FBM KLCI - turning bullish

Stocks on Bursa Malaysia closed higher yesterday on continuous gains in selected heavyweights which drove the benchmark FBM KLCI to close 6.61 points or 0.37% higher at 1,791.37 points after the Aidiladha holiday on Tuesday, as investors took cue from the positive performance on other regional bourses on Tuesday. The key index hovered between 1,786.1 and 1,795.48 throughout the day. Gainers led losers by 395 to 374 while 300 counters were unchanged. Trading was moderate with volume rising to 1.62 billion shares, worth RM1.884 billion, against Monday's 1.324 billion shares valued at RM1.041 billion. ...Read more>>

Chart following Vs Rumours following

(Click to enlarge chart)
Two weeks ago, a friend came to see me in the office to discuss about "share" matters. I told him that some counters offer good trading opportunities, but he mentioned that he was told to sell everything before Parliament starts, so he would not buy anything. I did not insist, but I told him that trading is about following market trend, not about listening to unfounded rumours or comments. Of course he didn't buy those counters that I mentioned (he would now say aiyah! missed la! as usual). A week later, another guy (somebody high in position in my office) also mentioned that he was told to sell everything before Parliament starts, I laugh again. Today, the Parliament started, I didn't see our market disappearing or plunging to a new low, instead, many counters are doing well, and I have been locking in handsome profits. This is not to boast, but just to tell a fact that, following the chart is always wiser than listening to all kinds of advices from those commentators in the street (everyone has a mouth, they can say anything they like).


The market was very slow and quiet today (Monday, 280408). KLCI was up 7.23 points, in which a last minute effort push the CI up by 3 points. Volume was very thin at 486 million shares traded. This shows the market lacks participations from the majority. Maybe the market is waiting to see any surprises after the Parliament starts. On the weekly chart, our market has actually ran up for three weeks since 7th Apr, and has touched the short term target of 1300, and maybe it is time to take a breather. The 60 days MA is posting some resistance to the CI, however, the short term 30 days MA has started to point northeast indicating short term up trend. The very short term 5 days MA is giving some support to the CI. If the CI is able to break through the 1300 psychological resistance, then it may test the next target area at 1340. On the other hand, if the market continue to stay weak, the CI may come down to close the gap at 1267.

Some of the stocks to watch are: Parkson, Puncak, Kinstel, Zelan, Kencana, Sapcres, Sunway and...


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 gap is closed

On Monday, the KLCI gap up open at 1278.25, right above the resistance at 1277.69 and hit the intraday high 1288.14 due to the spilled over effect of DJIA's gain of 228 points on last Friday's close. CI was trading downward the whole of Monday due to profit taking activities. Yesterday, the CI started the day with a bit of panic selling as usual because DJIA was down 24 points on Monday's close, however, the CI was gradually trading upward and turn positive at about 4.15 pm. Volume has gradually pick up, in the region of around 600 million shares. This shows the majority public has not regain confidence yet, and the smart-money has been actively accumulating. As Monday was a gap up open, CI may correct downward the re-test the resistance which now turned support at 1268 before it pick up steam to challenge the 1300 points.

The short term trend of CI has gradually turn positive as the 30 days MA has already starts to hook up. The 60 days MA which represents medium term trend is starting to go sideway and so is the 120 days longer term MA. So, the short term is up and the medium to longer term perspective is sideway with a trading range of 1250 - 1300.

On March 17, I mentioned opportunity in disguised, some were doubtful and some were opportunistic. Those opportunistic fellows who called me got on to the boat of Kencana, Sapcres, KPS, Zelan, Huaan, Hubline etc. However, there are also those who say they missed the boat, but the fact is when the boat was there, they didn't recognized it or don't believe that it is a boat, probably due to their lack of knowledge or lack of confidence. So, better revise what you have learned before. Do pay attention to those educational articles that I post here.

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.

Dull market.

The market was really dull yesterday. Regional markets was down due to the poor performance of DJIA on Friday, and KLCI was down 13.36 points to close at 1233.43, volume traded was only 355 million shares, one of the lowest volume day in recent months. This indicates a lack of interest. External factors and internal political uncertainties will continue to affect the performance of the KLCI. CI may continue to go sideway within the range of 1200 - 1265, if 1215 is broken CI may go further down to test 1200.

