Technical Rebound

Last few days have been very much like a roller-coaster ride in the KLSE. The CI first found a support around 1120 and rebounded to 1153, the there comes more surprising news and pressed the CI down. Last Friday, the CI took a further beating when the foreign funds sell down major plantation stocks like SIME, IOICorp, KLK etc. The way KLK falls was really scarry, down by Rm2.60 to a low of 12.60 from 15.20 in 2 days before recovering slightly to 13.70 yesterday. This tells us that during a bear trend, no matter how fundamentally strong is the stock, it will still come down under market force. So, never fight the force, flow along with it, that is what trend trading is all about.

Yesterday, the CI rebounded slightly to closed at 1109.57, just slightly above the critical psychological support of 1100. It is very important for the CI to stay above this level, otherwise the downside level mentioned in last post will come true. The immediate overhead resistant is at 1120, for the short term down trend to reverse, the CI must be able to go above 1160 level. However, under current economic situation worldwide, with the high oil price and the many political sendiwara taking place in our country, the CI is lightly to consolidate within a range of 1090 to 1120 to build a base before any uptrend rally can take place.

As the market is deeply oversold, where the CI actually falls continuous for almost two months nows, it might be an opportunity for the medium term player to pickup some quality stocks. There are also some stocks that refuse to come down with the CI and even buck the down trend, these can be a very short term trading opportunity. Whatever, you like to do, placing a stop loss is very, very important to help preserve your capital, as you might be wrong again.