KL Composite Index: Another Dead Cat Bouncing?

When the KLCI was at 1,150 points, rebounding from the low near 1,120 points, I commented that the KLCI is like a dead cat falling. The cat was dead and the KLCI went lower than the 1,120 points to a low of 1,089.47 points yesterday. The KLCI rebounded (again) and closed at 1,109.57 points today.

The price rebound yesterday formed a upward reversal pattern (In Japanese Candlestick, it is called a "long-legged candle". The pattern is also almost similar to a "Hammer" pattern). Whatever it is, it indicates that price is being supported at this level and a rebound is expected.

Will this rebound share the similar fate with the previous rebound? Like a dead cat bouncing? Momentum indicators like RSI and MACD show that there is a good upward momentum in this current rebound and therefore, the rally from this rebound is likely going to be higher than the previous rebound. The previous rebound rally was about 33 points.


Daily KLCI chart as at 23 July 2008 using NextVIEW Advisor

The trend is still strong downwards and its down trend line is currently at 1,160 points. Therefore the KLCI is expected to find resistance at this level. Support level is currently at 1,088 points. Maybe, this time, the cat was is dying cat, not a dead one yet.

Commentary and analysis by Benny Lee