The index is now just above 1,435, its critical support. A break below that level would be bearish for the index.
Immediate outlook:
The Kuala Lumpur Composite Index (KLCI) plunged last week following dismal performances of regional bourses as well as Wall Street. The index lost 77pts or 5% week-on-week. We did mention earlier that the index was overbought last Monday and that a pullback was likely. But after Wednesday’s sharp selloff, its daily chart showed a reversal pattern called island reversal. It looks like the KLCI may have peaked at 1,524.69 in the immediate term.
The immediate outlook
is fragile as the index is sitting just above the trend line support at
1,435. A break below the 1,435 support line is likely to induce sellers
to sell further. The selling pressure could send the index back down to test its 100-SMA at 1,375. While the index could hold this level and rebound from here, we rate the odds low due to the dead cross on its MACD and falling RSI.
Medium-term outlook (2-6 months):
The
long-term trend is still up but in the short term, the outlook has
taken a turn for the worse with the island reversal. The odds of the
index hitting our target level of 1,601-1,630 in 1H08 would be greatly
reduced should the index fall below its 100-day SMA.
The
possible bearish divergence on both MACD and RSI also adds to the
negative feel for the index. A confirmed dead cross on the MACD would
also suggest that this uptrend is over. Hence, investors need to keep a
close eye on the 1,435 and 1,375 support levels as well as the weekly
MACD.
Fibonacci retracement levels for the index are 1,377 (38.2%), 1,333 (50%) and 1,287
(61.8%).
Immediate outlook:
The Kuala Lumpur Composite Index (KLCI) plunged last week following dismal performances of regional bourses as well as Wall Street. The index lost 77pts or 5% week-on-week. We did mention earlier that the index was overbought last Monday and that a pullback was likely. But after Wednesday’s sharp selloff, its daily chart showed a reversal pattern called island reversal. It looks like the KLCI may have peaked at 1,524.69 in the immediate term.
The immediate outlook
is fragile as the index is sitting just above the trend line support at
1,435. A break below the 1,435 support line is likely to induce sellers
to sell further. The selling pressure could send the index back down to test its 100-SMA at 1,375. While the index could hold this level and rebound from here, we rate the odds low due to the dead cross on its MACD and falling RSI.
Medium-term outlook (2-6 months):
The
long-term trend is still up but in the short term, the outlook has
taken a turn for the worse with the island reversal. The odds of the
index hitting our target level of 1,601-1,630 in 1H08 would be greatly
reduced should the index fall below its 100-day SMA.
The
possible bearish divergence on both MACD and RSI also adds to the
negative feel for the index. A confirmed dead cross on the MACD would
also suggest that this uptrend is over. Hence, investors need to keep a
close eye on the 1,435 and 1,375 support levels as well as the weekly
MACD.
Fibonacci retracement levels for the index are 1,377 (38.2%), 1,333 (50%) and 1,287
(61.8%).
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