19/01/06 : Technical View – Back To Square One
This is an article courtesy of OSK Research Sdn. Bhd.
By : OSK Research Sdn. Bhd published in OSK188.com on – 19 Jan, 2006
Overwhelmed by bad news, the bull just could not take it. Intel’s poor earnings, a 3.7% jump in crude oil price, the melt-down of Japan’s stock market and weak stock markets throughout the world, were the main distractions to the local bourse.
The KLCI gapped down by more than 5 pts on the opening bell which is not common. After gapping down, the key index did manage to stage a rebound to close the downside gap, but most of the gains evaporated towards the end of the session.
All of yesterday’s bad news had distorted the short-term uptrend and believe it or not, the key index is now back to the breakout level. It means that those who had bought shares at the breakout level are now back to square one.
We retain our bullish bias view towards the short-term market but with a sense of caution. The 900-902 pts area can be considered as the last line of defence for the bull and the market is now struggling to hold up the previous breakout level.
If not because of the few major negative news items, the market would have had a great chance to at least consolidate at above the 906 pts level following the formation of an “Inverted Hammer” candlestick pattern, which is normally viewed as a rather reliable bullish reversal pattern.
More observation is needed as yesterday’s volatile market action has complicated the immediate outlook. Traders who are holding KLCI-linked shares may stick to their positions until we see a decisive dip from the 900-902 pts area.
Meanwhile, look for an immediate upside resistance at the downside gap, ranging from 902 pts level to the 907 pts level, followed by the 910 pts level. To the downside, the next support after the 900-902 pts area is seen at the 890 pts level.