KLCI: Getting Weaker

Yes. You read the title correctly. W-E-A-K.

While it’s not entirely bearish yet (the index edged only slightly lower today and the losers outnumbered the gainers just marginally, so for some people there’s still HOPE… Hey! It’s time to wake up!) several signals show that the bears are about to launch an aggressive attack on our market in days to come. If you are an active trader, you would have notice that majority of the shares that have rose for the past few days are starting to reverse. Some are even approaching lower support levels already. For shares that still manage to hold up, the momentum is obviously fizzling out. With the smart money booking in their profit since the first trading day of July, there is no way the market is going to move higher, especially when the regional peers are falling. A correction is needed before traders and investors are willing to take fresh position again. Let’s take a look at the chart.

klci (5)

Wave 4 is a little overbalance in terms of points and time (Gann methodology), which indicates a possible bull rally starting from the previous swing low. For the rally to be sustainable in the long run, however, a short-term correction is needed. Remember what I’ve mentioned in my previous posting about what might happen if we see a matching high? Yes, we could expect either a higher swing low (thereby forming an inverse head-and-shoulder) or a matching swing low (double bottom maybe?). Whichever it is, we let the market decides. As for the few days to come, the market sentiment is expected to be extremely weak and shares are expected to move lower due to profit taking/ loss cutting activities by late buyers.

If you have took some position today, do review your trading plan accordingly especially if your planned holding period is a short one. Please do not live in denial. Succumbing yourself to normalcy bias doesn’t help in protecting your portfolio. Rational analysis and execution does. If the market makes a big fall, you can be sure that your shares have a high chance to follow suit.

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