KLCI: The Inevitable Correction


klci (2) (1)

At last, after more than a week of bullishness, the market formed a bearish engulfing pattern yesterday (as indicated by the red arrow) and today our local index lost 16.31 points, with the number of losers outnumbered the gainers greatly. KLCI was dragged mainly by three of the heavyweights – Maybank [1155], Genting [3182] and IOICorp [1961]. Moving on, we need to watch a few support levels closely (1752 and 1743) as there is a high chance that the index will rebound at these levels. A break of the 1743 support will send our composite index down to the resistance-turned support of 1718, which is an ultra-strong support level. Let’s take a brief look at the two “culprits” that caused the fall of our index today and see whether there’s any profit opportunity. We start with our Gaming giant, Genting [3182].

genting
After rising  for months and touching the high of RM11, share price of Genting reversed gradually over the last few days before dropping sharply today. If we look at the big picture, we can see that the price development of Genting for the past few months have successsfully created a beautiful rounding bottom. So what’s next after a rounding bottom? Yes. A possible cup-and-handle formation. Today’s dip could be the beggining of the formation of a handle for Genting’s huge cup. Traders could turn aggressive once the  price touches RM10.20, a minor support level. Alternatively, one could participate only at the psychological support of RM10, which is a major support level. What about our plantation giant, Ioicorp?

ioicorp
If we look at the long-term price movement of IOICorp, we would notice that its share price has been moving sideway for years. For shares that has no apprarent long-term trend, the most sensible strategy would be to trade based on simple support and resistance levels. Looking at the short-term trend of this company, we can see that it is on an extreme bearish mode, dipping by about 60cents in just 3 days. As a KLCI constituent, it had fell too much in too short a period of time, and thus it’s share price is expected to stage a rebound tommorow or the day after, from which we can make some small profit. The RM5 psychological support would be a good entry point for aggresive traders while risk-averse traders may choose to participate only when the price touches the RM4.90 and RM4.80 levels, both of which are major support levels.

Do trade cautiously as the sentiment is expected to get weaker.

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