Composite Index Weekly Technical Analysis, 06/05/05 

Main Chart:

Despite the closure of Bursa Malaysia, KLCI managed to gain 22.26 point for the week, up 2.5%. On Tuesday, KLCI had a strong day with a gain of 13.07 points. The strong momentum was followed by Wednesday’s trading, which opened gap up and closed with 11.04 points higher (Refer to A). For Thursday and Friday, KLCI pulled-back for a correction. 

At the moment, KLCI encountered a resistance at L1, around 907 points, which was once a support level, but since broken down on the 21/02/05, it served as a resistance level till now. Further resistance would be the WinChart Automatic Fibonacci Retracement at 909.95 points. As for the supports, we are looking at the L2 at 885 points, as well as the 10 days Bollinger Band Middle band, which is serving as a dynamic support for KLCI. 

Volume:

As indicated by arrow B, volume only picked up to above the 40 days VMA on Wednesday and Thursday. In order for KLCI to sustain the upwards momentum, we need to have trading volume above the 40 days VMA, thus showing that the market participation is actively sufficient. Otherwise, this rally is difficult to carry on. 

Bollinger Band:

Due to the over-heated performance on Tuesday and Wednesday, KLCI was soon priced above the 20 days Bollinger Band Upper Band. According to the Bollinger Band Theory, if price is away from the upper band, there shall be a pull-back effect (Refer to A1) Therefore, KLCI undisputedly, had a pull-back effect starting on Thursday. In addition, from our past experiences, gaps in KLCI are usually closed a few days afterward. Therefore, inline with the pull-back effect, we shall expect the gap be filled as well (Refer to A). Nonetheless, the target for the pull-back effect shall be some where around the 10 days Bollinger Band middle. 

MACD:

MACD histogram showing first sign of correction; the correction is further confirmed when we see a round-top formation of the MACD histogram (Refer to C). Also, as pointed by Ca, MACD line has gradually raised above the zero level. This is a positive sign for it symbolizes the over-all market sentiment has slowly turned positive. 

RSI:

As circled in D, RSI retreated slightly after KLCI pulled-back. However, it is still situated above the 70% level, which is the mid-term bullish zone. As long as RSI stays above the 70% zone, KLCI upward movement is still intact. Contrary, if RSI falls below the 70% level, upward momentum is doubtful. 

Stochastic:

Like RSI, Stochastic remained above 70% level; short-term bullish zone. Since Tuesday, Stochastic has managed to climb above the 70%, and %K even touched 100%. Couple with the pull-back effect, Stochastic retreated as well. Nevertheless, Stochastic is still remained above 70%, therefore for the short-term, KLCI outlook is still at the bright side. (Refer to E) 

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