Greece government announced that the country would hold a referendum on a new aid package. The FBM KLCI fell 16.25 points, or 1.09%, to close at 1,475.64, after opening 7.76 points lower at 1,484.13. Losers led gainers by 583 to 198 while 213 counters were flat. Turnover was moderate with a volume of 1.19 billion shares worth RM1.29 billion compared with 1.33 billion shares worth RM1.58 billion on Monday.

Taking cue from the weak performance of Wall Street overnight, the FBM KLCI opened with a down gap of 7.76 points at 1,484.13 and was moving sideways in a tight range for the morning session. Heavy selling pressure appeared in the afternoon dragged the key index to close near the low of the day. Chart-wise, the FBM KLCI formed a bearish black candlestick which indicates heavy selling pressure and a reversal, and the key index is likely to further correct itself today. Immediate downside support is envisaged at 1,470, 1,465 1,459 and 1,450.

MACD continued to climb higher but is tapering off, and the histogram has turned shorter, indicating a slow down in the upward momentum. RSI (14) has hooked downward to 60.3, reflecting the pulled back. Stochastic has turned downward and crossed below the slow stochastic line, reflecting the reversal in the key index. Readings from the indicators showed that the FBM KLCI is currently undergoing a pulled back correction.

The short and medium term trend of the FBM KLCI remained up, while the long term trend is still bearish as the key index is still below most of the long term moving averages (MA). The 360-day MA at 1,470 and the 10-day MA at 1,459 are critical support level to watch, a break below both these support levels would likely see the FBM KLCI plunging further to the 1,450-point psychological support level. As the overall volume traded is shrinking, the market is likely to go into a consolidation mode.

Overnight, the Dow fell another -297.05 points or -2.48% to close at 11,657.96. Today, the FBM KLCI is likely to trade within a range of 1,460 to 1,497.

This week's expected range: 1432 – 1529
Today’s expected range: 1460 – 1497

Resistance: 1483, 1490, 1497
Support: 1460, 1467, 1471

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Wednesday, November 2, 2011

FBM KLCI - pullback correction

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