In a dull market like this, perhaps this is the best time to do more reading to enrich ourself. Below is a good article by Michael S. Shopshire, PhD, of Mental Edge.

The Obsessive Compulsive Trader

Careful analysis of all possible alternatives and all possible consequences of one's decisions is the hallmark of good decision-making. Amateur traders approach their decisions like recreational gamblers, but professional traders make a careful analysis of their options and act decisively. It's important to avoid impulsive decisions. It's vital to have a clearly defined trading plan, and to manage risk so that a single trade or series of trades will not have the potential to completely wipe out your trading account. It's also imperative when making a trading plan to define up front the signs and signals that indicate your trading plan has gone awry. It's useful to conduct a thorough analysis before making a decision, but some traders have difficulty making prudent decisions. Rather than act decisively, they become completely paralyzed by it.

At the outset, it's vital to point out that not all traders suffer from psychological ailments. When it comes to hesitation, for example, some traders have good reasons for waiting. Experience may have shown that it was worth waiting before making a trade, or novice traders may be risking too much capital on a trade and be legitimately afraid of digging themselves into a deep financial hole. That said, other traders act like they have obsessive-compulsive personality disorder. In other words, they hesitate too long and the reasons for their hesitation reflect personality characteristics.

Traders with a pathological variant of what traders usually refer to as analysis-paralysis are afflicted with an insatiable need to seek out certainty and security. For these individuals, uncertainty represents insecurity. It's not merely that they have a pessimistic outlook, although they have one. They equate money with psychological security; losing money represents not only a loss of financial security, but also a loss of basic emotional security and well being. How does such an affliction develop? For many it is rooted in early childhood. Parents often impose rules for their children to follow and punish them when the rules are broken. Young children are on the lookout for what rules to follow so as to avoid punishment and the unpleasant feelings associated with it. As adults, we make our own rules and decide to follow them or not; we no longer act as children searching for the "right" rules to follow in order to avoid punishment. People with extreme analysis paralysis, in contrast, tend to search for the "right rules." They continuously search for rules to follow, and when no clear rules exist, they simply make them up. It's as if their parents have followed them into adulthood. They are always there next to them nagging and threatening punishment when the "right" rules are not identified and followed unconditionally. For traders with a pathological variant of analysis-paralysis, this past childhood conflict manifests itself as searching for the "right" indicator or the "right" trade setup. And even when they see it, they have a strong need to want everything to be perfect. Because if they don't, they are certain that some form of unspecified punishment will follow.

Do you have an extreme form of analysis-paralysis? If you do have a pathological form of analysis paralysis, it may be difficult to overcome, but it is not impossible. The main thing is to take realistic action. If have a dire need to be perfect, you may want to minimize risk so that you can convince yourself that you can handle the worst-case scenario. Taking big risks will drive you to obsess about possible “disasters.”

Don’t be such a perfectionist. It’s not as bad to make mistakes as you think it is. "The harder you strive for perfectionism, the worse your disappointment will become," according to Dr. David Burns. Perfectionism has more disadvantages than advantages. Trading is a profession where you must take risks and explore new market opportunities. If you continuously strive for perfectionism, you'll never feel satisfied. You'll always think, "I could have done better."

Based on theories of Dr. Albert Ellis, a more adaptive approach is to realize that it's impossible as a trader to be thoroughly competent, adequate, and achieving all the time. Certainly, you should develop an extremely detailed trading plan and try to account for all adverse events that may go against your plan, but there are limits to what you can do. For your long term enduring success, it is vital that you learn to ease up. You don't have to be perfect. You are bound to make mistakes occasionally. Dr. Burns suggests that lowering your personal standards may be helpful. Rather than strive for high levels of performance, feel what it is like to be average. For example, instead of searching for the ideal setup, you may want to just find a profitable setup. You may not make as much profit, but you will feel more relaxed. If you compare what it feels like to strive for high standards, moderate standards, and low standards, you may find that merely going for moderate standards makes you feel better. You may also find that you put on more trades, and achieve greater levels of profitability. You may also want to change your self-talk. In her book, Overcoming the 7 Deadly Sins of Trading, Ruth Barrons Roosevelt lists some supportive beliefs that may help you control your need for extreme perfectionism: "I do my best and my best is enough. Trading is an imperfect art and science. The future is unknowable, so I don't have to accurately predict it. I can forgive myself and still improve."

