Equity Market - Will History Repeat Itself?

Weekly KLCI chart with volume as at 8 May 2009 using NextVIEW Advisor Professional

Technical analysis is under a test. The test is whether history will repeat itself from the price-volume pattern. If it does, KLCI is expected to fall to 650 points. However, the current momentum indicates that the KLCI can go higher. The KLCI is currently near the double bottom chart pattern formation target at 1,040 points. That is the resistance the KLCI has to overcome to continue its bullish momentum and the next resistance is at 1075 points, a Fibonacci 38.2% retracement of the longer term bear trend.

Failing go above 1,040 points resistance may cause the momentum to weaken further and history might be repeating itself. Personally, I have already been cautious since last month as I was expecting sharp correction downwards and shall continue to do so this month. Buy when market dips, not when it is flying high like this. A better level to buy is when the KLCI goes to the longer term averages between 920 and 950 points. Remember, there is a potential of history repeating itself and a stop loss should be in placed if KLCI falls further below 920 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.