KLCI: Preparing for The Second Quarter of 2013

klci april fool
The aggressive buying by foreign funds last week had pushed our local index higher by a staggering 50 points. It stopped rising at the point where the horizontal major resistance of 1679 crosses the upper trendline of the upward channel, which coincidentally is also the Fibonacci 123.6% level of the prior uptrend. Such bold acquisition by foreign funds are partly due to the pressure arises from the poor performance of their portfolio in our market. If the index was to stay at 1625, foreign funds would have made a negative return of 3% for the first quarter of 2013, calculated from the closing price of 2nd of January 2013. By pushing few of the heavyweight of our KLCI higher (thereby causing the index to close at around 1672 on Friday), foreign funds that have exposure to our local market will only make a marginal loss of 0.2% (All the calculations above are done by assuming that the average return of all the portfolio of foreign funds are similar or close to the market return).

Moving on, the index is expected to consolidate or retrace to a lower level in the near term before rising further. As long as the index stay within its upward channel, the outlook is still bullish and any retracement that comes should be taken as a buying opportunity. We will continue to see lots of volatility in the second quarter of 2013, which represent more opportunities for profit for professional traders. For amateurs however, it would be advisable to trade the big trend and ignore the minor swings in between. Hopefully, we will see a better trading environment for the retailers in the second quarter of 2013.

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