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Tuesday, November 18, 2008

KLCI : Fragile sentiments - excesses are unsustainable / 综合指数 2008年 11月 17日 / Composite Index 17/11/2008

KLCI : Fragile sentiments - excesses are unsustainable By Zhuge Liang

Let's recap the KLCI in late August ...........

The dominant feature is the bearish long term head and shoulder pattern. It is important to note that the downside targets near 760 have not yet been achieved. This market is particularly compatible with head and shoulder patterns. They occur often and they display a high level of reliability in this market.

This is not a freefall market. There is a long term support consolidation trading band between 860 and 920. A market collapse has a high probability of pausing in this consolidation area. There is some evidence of a consolidation rebound developing in this region. However this is a temporary rebound. All regional markets with head and shoulder patterns have achieved or exceeded these pattern targets

The neckline, or base of the head and shoulder pattern uses the extreme low in August 2007 and the low in March 2008. A straight forward application of the pattern target measurement sets a downside target near 760. This target is not an historical support level.. Support is located near 800 so this is the higher probability downside target. This has been achieved, and the rebound has developed from this area. The 760 target is an extreme technical target.

There remains the potential for a sharp temporary fall towards the head and shoulder target near 760. The sudden temporary falls in March and August 2007 and again in March 2008 show how it is possible for this behaviour to develop. This is consistent with the character of the Malaysian market.

Bear markets have three stages — sharp downreflexive rebounda drawn-out fundamental downtrend.

综合指数 2008年 11月 17日


如图所示,布林频带(Bollinger Band)收窄得相当的小,这表示综指酝酿的新走势有开始接近出现的迹象。当然由于综指目前已经是处于布林中频带(Bollinger Middle Band)以下了,所以若综指短期内还未能上扬突破布林中频带的话,那当布林频带开始明显打开时,综指是有下跌的风险了。




Composite Index Daily Technical Analysis 17/11/08

On Monday, the KLCI opened gap down, but managed to close higher, up 2.41 points at 884.06 points. Still, the KLCI failed to break above the 887 Fibonacci Retracement resistance. Support for the KLCI remains at 800 mark.

As shown on the chart, the Bollinger Bands Width is still contracting with a rather narrow Bollinger Bands Width, this implies that the consolidation is near its end, and the KLCI is about to break out from its consolidation. Again, if the KLCI should remain below the Bollinger Middle Band as the Bollinger Bands Width expands, it would be a bearish signal for the KLCI.

As indicated by B, total market volume declined another 20.5%, and as a result, the volume is now below the 40-day VMA level. This shows that the market participation is relatively low, as investors are mostly on the sidelines. However, it is rather normal to have lower volume during a consolidation of the KLCI.

As circled at C, the Stochastic remains below 30% level, which is the short term bearish region. As long as the Stochastic is still below 30% level, the short term bearish movement is expected to continue, until a valid break out above the 30% level.

In short, the market direction of the KLCI is still unclear, and we will still have to wait until the Bollinger Bands Width expands to determine the direction of the next movement.


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