Don’t let an extreme form of analysis paralysis get the better of you: Ease up. Remember, you don't have to be perfect. You are bound to make mistakes occasionally, and that’s all right. No one is perfect. A mistake does not mean that you should be punished, it just means that you are human.

Profit taking and consolidation

Last week, the KLCI entered into a profit taking week after a continuous 8 sessions of run up from 1166 on 180308. The profit taking is considered healthy. As mentioned in previous post, it was foresee that the CI will correct downward to the 1230 -1205 level. The CI has indeed did so and tested the 50% retracement level of 1215 for the run up. Now the CI is trying to find a footing at the 1220 level, in fact the small hammer like candlestick that formed on Monday, 070408 plus the very low volume of 428 million shares traded tells a clue that the selling pressure is waning.

For this week, the CI may continue to consolidate and move in range of 1205 - 1264. Internal political developments and external factors, especially the performance of the Dow will continue to have influence on the direction of KLCI.

As for the DJIA, it has gone through an almost three months of consolidation since January '08. From the chart, we can see that the DJIA is gradually moving upwards to test the resistance at 12760, if it is successfully broken, the Dow may continue to challenge the 13,000 level, otherwise, it may continue its sideway consolidation in the current range of the 12000 level.

For the medium to longer term players, the KLSE offers good opportunity to accumulate quality stocks that has corrected substantially; for the short term players, there are some trading opportunities too.


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.

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.

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.

Weak market, correction downward

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The KLCI closed weak at 1403.41 on last Friday(141207) after it hit the record high of 1449.70 a week ago. It was down 30.63 points week-on-week. Market players took the opportunity to lock in their profits. Stock markets worldwide was down since 121207 due to a rate cut by FED that was lower than what was anticipated by the market. Daily volume of Bursa Malaysia has shrunk to around 600 to 700 million shares, which is a bad sign indicating a weak market, and more correction ahead is anticipated. In view that 1423 did not hold, and CI actually penetrated 1400 to the low of 1396.45 before a last minute push up to close at 1403.41, KLCI may further correct downward to the 1380 level to close the Gap that was created due to the listing of Sime Darby. Strong support may be found around 1350 and 1330 level. If these two level could not hold, then the KLCI will actually turn into bear phase. Hopefully the year end window dressing activities could help CI maintain at the current level.

Stock wise, there aren't many stocks that are good for trading. Some of the strongly trending stocks are BJCorp, BJCop-LC, and BJland. Gamuda shows a strong reversal up due to the revival of the double-tracking project, with a potential target of 5.10.



To all my Muslim readers, I wish all of you Selamat Hari Raya Haji; and to my Christian readers, Merry Christmas.





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.

KLCI lacking participation

The KLCI started Friday(071207) with a positive mood, the CI touched the record high of 1449.70 within the first twenty minutes of the session, and thereafter profit taking sets in and sent the CI down to the low of the day at 1431.77, an 18 points retracement from the peak but closed off low at 1434.04 (-6.35, -0.44%). Losers outnumbered gainers with 542 to 275. Volume traded was weak at only 790 million shares, this clearly indicates the local market lacks participation from the mass retailers, the CI's gain over the last few days was merely due to the gain in a few heavy weights.

Technically, Friday's price action has lead to the formation of a bearish engulfing candlestick which indicates distribution, especially happening near the top. The KLCI may continue to retrace downward to the 1423 level, which may provides support for the immediate term. For the medium term the 1400 psychological support is important. For the long term, our KLCI is still on the uptrend. Base on the trend channel, we are looking at the very possible target of 1500, this target may be achieved by the first quarter of 2008.

Some of the stocks that may offer short term trading opportunity are Kianjoo and Pohkong.
















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