Market Outlook as at July 25, 2018

In the past 12 days, our market has enjoyed a scorching rally off the low at 1660. FBMKLCI may soon encounter resistance at 1775 or 1795. Those who had bought in late June or early July, should be sitting on decent paper profit. I think it is a good idea to take some profit off the table. Since FBMKLCI has broken above its downtrend line, it is likely that the market can begin its recovery. This bullish breakout can be seen for the other indices- FBM70, FBMSCAP & FBMACE.

Chart 1: FBMKLCI's daily chart as at July 24, 2018 (Source: Shareinvestor.com)


Chart 2: FBM70's daily chart as at July 24, 2018 (Source: Shareinvestor.com)


Chart 3: FBMACE's daily chart as at July 24, 2018 (Source: Shareinvestor.com)


 Chart 4: FBMSCAP's daily chart as at July 24, 2018 (Source: Shareinvestor.com)

Meanwhile we should note that DJIA, which has managed to stay above its 200-day SMA line as well as its uptrend line, is now poised to test the line connecting its recent reaction highs (denoted at "AB"). If DJIA can surpass the AB line at 25400, it may continue with its prior uptrend.


Chart 5: DJIA's daily chart as at July 23, 2018 (Source: Stockcharts.com)

Despite the brouhaha about trade war, we can see Shanghai's SSEC index has rebounded somewhat in the past 2 weeks. While it must be noted that the worst is not over yet for SSEC as it is in a downward channel, it is still good to see this stock market - caught in the middle of Trump's terrible tantrum - is shaking it off and steeping up.


Chart 6: SSEC's daily chart as at July 23, 2018 (Source: Stockcharts.com)

Based on the above, I believe the time is right to buy some good blue chip stocks as well as attractive 2nd liners for long-term investment - especially if you have not done it yet. However this market will not go up in straight line fashion. If you feel like cashing in some of your paper profit - or you have been waiting to reduce position as long ago as May or June - the market is now at a level attractive enough for you to do so. But, don't forget to buy back when the prices eased back- which is not a guarantee. Good luck!