Market Outlook as at January 10, 2017

FBMKLCI has broken above its downtrend line, RR at 1660. This plus similar positive indicator readings suggest that the index and market may continue to rise. The positive reading of indicators include:

• Expanding Bollinger Band; 
• MACD crossing above its signal line as well as going above the zero line; and
• +DMI above the -DMI plus rising ADX.

However, we must note that the trading volume is relatively small and market breadth is still far from exciting.


Chart 1: FBMKLCI's daily chart as at Jan 10, 2017 (Source: Chartnexus)

If you look back to April 2015 when we last had an upside breakout of the downtrend line, we will see the similarity with we have today, which are +DMI above -DMI (briefly) unaccompanied by rising ADX; MACD struggling to cross above the zero line; and relatively small volume. Thus the case for a decent rally in the market - think CNY rally - is not an open-and-shut case as yet. It is still a work-in-progress and as such, we have to be careful. By that I mean you need to sell if your stocks are knocking against resistance and buying small positions even if you see a breakout. As always, good luck in your trades.


Chart 2: FBMKLCI's weekly chart as at Jan 10, 2017 (Source: Chartnexus)