Let's take a look at the KLCI using technical analysis to try and figure out where is the next likely direction it will take. Fundamental analysis will help us to select stocks but it is technical analysis that helps us to time entry and exits.
The simple trend following tool of the MAs in the 60 min chart show weakness in the KLCI. So do be careful of longs until situation stabilizes.
The Malaysian market has recovered quite a lot from the recent drop.
The daily chart above shows that it might be forming a large ascending triangle in the daily chart. This is good news for Malaysian investors. If the market can break above the top of the resistance then we will have a follow through to the pattern and this might send the Malaysian stock market higher.
On the other hand, be cautious if the market breaks below the uptrend line. This will tell us that the market may fall.
If you look at the markets, recently it formed a bullish harami pattern as well as a bottoming tail. When you combine this picture with the 60 min charts, it can be very clear to those who were observant that the markets was going to go up.
The chart above is the 60 min chart of KLSE. As you can see, it formed a bullish ascending triangle pattern and the market shot up. It has met its target. Do take a look at the 60 min 20 MA. If KLSE can continue to stay above the rising 60 min 20 MA then more gains will come in the short term.
Those who follow my analysis often will know I emphasize on the importance of the Ascending Triangle. It is important that the new trader be focused on one pattern. I believe the ASDT can be a useful pattern if you are new to the markets.
Just focus on it and find trading opportunities using the ASDT.
Whether it is the US market or the Malaysian market there is ample trading opportunities for those who are focused.
First of all let us take a look at the daily chart of the KLCI. As you can see, these past few weeks have been very volatile for the KLCI. The plunge in the US market has also affected the Malaysian stock market. The subsequent rebound and rally in the Dow Jones is also reflected in the price movement of KLCI.
What is encouraging at the moment is the fact that the KLCI is still trading above its rising 50 MA. So mid term wise we can consider the Malaysian market to be healthy. One thing to note is that the KLCI may be forming some kind of a triangle just like the Dow Jones and S&P 500.
We can see the triangle by drawing two trend lines. An upper trend line and lower trend line.
I'm not very sure yet whether it is forming a triangle or an ascending triangle which is why we need to look at the markets each day as new price action comes in. But if KLCI can stay above the rising 50 MA and the uptrend line then it will be good for the markets.
If KLCI can break above the downtrend line then it might be conducive for more bullish moves to the upside.
Let's take a look at the EWM.
The EWM is Malaysia's ETF that is listed in US. Sometimes its useful to use it to analyze the Malaysian market as well. You can also trade the EWM just like the SPY or DIA. It even have options on it.
The triangle pattern is much more clearer in the daily chart of the EWM. If EWM can break above the triangle then it will be conducive for a bullish move up. And of course staying above the uptrend line and the 50 MA will also be good.
Let's take a look at the big picture now by looking at the weekly chart of the KLCI.
As you can see, we have recovered quite a lot of ground and is very near to the highs back in 2014. But there is still a lot of resistance there and the current sideways movement is absorbing the supply there.
Usually if there is heavy resistance overhead, it will take some time to overcome it and absorb the supply there. Imagine the people who lost money buying stocks there. When the KLCI goes back up to that area, they will sell to recoup their losses. So it might take some time for KLCI to trade sideways.
It will be good if we can form some kind of a continuation pattern in the weekly chart and then breakout. If that happens, it is very possible for KLCI to make new all time highs.
Let us now have a look at the short term trend of the markets. As you can see the KLCI gap up above a 60 min triangle thanks to the bullish run up in the US market 2 days ago. That is something good. You can use the 60 min 20 MA which is the red line on the charts as a short term trend following tool. If KLCI is below the 60 min 20 MA we are bearish short term and if it is above the 60 min 20 MA like right now, then we can be bullish in the short term.
Hope this analysis of the KLCI help you see things a bit clearer.
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