Although KLCI has found support at the important price support area of 1750, the rebound back up is pretty weak. Compared to our neighbor Singapore that has found nice support and bounce up better than Malaysia, the rebound back up lacks convictions and fire power. When the whole world is making higher highs, the Bursa Malaysia is just going up from an oversold level. Therefore, there is some fear that if the Dow Jones, S&P 500 and other major indexes have a correction, the oversold bounce by KLCI may not be able to hold.
Let's take a look at the charts below.
*I do an update on KLCI every trading day Mon - Fri, so I think I will post those updates here for you so that you can easily refer to them in future instead of scrolling up and down telegram. The latest will of course be on top. So press the refresh button often. If the charts are too small in your handphone just rotate your phone. Or just long press on the picture and download it and then you can zoom in to view that chart clearer.
When you want to analyze the stock market of a country, it is always best to start with a top down approach. In this case, we should always look at the major index and its long term chart. If you do not want to look at the monthly chart, that's alright. But it is advisable to look at the weekly chart of the KLCI every single week.
Because it helps to give you the long term picture of the Malaysian stock market. You can them zoom into the daily chart, the 60 min chart and if you are an active trader then the 15 min chart and the 5 min chart. That way you will have an edge over 90% of market participants.
Most of them never study a chart or do serious analysis.
The above is the weekly chart of the KLCI index.
The reason is because most stock markets in the world are already making new highs and there is no serious resistance overhead. The Dow Jones, the S&P 500 and the Nasdaq and closer to home, the Indonesian index, they have all made new all time highs.
On the other hand, we have some serious resistance to overcome around the 1800 to 1880 area. This problem stems from the 2014 to 2015 bear markets in Bursa KLCI.
There are some encouraging signs in that our index is challenging a long term weekly downtrendline. Usually it takes a few times to overcome a long term downtrendline and the current rally back up will be very important as if we can break above this downtrendline then we will be able to make new all time highs in the near future.
Some say that the October Budget might do the trick.
If you look at the chart, there is some good long term support at the 1720 to 1750 area. So, currently our market is in a state where the long term bulls and the long term bears are really clawing and raging at each other to be victorious.
Now that we have a bird's eye view of the Malaysian stock market, let us zoom into the daily chart for a more in-depth look.
The above chart is the daily chart of the KLCI with the MACD indicator and the stochastics indicator. There is no best indicator, I just like to use these two and the MAs for analysis. The KLCI has just rebounded at price support level. The stochastics is so far so good giving us a railroad track. The MACD histogram has shortened showing slowing selling momentum and the MACD lines are about to give a buy signal. Hopefully, these signals are able to help propel KLCI higher.
But in the event that the rally fails, we should still have confidence and optimism in the Malaysian market as the KLCI is still above its rising powerful 200 MA which it is about to meet. A rising 200 MA and prices staying above it still shows us that the long term outlook for the market is bullish. Unless and until it drops below it, we should remain optimistic.
We will change our mind if KLCI drops below the 200 MA. The 200 MA is extremely important and it represents the last line of defense in most indexes and stocks. If KLCI drops below it, things can get pretty nasty. Partly psychologically because most traders and fund managers look at the 200 MA as a gauge of long term health for an index.
Next we zoom down into the 60 min chart of Bursa Malaysia KLCI.
You can see that the index has formed a 60 min cup and handle. I must say that one day's data is lost because investing.com didn't show the data for Thursday but if you use your own charting services, you will still notice a 60 min cup with handle pattern.
The handle area is a very important area that you will want to watch.
The reason is because most major world indexes like the Dow Jones is extremely overbought and there is a fear of a short term correction. If they correct, then it may drag the KLCI lower to break below the handle. If that happens, there will be some selling down and we might have to look for a daily double bottom pattern in the KLCI or look for a support rebound when KLCI hits the daily 200 MA.
No matter what happens to the main index, there is always a bull market somewhere. There are always pockets of strength in any stock market and we have seen one of these in the Malaysian tech sector. The sector has been making higher highs and higher lows since early 2017 and have climbed up significantly.
The last time we spotted an ascending triangle in the KL Tech sector, it helped to lift up quite a lot of tech stocks. This time, it might also be forming another ascending triangle. Traders will want to look carefully for some tech stocks that may form some continuation pattern.
One very good tech stocks that has provided many many swing trade opportunities is Pentamaster. It has the pedigree and has been a good source of swing trade for Malaysian traders. You can see there are many break trendline trades, breakout and hitting 20 MA and 50 MA plays. Recently might be forming another break trendline trade. It tried to do so on Friday but failed and traders will need to look for another breakout, preferably trading above the topping tail made on Friday or they may need to wait for a break downtrendline at 50 MA.
Not everyone should swing trade. It takes some skill to enter and exit this kind of trades as the move up can be quite fast and last only 2-3 days. Perfect for contra players I guess. You need to do your own analysis and also look at smaller time frames for the best entry.
Everyday I try to do some analysis for friends. I must admit they will not be as detailed as index analysis because of lack of time. But I just highlight the support and resistance areas and some possible chart patterns. Entry and exit and strategy you will have to do on your own. But anyway hope it helps.
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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