KLCI: The Giant Hammer

At 5:15p.m. yesterday, the FKLI September (futures) contract was last traded at a massive 26 points discount (one of the largest discount gap ever seen on a day when the CI was up). This information alone is enough to tell us about the pessimism of the market and that a crash is about to happen (A warning was posted in our facebook fanpage). True enough, within the first half an hour of the trading session, our composite index loss 20+ points before rebounding. At it’s peak, the September contract was trading at a huge 30-points discount.


The fall was well-anticipated but the swift recovery was not. After breaking down the 1717 previous all-time high support, I was expecting all hell to break loose and our CI to dip below the psychological support of 1700. But it didn’t. In fact, it didnt even reach the psychological support. Buyers emerged as soon as share prices fell to attractive levels, thereby pushing the price up rather quickly. At the close, the CI was trading slightly above the 1717 level, forming a huge hammer. The discount gap between the cash market and the futures market had also narrowed to less than 20 points. It seems like the bull is getting aggressive today and wanting to win this tussle.

Moving on, 1717 and 1700 will remain as the two important supports to watch for while 1727 will be the immediate resistance (a break of which will signal more upside). As for individual stocks, look for shares that had stay strong during the past few days. As was mentioned in the facebook fanpage, it’s always safer to trade on flags/ pennants after a huge rise in share price. Consolidation is necessary for stocks to move to higher levels.