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Monday, August 22, 2011

FBM KLCI: Still above 1480 (OSK)

Despite the return of selling, we still keep to the view that a rebound in FBM KLCI can be reasonably expected as the index is at its most oversold level in more than 2 years, based on the weekly RSI.

The confluence of the Fibonacci levels at 1510 proved to be a strong resistance. The index failed to erase the bearish bias of last Wednesday and has since moved lower, charting lower highs in the very short term, the last being 1487. The weakness was compounded by Friday’s gap down, indicating the urgency of sellers. However, all is not lost as the KLCI managed to close above the immediate term support level of 1480.

The longer term view is also unchanged. The trend has yet to turn down and is at worst sideways. The support level at 1480 remains unbroken as the KLCI closed above 1480 over the last 2 Fridays. The index has stayed at its most oversold level in more than 2 years, as indicated by the weekly RSI. As such, the view that the KLCI may be making a low on the longer term basis remains, especially with US indices still holding above the intraday low of two weeks back.

Therefore, the upward move that started on 12 Aug is possibly very much alive, but it may have to go through a correction first. The correction will only end when sequence of lower highs in the very short term in broken, and currently a close above 1487 would indicate just that. And for added measure, only a close above 1510 would confirm the resumption of rebound. Nonetheless, based on Fibonacci levels, a pullback towards 1455, also the low of 11 Aug, can still be considered as a bullish correction provided that the index close above 1480 this Friday. Further support is at the 2 week intraday low of 1423. A close below 1480 this Friday may see the index fall to a low of 1380, which is the 62% retracement of the May 2010 – July 2011 rally.

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