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KLCI Analysis March 2020

With the political uncertainty plaguing the nation, there is quite a lot of uncertainty. What about the KLCI?

Investors certainly do not like political uncertainty as this will affect their investments. The question now is will Tan Sri Muhyiddin Yassin be able to secure his position as Prime Minister for the foreseeable future.

And even if he can, will his new administration bring an economic recovery to the nation?

Technical charts can give us a clue to the success of the new government, so let's take a look at the charts of the KLCI in this month's analysis below.

31 March 2020 Tuesday - 60 Min Ascending Triangle Forming In The KLCI

After the weakness yesterday, the market today gap up and closed near its highs.

If you can see from the chart above, the KLCI might be forming a 60 min ascending triangle pattern. This is a useful continuation pattern that may tell us whether the index may continue to go up or reverse in direction.

If KLCI manages to break back above the highs of this ascending triangle, then the KLCI is likely to continue to move higher.

On the other hand, we can employ the lower uptrend line to tell us whether KLCI might go down. If it breaks below the trend line this will mean a pattern failure and may signal to us a possible weakness in the KLCI.

I don't know whether you can see it or not but if you observe the chart properly, perhaps you can see a cup with handle variation.

This can happen when an index is bottoming. 

The sideways trading this past week is the handle and if KLCI is able to break above this handle, then KLCI is likely to move higher.

We are at the close of trading day for March 2020. I will start a new page for KLCI's analysis for April. Do join me on this journey next month as we continue to analyze what KLCI might be doing.

If you find this analysis helpful and perhaps find that someone else may benefit from this analysis, do share this page to your friends. 

Thanks for reading and have a nice day!

30 March 2020 Monday - Some Signs Of Weakness In The 60 Min Chart Of KLCI

Compared to many other countries, Malaysia has been able to keep its Covid 19 cases low. But it has already past more than 2000 cases.

I think the government needs to extend the restricted movement order period for at 2 weeks to early May 2020.

Today, the KLCI showed some weakness in that it has dropped below the 60 min 20 MA. It has not dropped below this MA for quite some time and a drop below this signals weaknesses.

If it drops below the 60 min 50 MA, there could be more weaknesses as well.

I do not know if this is just a sideways trading before breaking out higher but a good gauge is whether it can stay above the horizontal line support area that I have drawn above.

That will be about 1310 area. If it drops below this area and also below the 50 MA then we could see more correction which might even lead to KLCI testing the previous low.

Hopefully it is just a sideways trading before going higher.

27 March 2020 Friday - RM 250 Billion Covid 19 Stimulus 

Today the Prime Minister Tan Sri Muhyiddin Yassin announced a RM 250 Billion stimulus package to combat the economic impact of Covid 19.

Another good news is the number of reported cases has dropped today. If Malaysian can keep the Covid 19 cases with around 100 each day and then decline as time goes by, we can be out of this mess quite soon.

Hopefully the government won't be soft hearted and end the Restricted Movement Order in mid April. My hope that is that they will extend it to at least 6 weeks.

I think I read somewhere that Bill Gates mentioned that 6-10 weeks of controlled movement is needed to combat this virus. He knows what he is talking about as his foundation deals with these kinds of health issues around the world.

Looking at the 60 min chart of KLCI above, we can see how the KLCI is already in a 60 min uptrend. There has already been a bullish cross and the KLCI is above the 60 min 20 MA and 50 MA.

We can draw an uptrend line to connect the lows. There is something I do not like as a break below the uptrend line could signal correction. But let's not jump ahead.

If KLCI can stay above the green support area then we will not have a correction but will continue to move higher. These past 2 weeks, KLCI has formed a weekly bottoming tail and then a large green candle in the weekly chart.

So hopefully this 2 bullish weekly candles can continue to give an impetus for a bullish move up.

26 March 2020 Thursday

The Coronavirus cases in Malaysia has already reached more than 2000 cases. Thankfully we have a restricted movement order in place.

I think Malaysia might need to have a longer confinement period perhaps up to May. Some pain now is better than a huge economic impact that is prolonged and that will affect the economy.

If you look at the charts above, the KLCI is now above the 60 min 20 MA and 50 MA.

KLCI has perform good so far. With it trading above the green support area. I think as long as this support area holds then we will continue to see higher prices.

On the other hand, if KLCI drops below this green support area, then we might see some downward correction.

