MALAYSIAN STOCK MARKET IS AT A CROSSROAD

Investors sentiments remain mixed. Some has started to accumulate shares when market starts to heat up last week only to find out that the heat only lasts a few days. Others who have not decided to buy stay in the sidelines waiting for a clearer signal. I have mentioned before that the long term down trend cycle is not completed until the KLCI goes to at least 550 points. If you asked me, I would only start accumulating shares after one more selling pressure in the market.

Technically, the KLCI is still in a major down trend. The 90 day moving average (90 SMA) is still declining although the KLCI tested it again last week on Monday. However, it did not managed to stay above it to change the course of the down trend. The long term down trend is in a correction because the short term trend is up. The KLCI is still within the corrective wedge chart pattern since last month when the pattern was formed.

There is still no evidence of market wanting to go move into a direction, it is still sideways. The Relative Strength Index (RSI) remains neutral with higher lows and lower highs. The Bollinger Bands which measures volatility shows tightening bands which means that the volatility is getting weaker. There are no clear signals from the technical indicators to determine the next direction and the determining factor would be the breakout on the wedge pattern. The Malaysian stock market is at a crossroad.

The wedge pattern support and resistance level is at 880 and 940 points respectively. A break above the resistance level shows that the bulls are in control and therefore there is a high change that price would rally. However, if the price breaks below the resistance level, then a continuation of the long term down trend is expected.


Daily KLCI chart as at 12 February 2009 using NextVIEW Advisor. Click on chart for larger view.

The short term target that I have set is at 940 points and therefore I expect the KLCI not to break above the resistance level of the wedge pattern. This week, I would expect the KLCI to continue to trade sideways with a range between 880 and 910 points.

KLCI Short term target (2 months): 940 points
KLCI Long term target (11 months): 550 points

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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.