KLCI Analysis 15 April to 19 April 2019

Hello and good day to you.

I hope you had a great weekend. KLCI is not doing that well compared to other markets like the United States. The recent ECRL deal has also not made the markets jump up that much.

Therefore, we can conclude that investors were not very impressed with the deal with China. Perhaps we will have more clarity about the deals with China and its impacts to the Malaysian markets as time goes by.

I am a firm believer that as a small nation, Malaysian needs to be friends with lots and lots of powerful and big market economies around the world. China, US, India well to name a few.

Better trade deals and negotiations and warm and friendly tones of economic deals with these countries will help to lift the KLCI no doubt.

I will update frequently on the KLCI for this week's trading on this same page so do drop by for the latest analysis and refresh your page to load a new analysis.

17 April 2019 Wednesday - 60 Min Charts And Daily Charts Points To Bearishness

The KLCI had a nasty drop today. I think the fact that Malaysia is being dropped from a number of investments / benchmark...something like that...around the world contributes to the bearish perception.

For example Norway's fund does not want to invest in Malaysia anymore.

Take a look at the 60 min chart of KLCI above.

Well, the bearishness speaks for itself. 

KLCI is still below the 60 min 200 MA, 50 MA and 20 MA. This is a picture of bearishness and as trend followers we should continue to be cautious or bearish on the Malaysian stock  market.

EWM Flashes Bearish Signs

The chart above is the daily chart of EWM. Its the iShares MSCI Malaysia which is listed in US. If I'm not mistaken it combines the Malaysian stock market as well as its currency.

I think it has formed a rounded top. It was unable to go back above the 200 MA.

Now it is in a bearish mode.

It is trading below its daily 200 MA, 50 MA and 20 MA. This means that we should continue to be bearish on the Malaysian stock market.

Do be careful my friends when it comes to Malaysian stocks.

Be very selective and also try to do swing trades and take your profits faster. The buy and hold approach may not work that well in this bearish environment.

15 April 2019 Monday - Still Below Important Moving Averages.

Let's start off this week with a look at the daily chart of the KLCI.

A glimpse of it will tell you that we are still in a bearish environment for the KLCI. I would say triple bearish because the KLCI is still below the 200 MA, 50 MA and 20 MA.

200 MA for a long term outlook, the 50 MA for a mid term outlook and the 20 MA for a short term outlook. I try to keep it simple. If the KLCI is below all these 3 moving averages, then things are still not fine for the Malaysian stock market in the:

  • Long term
  • Short term and
  • Mid term

Perhaps the most important of them is the 200 day moving average. 

Any stock or index that is below its 200 MA is not of investing quality. The yellow line in the chart above is the 200 MA. It is still sloping down. Which means things are still bearish.

Things will improve if the 200 MA is getting horizontal. And the Malaysian stock market is only considered investing quality by most investors when KLCI trades back above the 200 MA.

So far, you can see that it is still below the yellow line (200 MA).

A simple trend following tool but they work very well to help you be on the right side of the trend.

For those of you who read my commentaries often, you will realize I have drawn a trend line on the daily chart of the KLCI. What we really want to see is for the KLCI to break back above the short term downtrend line.

Then and only then should you be short term bullish on the KLCI.

We can draw a daily box now for analysis purposes. After 2 weeks of trading, you can see how the KLCI has traded sideways a bit. So we can actually draw a box to analyze where the market might go.

The point where the downtrend line is extended can be used as a timing purpose for when KLCI is likely to go back above the trend line (if it goes back up). So I have drawn the box to that extent.

If KLCI breaks back above the box and also the downtrend line, then we can start to be bullish on the Malaysian market. Not the long term but the short term.

It may also be the turning point of a bigger trend change. But for a long term trend change I still want it to trade back above the 200 MA.

What if the KLCI breaks below the box?

Well, that means the bears are in control and have won the battle.

If KLCI breaks below the box, then it is likely to go lower. So do take that into consideration.

Weekly Chart Support Is Eroding

If you take a look at the weekly chart of the KLCI above, you will see a green zone area that I have highlighted. That is a long term support area.

Which is why everytime KLCI drops to that area, it rebounds back up. Support is an area not a definite price. Remember that.

However, just because an area is a long term support area, it does not mean that the area will forever hold the stock market from dropping.

Support can erode.

Especially if it has been challenged a few times.

Every time the KLCI drops to that area, demand is absorbed. Notice how the first time it dropped to that area in May 2018, it quickly rebounded.

The next time it dropped to that area in late 2018, KLCI dropped lower than the time it had in May 2018. The rebound back up was not that impressive compared to the time in May 2018.

So you can see how support is eroding.

Therefore it makes sense for us to realize that if KLCI cannot rebound this time, the support there is so weak that it can no longer hold up the market.

Thus, if support breaks, the KLCI can go lower than 1600 and possibly to 1520.

So for Malaysian stock market investors, we really do hope that KLCI can break back above the daily downtrend line I showed you earlier.

We also want to see KLCI break back above the weekly downtrend line. If you want to see a new weekly uptrend in the Malaysian stock market, then we really need to have the KLCI break back above this long term downtrend line.

Until it does so, many Malaysian stocks will be performing badly. With the exception of certain stocks in certain sectors, most Malaysian stocks should be viewed with caution.

Hope this helps in your investing and trading.

Remember always to have an investing or trading plan and stick to it.

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