Thursday, September 23, 2010

Market Outlook as at September 23, 2010

FBM-KLCI failed to surpass the 1479-1480 level three times over the past few days. The current market correction set in after the index broke its short-term uptrend line support at 1365-1367 today. This correction could send the index to the horizontal support of 1445-1450. If this support failed, it may even test the immediate uptrend line support at 1390-1400.


Chart 1: FBM-KLCI's daily chart as at Sept 23, 2010_4.20pm (Source: Quickcharts)

Looking at the weekly chart below, we can see that the index's uptrend can be fitted into a 3-fan line pattern. The possible third fan line support is at 1360-1370. If that support were to be violated, the market outlook would turn bearish. We have seen a similar 3-fan lines pattern in 2007/8. In that instance, the market turned bearish when the index broke below the third fan line at 1200 in June 2008.

See how the current rally failed to surpass the second fan line at 1480. In the 2007/8 bull market, the index also failed to surpass the second fan line in May 2008.


Chart 2: FBM-KLCI's daily chart as at Sept 22, 2010 (Source: Quickcharts)

Based on the above, we can expect the market to be weaker over the next few days. Until we have seen a convincing recovery, we must treat this market with caution.
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5 comments:

  1. SureWinFriday, September 24, 2010 11:24:00 AM

    Hi Alex,

    What is your opinion on JADI giving out free warrant on 1 for 2 basis? How would the mother price be adjusted comes ex-date? Appreciate your pro. advice.

    Thanks.

    ReplyDelete
  2. LimFriday, September 24, 2010 2:46:00 PM

    Hi Alex,

    CIMB has risen to its highest of RM8.37 and now drop to RM8.08. What do you think will be the support level?

    ReplyDelete
  3. Alex LuFriday, September 24, 2010 4:28:00 PM

    Hi surewin1woh

    Jadi is a profitable company making ink. Its prospect is good & the company is on an expanding phase.

    Chartwise, its support is at RM0.32 & resistance at its all-time high at RM0.36.

    The free warrant issue should have no impact theoretically. However, investors would get into the company prior to the entitlement & this would push up the price. The market would adjust lower after the entitlement date. If the exercise price is at the market price, the new warrant would be valued at about 8-10 sen.

    ReplyDelete
  4. Alex LuFriday, September 24, 2010 4:32:00 PM

    Hi Lim

    I see the immediate support for CIMB at the psychological support of RM8.00 & then at the next uptrend line support of RM7.50-60.

    ReplyDelete
  5. NiCol LimMonday, October 04, 2010 5:45:00 PM

    Refer to article:
    "Market Outlook as at September 23, 2010"
    Is the current trend of downturn still valid?

    ReplyDelete