Anyway the fact that KLCI is now above the 60 min 20 MA and 50 MA points to a bullish bias. What we want to see is for it to trade back above the 60 min 200 MA.

Watch the box I have drawn today. This is a trading range that is formed from the past 2 days of trading.

If KLCI can break above the highs of this box then it could go higher. On the other hand, if it drops below the box, then it could move lower.

25 March 2020 Wednesday

I think the markets like the measures that are put out by the Government to help the economic crisis that will be caused by Covid 19. Plus the Fed stimulus and a possible agreement by Republicans and the Democrats also help to lift the move on Wall Street and around the world.

Malaysia already is near 1800 cases of Covid 19 and today I read from an article that a possible peak case for Malaysia may be in mid April with as much as 6000 plus people infected.

If the government continues to enforce strict movement restrains then this will indeed help to combat the rise of this virus. Fellow Malaysians also need to do their part and not take this Coronavirus lightly.

I think many people still feel like Covid 19 infection is something you read in the news but this is serious and it can infect us if we are not careful.

Looking at the chart above, the KLCI today gap higher and remain above the highs of the previous day. This is good. After the bullish cross, it is doing what it is suppose to do.

But we need to see it stay above the green area that I have coloured. Otherwise if it drops below the uptrend line and then below the green area, we might see sell off again.

Let's hope that the weekly bottoming tail works in the KLCI and it marks the bottom.

24 March 2020 Tuesday 

I think KLCI is trying to break above the weekly bottoming tail.

The chart above shows the 60 min chart with a box that represents the entire trading week. If KLCI manages to go above this box and stays above it, then we will have a bottom and move back up.

On the other hand, if KLCI breaks below the box, then it might continue to move lower.

Oh by the way we already have a bullish cross in the 60 min chart. A move back up usually happens with a bullish cross. Not a definite thing but at least we have some bullishness on our side.

23 March 2020 Monday - No Follow Through To Weekly Bottoming Tail Setup Yet

Last week I showed you the weekly bottoming tail setup in the weekly chart of the KLCI.

When you zoom out into the weekly chart you can see that there is a long bottoming tail. This usually can be a sign of a bottom and also a bullish setup.

However, today the market gap down and there is no follow through to the setup yet.

Perhaps in the next few days KLCI might trade back up above the highs of the bottoming tail. We do not know.

I think a clue to take is from the US stock market and also the number of Covid 19 pandemic cases that is in the world. As long as there is no peak in the cases, I do not think that a bullish setup will work that well. Perhaps only a 25% chance of success rate.

That's because all the public can think of is more cases means more lock down and businesses everywhere are going to be affected. And when your neighbor has no job and pay, the public are scared that any bottom in the stock market may not be in sight.

Its simple psychology.

Anyway coming back to the charts, stay bearish or cautious as long as the KLCI is trading below the highs of the last week's bottoming tail.

If KLCI trades back above the highs of the bottoming tail, then we might have an oversold bounce back up.

Follow the charts and let them tell the story.

20 March 2020 Friday - Strong Rebound In KLCI

Despite the looming increase in Covid 19 cases in Malaysia, the market rebounded strongly today. Perhaps thanks to the big rally in oil prices.

This help to form a weekly bottoming tail which you can see in the weekly chart of the KLCI above. Some may call it a hammer because that is what it looks like.

A long bottoming tail usually tells us that the index or stock is rejecting to go any lower.

What begin as a big sell off early in the week ended with the index closing near the highs. So, this is bullish because the market ignored the bearish sentiment to close higher.

Normally a bottoming tail can be a setup.

You buy the index or the stock when it trades above the highs of the bottoming tail. Which means, one can long KLCI if it trades above the highs of this weekly bottoming tail.

A reasonable target might be the length of the entire bottoming tail.

Whether it will reach the target or not I do not know. With the negative news of cases all around the country and the world, we might have a failed setup.

Even if it trades above the highs of the bottoming tail, we do not know whether it will be a V shape recovery or a slow dragging move up.

But do remember, many bottoms in stocks and indexes were formed with a weekly bottoming tail.

19 March 2020 Thursday - Malaysian Economy Affected By Movement Control

The KLCI was not able to go above the resistance area that I mentioned 2 days ago. Thus it continued to fall as it follows the bearish trend.

KLCI is still below its declining 60 min 20 MA, 50 MA and 200 MA. This is still bearish and I advice you to continue to be bearish on the Malaysian market when it is below the 20 MA and 50 MA.

