Kuala Lumpur Composite Index - path still not decided.

The KLCI is still within the wedge pattern support and resistance and this means that the market is still in a correction period. The market has already been in a correction for three months. The major trend is still down as the 90-day moving average (90 SMA) is still declining although the KLCI is able to stay above it currently. The weak Relative Strength Index (RSI) which is currently at a neutral reading indicates again that there is not strength from both sides (the bulls and the bears). It has been like this for the past one month.

The Bollinger Bands which is a volatility indicator is still contracting. This shows that the volatility has continued to decline and confirms that the market is in a correction. However, the tightening bands would also mean that the correction may be over soon. Furthermore, the wedge pattern support and resistance level is also converging and nearing an apex. Expect a breakout in the very near term.


Daily KLCI chart as at 19 February 2009 using NextVIEW Advisor. Click on chart for larger view.

The market is currently at a very crucial point of time on the chart. The next direction depends on which level the KLCI breaks, the support or resistance level. The support and resistance level is from the wedge pattern and is currently at 880 and 940 points respectively. A break below 880 points would see the KLCI making its way to test the 800 points support level again and may continue to decline further.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.