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Monday, February 14, 2011

FBM KLCI : 1,505 Decisively Violated (OSK)

A further 9.5-pt drop in the FBM KLCI last Friday wrote off the market’s possibility of constructing a sideways trend at above the key recent-low of 1,505 pts. As we mentioned last week, the slightly more than 20-pt rebound off the 1,505 pt-level that occurred on the 26th of last month indicated an obvious attempt at bottoming out and the market action on 31 Jan 2011 again reaffirmed this rebound conviction. When the market finally failed to hold up the 1,505 pt-level, market sentiment deteriorated quickly and led to the FBM KLCI giving up another 9.5 pts.

Not only was the “non-classical Hammer” not confirmed, the FBM KLCI also violated the key recent low and created a lower high at the same time. Not to forget, the index has already violated the uptrend line which had supported the previous uptrend for more than 6 months.

The technical landscape of the FBM KLCI is no doubt weakening. As the FBM KLCI is no longer trading at above the uptrend line and has decisively violated the 1,505 pt-level, we are now Neutral on the index’s near-term outlook. After the violation of the key recent low, there is a possibility that the market will eventually retrace towards the 1,474 pt-level, or the next strong support. At the 1,474 pt-level, the bulls will have a great chance of retaliating.

As the market closed below the 1,500-pt psychological mark, immediate support now lies at the 1,474 pt-level. To the upside, there is immediate resistance at the 1,500-pt mark, followed by the 1,505 pt-level, and the 1,524-1,536-pt area.

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