Technical Analysis Of KLCI July 25 2018

Most Malaysians would have been delighted by the rapid rally up these few weeks. What's next for KLCI?

Seeing the rise in KLCI I have a preference for it to take a rest. One of the reason is because I want to see the selling pressure being absorbed by the consolidation.

It is like a climber who runs non stop in a hill. He needs to take a rest before going up.

There are many possible scenarios right now for the KLCI and as traders, we should be ready for all of them. The chart of KLSE above shows the first possible scenario.

Ideally there should be a consolidation.

As the 20 MA crosses back above the 50 MA, a breakout above the consolidation will be very ideal to help send KLCI higher.

The consolidation can also be considered as the handle of a cup with handle pattern. Cup with handle patterns are bullish reversal patterns that helps to set up nice bullish runs and if it manifests in the KLCI, then Malaysians can get ready for a nice run up in the near future.

There is also another possible scenario that might take place. The KLCI might hit resistance as it touches the daily 200 MA and then collapse. But as long as the correction stops near the 1700 area, then we will be looking for a possible inverse head and shoulders pattern.

This pattern is also another bullish reversal pattern. The index shakes out weak holders one more time before shooting higher.

Well, there are indeed many possible scenarios and that is why a trader needs to bend like the reed and be like the river. Powerful yet flexible.

A look at the 60 min chart now and then will also help traders to be on the right side of the short term trend. Following the successful breakout above a 60 min bullish cross box pattern, the KLCI has been rising powerfully.

Bullish momentum is slowing down but it is still above the 60 min 50 MA. I believe that if KLCI can stay above the 1750 area, then any sideways movement will just be a consolidation that will likely result in Scenario 1 of the cup and handle which I point out above.