From Chart 1 below, you can see that the index nearly went above the violated uptrend line, SS. The failure to stay above the uptrend line, SS could lead to 3 possible price directions:
1) A bearish reversal into a downtrend (which I rate as an unlikely scenario)
2) A neutral sideways market (which I rate as a probable scenario)
3) A deceleration of the uptrend market (which I also rate as a probable scenario)
Chart 1: FBMKLCI's daily chart as at May 4, 2017 (Source: Malaysiastock.biz)
Between the 2 probable scenarios, I believe we are likely to see a decelerated uptrend market based on 3-fan uptrend lines (see the re-drawn FBMKLCI chart below). The idea behind the 3-fan uptrend lines is very simple: Markets continuously search for a sustainable uptrend line. Our current bullish market began with a steep uptrend line, S-S1, which was violated in mid-February. After that, the market transitioned into a more gradual uptrend line, S-S2, which was also violated in early April. Since then, the market could have potentially entered into its third uptrend line, S-S3.
Chart 2: FBMKLCI's daily chart as at May 4, 2017 (Source: Malaysiastock.biz)
There are 2 rules to follow:
1) The violated uptrend line shall act as a resistance capping subsequent price rise.
2) There could only be 3-fan uptrend lines; from S-S1 to S-S2 & finally to S-S3. The violation of S-S3, at 1745 would mean the end of the uptrend. There will not be another uptrend line, S-S4.
Hence, it is important that FBMKLCI should stay above S-S3 at 1745.
Note: I am very reluctant to use the 3-fan uptrend lines. The reason being I'm unable to attribute the rules governing this idea to anyone. I remember reading about it in a book a long time ago. Unfortunately I can't remember who's the author (possibly, Murphy) nor can I find it on the internet. I have to highlight this point because its veracity is uncertain. I also don't want anyone to think that I made it up for my convenience. Because it's not illogical, I continue to use it in my technical analysis.