For the past 2 weeks, FBMKLCI has been pressing against the upper line ('AC') of its medium-term upward channel, ABCD. Buyers were reluctant to bid too aggressively but sellers were also hesitantly to sell off their shares. This stalemate must be resolved by either a breakout above the upper line, AB or a pullback towards the lower line, BD. The market was down by 14 points to 1704 as at 4.30pm and we will sign a test of the buyers & sellers' resolve tomorrow. If the index breaks below the psychological 1700 mark, it may slide down to test the horizontal line 1690. Beyond that, the index will find support at the lower line, BD (of the medium-term upward channel, ABCD) and the intermediate downtrend line, RR at 1650.
Chart 1: FBMKLCI's daily cahrt as at Oct 20, 2015_3.30pm (Source: ShareInvestor.com)
With its near-term upside checked by the horizontal line 12800, FBM70 may enter into a corrective phase shortly. This index may pullback to the horizontal line 12400.
Chart 2: FBM70's daily cahrt as at Oct 20, 2015_3.30pm (Source: ShareInvestor.com)
All in all, I believe the market is poised for a short-term correction which is led by a correction among the blue chip stocks, as reflected in the 14-point drop for FBMKLCI today.
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