Market Outlook as at February 10, 2012

The past few weeks have been very kind to second & third liner stocks. However, we must be careful for the next week as the index for FBMFLG, FBMACE & FBMSCAP are now testing the high in early 2011. There is a good chance that the market may fail on this first attempt and the case will then be set for a correction for the broad market. See Chart 1-3 below.


Chart 1: FBMFLG's daily chart as at Feb 10, 2010 (Source: Quickcharts)



Chart 2: FBMACE's daily chart as at Feb 10, 2010 (Source: Quickcharts)



Chart 3: FBMSCAP's daily chart as at Feb 10, 2010 (Source: Quickcharts)

Meanwhile FBMKLCI is testing the upside of a rising wedge (at 1566). Can FBMKLCI break above this resistance or would it correct in tandem with the second & third liner stocks? If it can surpass this resistance, its next resistance is at the horizontal line at 1575 & then the all-time high at 1595 recorded in July 8, 2011. If it failed to breakout of the wedge, it may drop back to the downside of the wedge at 1522-1525. See Chart 4 below.


Chart 4: FBMKLCI's daily chart as at Feb 10, 2010 (Source: Quickcharts)

Based on the above observation, we should be reduce our trading position next week.