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Thursday, March 08, 2018

Market Outlook as at March 8, 2018

Yesterday FBMKLCI broke below its uptrend line at 1848. This breakdown of the heavily managed index, with hard to decipher pattern or trend may be cast aside for a while if not for a more serious breakdown of FBM70 index. Let's take a closer look at both indices which are appended below.

1) FBMKLCI rallied from December last year after it broke above the downtrend line, RR at 1725. It made a high at 1880 in late January. Subsequent attempt at that high failed, setting the stage for a possible double top reversal of this short rally. Yesterday it broke the uptrend line, SS at 1848. If it cannot recover back above this level, it may continue to slide to the next support at around 1820 & below that, at 1800.


Chart 1: FBMKLCI daily chart as at Mar 7, 2018 (Source: Shareinvestor.com)

2) FBM70 broke to the upside of a Cup-with-handle formation in December last year. Like FBMKLCI, this index made a high (of 16850) in late January. Subsequent attempt at that high failed, setting the stage for a possible double top reversal of this short rally. The subsequent sharp pullback tested the extension of the line connecting the top of the Cup (AB) at 15700. A rebound ensued until it was cut short by the selldown in US two weeks. This brought the index down to the same line again. Yesterday FBM70 convincingly broke below this line.


Chart 2: FBM70I daily chart as at Mar 7, 2018 (Source: Shareinvestor.com)

 Based on the double breakdown noted above, I expect our market to be very weak. If there is no sharp rebound to correct the above breakdown, we could well be going into a period of correction in the next few weeks.

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