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Tuesday, September 6, 2011

FBM KLCI: Minor Support at 1460 (OSK)

The index’s intermediate term trend remains weak after consecutive closes at below 1480 on a weekly basis. However, a mild support is expected at the recent 2-day low of 1460, which if broken should see selling resume.

The weak intermediate term trend is now confirmed by another weekly close below 1480, making it a consecutive close below the important 1480 level. The index has since failed to close back above this level, even on a daily basis. As such, it should continue to trade lower and the levels to watch in the intermediate term are 1420 and 1380, representing 50% and 62% retracement of the May 2010 – July 2011 rally. The 1420-pt level is also not too far from the low of August.

Nonetheless, the weekly RSI remains at its most oversold level in more than 2 years. Therefore, the FBM KLCI could still be searching for a bottom on a longer term basis, which can only be confirmed by a formation of a positive weekly candle(s). This of course has yet to occur, especially as the index has not even traded above the prior week’s high since hitting its all-time high in mid July, 8 weeks ago. The latest high is at 1484.

In the shorter term, the trend too remains weak. The index has yet to break the series of lower highs since mid August, the last being 1476. Note the mild support at 1460, which is the low of the gap of last Friday. That gap formed a sort of bullish “Island Reversal” pattern with the support level a sort of “Neckline”. However, the upward bias will be neutralized should the share price close below this level today, which should signal a resumption of selling. Minor supports are expected at 1440, not too far from the low of two weeks ago, 1420 and the psychological 1400 pts.

(Chart extracted from ChartNexus)

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