Chart: FBM-KLCI's daily chart as at Jan 18, 2011_12.00am (Source: Quickcharts)
Wednesday, January 26, 2011
Market Outlook as at January 26, 2011
FBM-KLCI broke below the medium-term uptrend line at 1533 as well as the horizontal line at 1530 yesterday. The next support will be the psychological level of 1500 & thereafter the strong horizontal support of 1475. However, we have to be careful when applying technical analysis in extreme market condition. The market is awash with sellers who positioned wrongly for a lunar new year rally that fizzled out. The long holiday break next week saw the drying out of buyers which resulted in a market squeeze. We saw the effect of this squeeze when the index plummeted by 21 points to hit a low of 1505 this morning. If the index can recover today or over the next 1 or 2 days back above the uptrend line (say 1533), then no harm is done to the market. However a failure to do so could be quite bearish. For those holding a contrarian (bullish) view, the present market squeeze could be a buying opportunity.
Chart: FBM-KLCI's daily chart as at Jan 18, 2011_12.00am (Source: Quickcharts)
Chart: FBM-KLCI's daily chart as at Jan 18, 2011_12.00am (Source: Quickcharts)
As expected many have opted out during the coming lunar year and measuring that the market is awashed with the sellers instead of buyers . The effect is sorely felt by the declining index given that the long term prospect still intact. If the support level is breached again say 1475 , then surely the long awaited bear is bearing its head given that the 22 months bull has taken its toll.
ReplyDeleteHi Alex
ReplyDeleteSeems like we are now approaching a head and shoulder scenario. If so the market is quite bearish.
What is your view? If it is a head and shoulder situation what will be the next support?
A 5 per cent correction will take us to 1470 to 1480?
Hi zhouyu44
ReplyDeleteThe past few weeks formation in the FBM-KLCI doesn't look like a head and shoulder pattern. It looks like a double-top & a break of the uptrend line. A double-top formation is not as reliable as a head and shoulder pattern but when combined with a break in the uptrend line, one has to be very careful. The recent rebound failed at the horizontal line of 1530. All in all, the technical outlook is getting gloomier. The only consolation is that the market action has been compromised by the buyers' reluctance to take on new position & sellers' willingness to selldown ahead of the long holidays. If the market does not come back after the CNY holidays, we should be very worry!