Technically Speaking – Here we are, again

I’ve said recently that I would try to avoid writing another financial market update, but, I’ve relented, and here we are, again, with another post about the financial market – the KLCI to be specific.

This year has been an interesting one on the stock exchange. Despite moribund overall economic outlook, the stock market has been quite…festive, creating huge winners, and conversely huge losers all around. Generally, the less speculative sectors (and here, I mean sectors that are expected to underperform, or market perform) have generally done what they’re supposed to do. But sectors such as the healthcare sector and tech, have done spectacularly well. I don’t know if the fundamentals support their performance, but traders have had quite a blast with them.

Anyhow, the reason I’m writing this entry is because the KLCI is now at an interesting point in time.

Let me show you:

Back at it!

The index is now tickling the major resistance of 1620. Why do I say ‘major’? Well, if you recall, 1620 was the neckline of a giant double top formation, which at the time, foreshadowed that the index would plummet to 1300 levels – which it did (if you need reminding, I have a post here). This attempt would be the sixth time that the market is trying to break this resistance in the span of one year.

The question is…will it succeed?

Whew. I can’t answer that, some Elliot Wave Analysts I’ve been following are typically bullish with the Index’s movement, and any pullback right now is a precursor to a higher move…and, they might be right, or wrong…it depends (not helpful, I know).

I think it depends on the kind of investor that you are, if you’re the aggressive type, well, yes, you would be pretty bullish. I am more the wait and see, semi-conservative type (whatever that is) and tend to wait for pattern confirmations before I decide to take a position.

So if I were to give an opinion as to what the KLCI does next, I would say this:

Obviously upon touching the 1620 level again, I don’t expect it to break through immediately. I expect it to pull back a bit to 1590 or even 1580, before having another go. If the index falls below 1580, then it’s game over for now, we’ll head to 1550 and waddle between this range for some time. On the contrary, if the index instead rebounds from 1590 or 1580 and breaks through 1620, it would complete a cup and holder formation, with a potential target range of 1780 – good news for everyone!

Bottoms up!

Fundamentally though, there has to be a damn good reason why the index would want to go that far in the near term (I’m talking about the next year), but, we’ve seen the index and the market do strange things all throughout the year, and, we may continue to see it in the coming months too.

What do you think is going to happen? Would like to get your thoughts on this too. But, in the meantime, trade safe, stick to your plan, take your profits, cut your losses, live to trade another day.

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