KLCI Weekly Analysis 22/04/05 

Last week, KLCI opened on Monday at 871.85, made a weekly low on the same day at 863.93, a weekly high on Friday at 879.67, and closed at 877.78, up 3.53 point or 0.4%.

 Main Chart

On Friday, KLCI opened gap up and broken out from the down trend channel which began since 19/01/04.  However, it soon hit the WinChart automatic Fibonacci Retracement at 878.96. In addition, 31days Exponential moving average is also a crucial resistance for KLCI which is also at 878.96 (Refer to A). Mean while, supports are at 10 Bollinger Band Middle band, as well as the WinChart Automatic Fibonacci Retracement at 859.81.

 Bollinger Band

10 days Bollinger Band was consolidating for most of the week indicating that the volatility for the week was relatively low. It suggests that the KLCI is at a side ways market or a consolidation phase, which, by the way, is the best correction for the down trend market. As long as the KLCI remained above the Bollinger band middle, should the Bollinger band open wide, we should see more room for up side movement.

 Volume

Due to a closure of Bursa Malaysia on Thursday, we see total volume for the week declined to 1,305,267,000 shares, downed 28.4%. Although KLCI broke out from the down trend channel on Friday, volume remained below 40 days VMA. Therefore, the validity of the break out is doubtful, unless volume traded is above 40 days VMA. (Refer to B)

MACD

MACD line gradually moving higher, and this is a good sign signaling the market mood is slowly turning positive. However, MACD line remained below the Zero line, thus suggesting that the long-term sentiment of the market is still relatively weak. MACD issued a short term buy signal on Wednesday, 13/04/05, and since then, it is still valid. However, if we see a round top of the MACD histogram (oscillator) we shall see a short-term down ward correction of the KLCI. (Refer to C)

RSI

For most part of the week, RSI was below 50%, except on Friday, 22/04/05, it broke above the 50% level. This is a positive sign showing that the mid-term market sentiment is turning slightly brighter. However, it is still in a neutral zone, unless we see RSI break above the 70% level, which signals a mid-term bullish zone.

Stochastic

Once again %K of Stochastic broke above 70% level signaling a short-term bullish zone. But this is yet to be confirmed by the %D, which is still below 70%. Anyway, if the KLCI go side ways, the accuracy of Stochastic signals are reduced.

Important note:

As mentioned in our last week’s weekly analysis, we stated about the possible side-ways consolidation of KLCI. It was because weekly MACD histogram showed a correction signal, and for this week, the MACD histogram continued to tick up signaling that the correction was intact, and it temporary interrupted the down trend market. Should we see further tick up of the weekly MACD histogram next week, we would see the KLCI turn positive.

In the Nut Shell

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