Biz Direct MarketKnowing When To Make A Good Decision

The KLCI closed at a new 2009 high at 1088.96 points, breaking the 1,076 points resistance level. The KLCI is 25 points or 2.3 percent higher from the previous week. The price trend is still inherently strong with the short to long term moving average still increasing and the KLCI moving higher above these averages. The KLCI is 11 percent above the long term 90 day moving average (90-SMA), another 1 percent higher from the previous week. The Ichimoku Cloud indicator is still expanding strongly and shows no sign of major trend reversal at least in the next one month.

In the longer term, the momentum of the trend is still strong with most momentum indicators like the 14-day RSI, 14-day Momentum and MACD indicators above the mid-point which separates the bulls (above mid-point) and bears (below mid-point) strength. The Average Directional Index (ADX) indicator continues to increase since last week and this confirms the strong up trend momentum. However, in the short term there is a divergence between these indicators and the KLCI. Therefore, the short term momentum of the KLCI is a little weak.

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No market in the region shows very strong bullish sentiment like in Hong Kong. The equity market continues to make new highs and breaking a few technical resistances in a month. The HSI closed at 18,697.53 points at the end of the first week of June, surging more than 20 percent in a month. So far, the HSI has climbed 60% from the low in March this year. Investors are confident about the recent economic developments which are expected to improve its economy.

Weekly HSI chart as at 5 June 2009 using NextVIEW Advisor Professional

The HSI becomes very bullish once it broke the 15,900 points resistance level. There was no major pullback in the current uptrend rally despite being overbought for weeks. Investors and traders are picking up stocks at slight pullbacks are most of them do not want to miss the current wave. The momentum indicators are indicating strong upward momentum which means that there is a high chance that the HSI testing the next resistance level at 19,150 points, a 38.2 percent Fibonacci retracement level from the longer term bearish trend since October 2007. If the HSI remains bullish, expect the HSI to climb to the next resistance level is at 21,300 points. Immediate support level is at 17,680 points while stronger support level is at 15,700 points.

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