Tag Archives: KLCI

KLCI: A Roller Coaster Ride


An extremely volatile market it is today with the index dipping by more than 50 points in the morning in anticipation of the dissolution of parliament. It recovered gradually once the dissolution is confirmed and ended the day marginally higher than yesterday’s closing. As we can see from the chart above, the index reversed after touching the lower boundary of the upward channel, creating a total move of more than 100 points in a single day. As was mentioned in the previous post, as long as the index stays within the upward channel, we can still afford to be bullish. This bullish view is further supported by the fact that the recent upward movement had created a “cushion” that ensure any downfall caused by election fear will not alter the effective trading range. If the index were to remain at low levels in the past few weeks, then the stance would be a bearish one since a dip like the one we saw today would bring the market to levels lower than 1600, thereby changing the effective trading range (which is dangerous because the lower boundary of the effective trading range cannot be known with certainty – This means that the risk is not assessable, and the risk-reward ratio cannot be estimated).

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.

KLCI: Strong Push by The Foreign Funds

KLCI (3)
It has been some time since we last seen our index soar by more than 15 points. After closing lower than its opening for 2 days on high volume, the local index rose by 17 points and stopped near the immediate resistance of 1645. The hike in our index was caused mainly by the aggressive acquisition by foreign funds. They had, according to statistic, made a net purchase of 326million shares today. If the index manages to break above 1645 again, then the low created on the 18th of March would be the cycle low, and we would see the index forming an arc in the next one and a half-month. As long as the index stay above the trendline, the arc should be a bullish arc, meaning the end of the arc would form a higher low compared to the beginning of the arc. Looking at the current situation, it is definitely risk-on for investors although the ratio of gainers to losers for the past few days are not satisfying.

KLCI: A Change in Free-float Methodology

Our KLCI sank deeper today after news of EU leaders taxing bank deposits in order to part-fund the bailout of Cyprus created renewed worries among investors worldwide. This came after a huge sell-down on the last 10 minutes of the trading session on Friday, believing to be due to portfolio rebalancing by funds that track the performance of our index as the methodology used in calculating the weightings of the index constituents will be changed effectively on the 18th of March. The shocking moves by EU leaders, coupled with the election fear that has been lingering since late January, is expected to send our CI lower to test the 1600 psychological support again. While our index is moving into the oversold territory and today’s candlestick is forming a long tail, indicating a possible reversal, we should be mindful that the sentiment is weak currently and any release of unfavourable news might bring our index to a lower low. Do trade cautiously.

KLCI: Testing the Downtrend Line.

KLCI 25.2.2013
After testing the psychological support for the third time, our local index rose for 3 consecutive days. The low traded volume for the past 2 days indicates declining interest as the index move higher. Moving on, we need to observe whether the downtrend line will be broken. If it does, our index will move up to test the next resistance level at 1635. If you are holding a long position now, you may want to consider closing your position tomorrow as trend tends to get exhausted on its 3rd day. If you do not own a position and are eager to take one, this would be a good opportunity to short the index. Do not initiate a long contract at this juncture because the possibility of reversing is much higher.


KLCI: An Up Thursday Maybe?


While the short-term trend is still bearish, as indicated by the downward slopping trendline that connects all recent highs, KLCI may rebound slightly tomorrow and the day after. This prediction is not without a basis since a hammer with high volume is formed and risk-taking activities can be seen in a number of shares (I shall share some of the shares with bullish signal in another post). From a market anomalies perspective, Wednesday has proven to be a day with high possibility of reversal, especially if the direction of the price movement are the same from Monday to Wednesday. A green bar is not impossible since 20th of February is also one of the reversal dates according to Gann’s wheel.

Despite the bullishness in the immediate term, we have to be wary of the announcement of the dissolution of parliament as it could potentially send our market down towards the 15xx region. The continuation of the downtrend of our major telcos (Axiata, Maxis, Digi) could also offset any gains in other KLCI constituents, thereby dragging the CI down as they are among the top 7 companies by index sensitivity.

To conclude, its a 2-days GO for day-trader but a WAIT for others. If you are planning to take a position, make sure you keep your stop loss tight.

Predicting the Market using Feng Shui

A publication in the business column attracted my attention today – Year of the Water Snake Prediction. I have always knew that there are people who have been relying on FengShui, or particularly “Flying Stars” and “5 Elements”, in identifying investment opportunities around the world, but I never expect to see such kind of advice appear in the newspaper. In this post, we shall see whether the economic predictions based on Feng Shui are aligned with those predictions of research houses and my opinion on sectors to focus in 2013.

Chinese New Year Rally? Probably Not.

KLCI - 4.2.2013
4th of February is an up day for Malaysia!  So will there be a Chinese New Year rally? Let’s look deeper and see whether the rally is possible and if it is, whether it’s sustainable.

The week before Chinese New Year – how will KLCI fares?

KLCI 2nd March 2013

Though underperforming our regional peers, our KLCI is still moving within the upward channel, thus the long-term outlook remains intact. But how about its short-term movement? How will KLCI fares this week? Will there be an additional dip or will we see a W-shape recovery?

Honestly, I can’t tell until the market (KLCI) provides me with more information. I was expecting the market to make a clear directional move on last Thursday but both the bulls and bears were equally strong. Until there is a clear winner between the two, I shall not attempt to make any bold directional prediction.

While it is possible that the directional movement occurs on any day of the week, 4th of February (Monday) is definitely a day worth watching because according to Gann wheel, it is one of the many dates that we will see a reversal of price movement, either up or down. Otherwise, the market should move sideway since investors are cashing out for Chinese New Year celebration.

At the meantime, I shall maintain my downward bias since our general election (GE) is around the corner and based on historical trend, a GE announcement would usually send our market to a lower low.