No sign of bottoming yet.

If KLCI continues to drop below the second read area that I have drawn in the chart above, then it can go lower. This will be the lows of today.

I think the restricted movement has really impacted the economy of Malaysia and this is reflected in the KLCI. The number of Covid 19 cases continue to rise and the government might extend the controlled movement period longer if the situation worsens.

It might go on for another 2 weeks and thus if that happens, do be prepared for more decline in the KLCI.

I think one should continue to remain bearish until the Covid 19 cases peak in Malaysia. Then perhaps we might have a bottom.

17 March 2020 Tuesday - KLCI Drops As Restriction Of Movement Kicks In

After Prime Minister Tan Sri Muhyiddin Yassin announce measures to combat the Covid 19, the KLCI plummeted today. The restriction of movement and closure of business will have a negative impact on the economy.

Although the KLCI bounced back up higher after the initial gap down, I think we are still not out of the woods yet. The KLCI is still in a bearish mode in the 60 min chart.

It is below the 60 min 20 MA, 50 MA and 200 MA and this still points to a bearish bias.

If KLCI cannot go back above the red area that I have drawn in the chart above, then it is possible that it might move lower again.

16 March 2020 Monday - Market Continues Sell Off As Coronavirus Cases Increase

In the past I mentioned that the Malaysian stock market index was in a very bearish state. It is below the daily 20 MA, 50 MA and 200 MA.

Today it continued to move down as the number of cases of Covid 19 increase dramatically.

I think investors in Malaysia are concerned that we might have a situation like Spain, Korea or even worse Italy. Since the economy is already very bad, imagine what will happen if we have a lockdown in major cities like KL or Penang.

This will indeed impact the livelihood of many people and many Malaysian companies.

Therefore, I think one should continue to be bearish or at least cautious of the KLCI and Malaysian stocks as long as the Covid 19 cases increase.

Last week I wrote the analysis before closing stating that a possible daily bottoming tail might happen. But when the market closed, the bottoming tail become less beautiful.

The market did not move above the bottoming tail but instead gap down below it. So there was no bullish setup trigger.

When the market drops below the lows of the previous trading day, this is not good especially when the overall daily trend is down. 

So do continue to be bearish or cautious on this stock market.

13 March 2020 Friday

KLCI had a massive sell off today but it looks like it could close with a nice bottoming tail.

Australia's index was down 8% but it managed to go up positive 4%. That was what I read in the news so, this is a panic sell off and markets could bounce up to give traders a nice few days bullish trade.

If KLCI closes with a bottoming tail, one could buy when KLCI trades above the highs of the bottoming tail. This rise might go up a few days to around 1420 area. So its a trade rather than invest.

I suggest looking at stocks that will make a large bottoming tail and they are at support. This is because stocks at support could rise further than the index.

The target could be the length of the bottoming tail. But it could go higher than the initial target. So do some homework and see if you can find a trading opportunity.

11 March 2020 Wednesday

Now that the political situation in Malaysia is more stable, the market may start to expect a possible catalyst for reversal. Tun M says that it will be difficult to challenge Tan Sri Muhyiddin Yassin in a no confidence vote and therefore this government is likely to stay put till GE 15.

This provides stability and may be a catalyst for Malaysians to look forward to as the reason for a reversal in the KLCI.

If the new government can introduce policies the make the economy grow, then there could be a bottoming in the KLCI in the near future.

But for now, the KLCI is still in a daily downtrend.

The KLCI is still below the daily 20 MA, 50 MA and 200 MA. This is a very bearish situation. Unless the KLCI can trade back above the resistance area I drew on the chart and start making higher lows, you should continue to remain bearish on the KLCI.

Despite a change of government, perhaps the effect of the Coronavirus or Covid19 will have a big impact on the Malaysian economy and its trade partners.

Therefore, it may take time for a new uptrend to happen in the KLCI.

Let us follow the trend and let the charts tell us what to do.

10 March 2020 Tuesday

Its been a few days since I wrote. Sorry about that. But I think I did warn of more sell off if it broke below the uptrend line in the 60 min chart.

The KLCI is still in a bearish downtrend in the 60 min chart.

There is some slight rebound today but it is fast approaching a resistance area. If it could not go back above the resistance area, then there could be more sell off.

