On Friday we had a very big rally day for the KLSE Composite Index. Many stocks were lifted up and some were making very impressive gains in a single day. The question is, after the nice rally, will the Malaysian KLCI continue its bull run into June? On May 31st we saw a huge amount of volume for KLSE like we have never seen before for a very long time. Very interesting as we see portfolio and fund managers rebalancing their portfolio towards the end of the month.
I have been on holiday for the last few days and therefore I did not update anything on the US market. But while on holiday I was extremely excited as the Dow. Nasdaq and SPX keep making new all time highs. Hopefully, the bullishness will spill over to the Malaysian stock market on Monday's trading day. I update almost everyday on the US market and you can check them out at the Latest Post section. It is important for local investors to know about the world markets especially the US market because the rise and fall of the biggest economy in the world has a big impact on smaller countries like Malaysia.
What happens in NYSE will spill over to the Nikkei markets by the next trading morning and then the wave will continue in Hong Kong to Malaysia and then the European markets. Which is why when you see a big red day in NYSE, the Hang Seng and KLSE will usually also have a huge wave of selling. In a world of modern technology and instant communication, the impact of a news is just one click away.
My views of KLSE has not changed since the last analysis. We remain bullish as long as the trend is up. But lets take a look at some charts and some stocks to see what is in stall for this week.
The above chart is the daily chart of the KLSE. As you can see, the index is still in a nice bullish daily uptrend. As a big believer in trend following, I remain bullish until the charts tell me so. Usually a sign of weakness in the market can be seen by:
While a simple trend following might seem simple, it is nevertheless very effective. When an index is in an uptrend, it does not mean that there won't be any correction. There will be and it will no doubt hurt many people's portfolio. But if you choose a stock that is a strong uptrend, it will not really hurt your portfolio because the correction in the general indexes are buying opportunities for a stock that is in an uptrend.
When trading a stock that is in an uptrend, you:
Some of the best ways to make money in a bull market is to trade stocks that are in an uptrend. There is always a bull market somewhere and if your stock is not in its own bull market, you better find one that is in an uptrend. Otherwise, you might be wasting a lot of precious resources waiting for a stock that is in a downtrend to rise.
The chart above is the 60 min chart of KLSE. One look at it is terrifying for non full time investors or traders. It is so choppy and during this period it really hit stocks making them go up and down wildly. On Friday, the KLSE gap up above a downtrendline in the 60 min chart which set it up for a nice bullish rally.
By breaking above a downtrendline, the market is telling us that the tide of battle is turning. On Monday we would like to see the KLSE go above another downtrendline. And once it breaks above the old highs, the battle is won.
While most investors and traders will look at the main index, not many will look into sub indexes and sectors. But if you want to find the biggest winners in a stock market, you have to be at the right place at the right time. Have you ever notice how some stocks zoom up 30%,40%,50% in a single month? Most probably it is in a sector that is:
To be an all rounded investor or trader in the Malaysian KLSE or any stock market in the world you need to be aware of:
Which one has the best chart pattern and in a strong uptrend, that is the one you want to be focusing on.
I have put in a few sub indexes below and when you look at the sub indexes we can get a very clear picture of why the KLSE rebounded and rallied so sharply on Friday.
The FTSE Bursa Mid 70 is in a very strong daily uptrend and if you have focused on the stocks in this index, you would no doubt have found some very very superb winners. Prior to the big rally last Friday, the index formed 2 dojis at the 50 MA. If one doji was not enough, two dojis at the 50 MA was a very clear signal to traders that a rally was on the way. I think some stocks would have shot even higher than the index itself.
The FTSE Bursa Malaysia ACE index also tells the same story. It found support at the 50 MA with a bottoming tail and changing of the guard (where red candle followed by green candle indicating bullishness). There are ample support areas below and I believe the uptrend for this index is still intact at the moment.
Small caps have been hit a lot lately but when you look at the big picture using the weekly chart of the small cap index you can see the index is just hitting some resistance area. As long as it does not fall below the box and the rising weekly 20 MA, the bull trend in the small caps is still intact. There is also ample support below. So, as it trade sideways and if breaks out, small caps will once again have a nice bull run soon.
The chart above is the chart of FTSE Bursa Malaysia EMAS index. Needless to say, this index is in a nice daily and weekly uptrend. There is a 1st support below and the congestion area from September 2016 to early 2017 will act as a super strong support. Currently the index is hitting some resistance but if it trades sideways it will eventually breakout and move higher to meet the old highs.
A top down approach is always a good approach to find super stocks. Stocks rarely have a big bull run of its own without the sector indexes also in an uptrend. Some of the biggest winners in every bull market is the leader in a sector. You want to find these "leaders" not the laggards. If you put your money in a laggard that barely moves in a bull market what can you expect of the stock when the indexes trade sideways or have a bear market?
Always try and identify a sector making a strong bullish pattern and then zoom in to look for the strongest and best stocks. They will be the 2 bagger, 5 bagger and even 10 baggers in a bull market.
Those who invested and traded in tech stocks are some of the biggest winners in the stock market. Just look at the nice rally the tech sector had since January 2017. The monthly chart of the Malaysian tech sector above shows us it is in a nice uptrend. It even overcome the old resistance area and currently is correcting a bit. As long as it stays above the consolidation in 2006 to 2008, the tech sector will continue to perform well and will move higher.
The finance sector is also doing very well. With banks making a big portion of the Malaysian index, a finance sector that is an uptrend is crucial to the bull market in Malaysia. Currently I do not see any weakness in the Malaysian finance sector and as long as it is in an uptrend, the bull market in Malaysia will continue.
The Malaysian construction sector if I'm not mistaken is making an all time high. Just look at the beautiful uptrend in the daily chart of the construction sector. Nothing is more beautiful than a sector making a nice uptrend. You definitely want to find stocks in such sectors.
There is always a bull market somewhere. No matter what the major indexes does, there will always be a bull market for traders or investors who choose the correct stocks. What stocks do you want to choose? Well, choose a stock that is starting an uptrend or is in an uptrend.
Pentamaster has been the darling of the Malaysian market for quite some time. Currently it looks like it is about to breakout of another box.
Malayan Banking Berhad has been breaking out of many boxes lately. At this moment it is breaking out of another box. The gap down as one friend pointed out is because of dividends. I don't trade Malaysian stocks so I just use investing.com otherwise I might have spotted the difference if I use ChartNexus or something. But it doesn't matter. As long as MBB is moving higher, things will be good for the Malaysian stock market. No question about that.
KESM just broke out of another box. Stocks in an uptrend tend to just go higher. If you thought 8.00 was very expensive for this stock, just look at the stock price now. It pays to play uptrend stocks.
That's it for this week's analysis. "The trend is your friend". Happy investing and trading.
I will try to have a page for "Malaysian Stocks To Watch For June". Haven't build it yet, so do check the Latest Post page for any update. At this moment I don't have enough time to write about the Malaysian market everyday. My main trading is US stocks with a special focus on Nasdaq 100 stocks so I do an analysis on it everyday which you might want to check out everyday for exposure. I have written an outlook for June in US Stock Market Outlook For June 2017. You can check it out if you want.
Charts with the Freestockcharts.com label are courtesy of Freestockcharts.com
Charts with the investing.com logo are courtesy of Investing.com powered by Trading View
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