Market Outlook as at December 22, 2014

Our FBMKLCI rebounded very well today. At the time of writing (4:40pm), the index is up 29 points at 1745. The question on everyone's mind is whether this is the beginning of the recovery.

Looking at the weekly chart, it is clear that our FBMKLCI was in a Head-and-shoulder formation until it broke below the neckline at 1770 two weeks ago. This means that FBMKLCI has a bearish reversal. Based on a 1-for-1 projection, the immediate downside will be 1640. It may go below that level. However, if FBMKLCI can climb back above the neckline of 1770, the bearish reversal may be negated.

It has been 2 weeks since the breakdown and I feel that the market had ample opportunity to recover above the neckline and it failed to do so. If you shared this view, then you should use the current rebound to reduce your position. The rebound may fail at 1750-1770.


Chart: FBMKLCI's weekly chart as at Dec 19, 2014 (Powered by ShareInvestor.com) 
 
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of FBMKLCI.