KLCI is still below the 60 min 20 MA, 50 MA and 200 MA, therefore you should still continue to be cautious or bearish on the KLCI.

5 March 2020 Thursday

KLCI has gone back above the 60 min 50 MA. This is something good and there is a possibility that it can reverse trend.

However,  there is still some risk as the daily trend is down and the KLCI is still below the 60 min 200 MA.

What you want to observe now is whether it can stay above the support area of 1480. Secondly, watch the uptrend line. If KLCI can stay above this trend line then it can move higher.

On the other hand if KLCI breaks below the uptrend line then it could move lower.

What we want to see is a bullish 20 MA cross above the 50 MA and then KLCI move back above the 60 min 200 MA.

4 March 2020 Wednesday

Today we learned that the Parliament in Malaysia will resume its session on May 18 2020.

Well, to some Malaysians that is a relieve and to others it is a disappointment. That's because the opposition (Pakatan Harapan) will not be able to table a motion of no confidence against Tan Sri Muhyiddin Yassin.

They will have to wait for at least 2 months.

During this time period, it could give the new PM the time he needs to solidify his power. He can have the opportunity to secure more MPs to his side and thus thwart any attempt that the opposition may table a motion of no confidence.

I think this gives investors some sense of certainty and thus it help to lift the KLCI today.

The doji type of pattern formed in the KLCI two trading days ago will be an important point to take note off. As long as the KLCI stays above the low of the doji then this could be a possible bottom for the KLCI. 

Especially if the new government is able to have policies that will shore up investors confidence, then the KLCI could go up and start a new uptrend.

But then again, we are still in a downtrend and I think the KLCI needs to break above the downtrend line that I have drawn to have a meaningful trend change.

Then we want to see it trade back above the daily 20 MA and 50 MA. This would help to give a hint to us that a new uptrend may be around the corner.

3 March 2020 Tuesday

I think the market still does not like the uncertainty in the Malaysian political scene.

Yesterday the Dow Jones rose more than 1200 points but the Malaysian market does not seem to be able to rise that much. When that happens, it means that good things in the US is unable to bring sunshine to the local market.

There is a small bright light in the KLCI though. 

It is now trading back above the 60 min 20 MA. But then again, it is still below the 60 min 50 MA and 60 min 200 MA. Trend changes happen when the index trade back above these moving averages. 

But so far, the KLCI is only above the 60 min 20 MA. And that MA is still pointing downward.

Well, as a trend follower, one should still remain bearish or cautious of the KLCI based on the fact that it is still below the 60 min 50 MA and 200 MA.

There are a few trend lines that you can watch.

The first is the small uptrend line. If KLCI breaks below this trend line then it could resume the bearish downtrend. Then there is the horizontal trend line. If KLCI breaks above it, then it could move higher a bit.

Together these 2 trend lines form some kind of a 60 min ascending triangle so if it breaks out of it then at least the height of the pattern could be a target.

And if KLCI can break above the bigger downtrend line I show above, then KLCI could rise even more.

But then again the trend is still down and any bounce would be a trade bounce, meaning one should sell it a bit faster after it rallies as the downward pressure in the 60 min chart and daily chart is still very strong.

2 March 2020 Monday

The chart above is the 60 min chart of the KLCI. As you can see, the KLCI opened lower, tired to move back up but eventually close below the lows of the previous trading day.

It is still in a downtrend.

I think that the market is telling us is it does not like uncertainty. There are times when there is a change of government and the market will just go up.

This is a vote by investors that they believe that a new government might usher a new change and make the economy of the nation better.

However, we do not see the market reacting positively to the change of government.

Perhaps the reason is because of the uncertainty surrounding the sustainability of Muhyiddin's government. Does the new PM have the majority?

If there is no majority, then when Parliament is in session, there could be a vote of no confidence.

And if there is a vote of no confidence, there could be a snap election.

We do not really know what might happen and when there is uncertainty, I guess the market does not like it. Hence the gap down and the inability of the KLCI to rise higher.

So until there is political certainty, one should still be very cautious of the Malaysian stock market.

The other thing to take note is the fact that the KLCI is still below its 60 min 20 MA, 50 MA and 200 MA. The faster moving averages are below the slower moving averages.

This is a bearish setup and it is what we call a downtrend.

So, unless the KLCI moves back above the 20 MA and 50 MA, one should still be bearish or at least cautious of the Malaysian market.

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