The KLCI’s new high for the year (till April 29 April 2014) indicates that the bulls are still charging. However, the momentum is weak, causing it to pull back. The KLCI remained above the short term 30 day MA. The immediate support level of 1840 points has been renewed to 1845 points. The higher immediate support level is another indication of support for the bullish trend.
The resistance level has shifted from 1880 points to 1870 points after the index failed to break above this level twice in the past one month.
Momentum indicators continue to indicate momentum is bullish but weak. Despite the index climbing to new highs, momentum indicators like the RSI, MACD and Momentum Oscillator were not able to meet new highs, creating a negative or bearish divergence.
Furthermore, the KLCI pulled back from the top Bollinger Band after the decline last Friday. The bearish divergence is an indication that the trend is weak and a reversal can possibly happen.
Technically, the bearish divergence indicates that the chance of the KLCI climbing higher is slimmer. Nevertheless, the trend is still bullish unless the immediate support level of 1845 points is broken. Fundamentally the market may be cautious ahead of companies reporting their earnings for the first quarter 2014 which is expected in the next one month (May 2014).
The traditional sell in May and go away market wisdom may dampen market confidence.
Expect the index to trade between 1850 points to 1870 points. However a breakout below the 1845 points will see the index falling lower level to the next support at 1800 points.