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Tuesday, September 23, 2008

Composite Index Daily Technical Analysis 22/09/2008

As indicated by A, the KLCI opened higher as influenced by the positive news of US market; however, the KLCI hit the regularly mentioned 1037 Fibonacci Retracement and started to retreat, therefore, the 1037 Fibo 23.6% is still the resistance for the KLCI. This is because of some profit taking activity at the 23.6% Fibo Retracement line, and traders can monitor acutely the immediate resistance with the Fibo Retracement.

Meanwhile, support for the KLCI is at 1000 psychological level followed by the 963.29 Fibonacci Retracement.

As shown on the chart, the KLCI is still testing the Bollinger Middle Band, and the breakout of the Bollinger Middle Band is yet to be confirmed.Since the Bollinger Bands Width is still contracting, this suggests that the KLCI is consolidating from its downtrend.

Nevertheless, the KLCI has to stay above the Bollinger Middle Band, or the immediate outlook for the KLCI is still bearish biased.

As indicated by B, total market volume declined 20.3%, but remains above the 40-day VMA level. This shows that the overall market is well participated, and generally a positive sign for the market. If the KLCI should break above the Bollinger Middle Band with market volume remain above 40-day VMA level, the improvement of the KLCI shall continue.

As indicated by C, the MACD histogram is still rising, and therefore, it is showing a rounding bottom signal, suggesting that the market movement for the short term is gaining strength. The improvement is likely to continue until the MACD histogram should form a rounding top.

BY Zhuge Liang

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