The market may have bottomed and with foreign funds coming in, we now look at the technicals to see if KLCI can continue to move higher.
I must say that Malaysia's market is a bit slow to rise compared to US markets which have bottomed long ago and move up near to its previous highs. Well, as the saying goes...better late than never.
I think one of the reasons why Malaysia is meandering is because of the political environment. Cancellation of so many projects and the power shift will take some time for the economy to recover. But once the new government starts to jump into mega projects and open up its economy to foreign investors I believe Malaysia can recover from the lows.
The KLCI has been a bit weak and has broken below the 60 min sideways box that I have drawn a few days ago.
However, it is still behaving in a way that I like. The 60 min chart shows it is declining and perhaps may setup another 60 min break downtrend line setup.
The last two times has been successful and perhaps this time might be successful as well. There is no buy setup till KLCI breaks above the 60 min downtrend line.
It must have been quite frustrating for Malaysian investors to see Asian bourses fly higher while the local market remain stagnant. But don't be depressed yet. There is a reason for the behavior of KLCI.
The daily chart above shows we are going to meet the declining 200 MA as well as the downtrend line. From my experience, the best thing for stocks/market to do at this moment where it meets the 200 MA is to trade sideways a bit. Perhaps a week more or two.
Then we want to see it break above the consolidation and with that it will also break above the downtrend line and the 200 MA. Thereafter, the box will act as a support area.
Well, the market may shoot up higher tomorrow past the 200 MA but my preference is for it to trade sideways a bit.
The 60 min chart tells us that the KLCI is still trading sideways. Nothing bad about trading sideways. As long as it stays within the box, I'm happy with KLCI's performance.
The chart above is the daily chart of Malaysia's construction sector. It is trying to start a new uptrend. There is a bullish cross recently but just like the KLCI it is having some problems with the 200 MA.
Today there is a gap down as well after the government announces something about tolls.
Gamuda gap down as a result of that. But as long as the construction sector stays above the top of the box it will eventually go higher. A trade above the 200 MA will be good.
I think the construction sector is dragging the economy down. Hopefully the government will start mega projects. Make deals with China and other foreign countries. A new hope of trade deal between China and US has help to send both markets in China and US higher.
For our market to shoot up, the government needs to have more talks with China. That in turn will enrich the coffers of Malaysia's economy and enrich the lives of everyday Malaysians and eventually send the market higher.
If you look at the time where KLSE broke above the 60 min downtrend line and where it broke above a box, you will realize that the market has moved up quite a lot. Experienced traders try to get in at the bottom. When it has moved too much, one needs to be careful.
Right now I do not see a buy setup that will make the market shoot up like the break of downtrend line. So patience is needed.
Part of the reason may be the declining 200 MA which sets up a psychological resistance. Either the market has to trade sideways a bit where we try and find a sideways trading range breakout or if it drops to the top of the ascending triangle pattern, we can look for a buy setup.
Also, we read in the news that the PH government is negotiating with China to revive the ECRL. If it is successful then the market will have a catalyst to shoot up higher. I think the place where the KLCI breaks above the daily downtrend line I have drawn in the past and the news will help the market to shoot up very fast.
Remember, construction business affects many many industries in Malaysia and the news of confirmation of ECRL and other mega projects will lift the stock market.
The above is the daily chart of KLCI.
In the past analysis I had drawn a box with a bullish cross and although the market was not able to break higher, nevertheless, the bullish pattern is still valid since it did not drop below the lows of the box.
After a few more weeks, the market is forming what we call an ascending triangle bottom and it may just breakout higher of this pattern.
The declining 200 MA may cause some resistance but I think it is possible to break above it. And if the market breaks above the downtrend line then we may be looking at a very nice bullish rally in Malaysian stocks.
One of the reasons is the move up in September has already absorb the supply/resistance in the past. If the market breaks above the downtrend line one should be prepared for a very bullish rally in Malaysia. Never underestimate the simple yet powerful concept of breaking trend lines.
I myself have started to take an interest at analyzing many Malaysian stocks and have started to comment on them again. So do check out some of the other commentaries.
For you, do start to look for bullish patterns in Malaysian stocks to trade or invest.
Hope this helps.
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