22nd August 2011, Monday – Weekly Market Outlook

SUMMARY

	Stock	Futures
		FKLI	FCPO
Today Strategy & Stock Pick	For Risk Taker Stock: Will not encourage stock accumulation at this down trend.	Risk Taker: Hold on to previous short position Risk Averse: Hold on to previous short position	Range trading, 3000 - 3045
	For Risk Averse Stock: Should remain sideline, follow overall market direction.
Stop Loss	Nil	1510 - 1515	Risk Taker: 2910 - 2900 Risk Averse: 2980 - 2970
Market Direction	KLCI: Downtrend	Firmly Downtrend	Further sideway trading is expected until either direction is being taken out (at the triangle)
Support & Resistance level	KLCI: S1: 1474 S2: 1450 R1: 1489 R2: 1500	Support: S1: 1474; S2: 1450	Support: S1: 3000; S2: 2910
		Resistance: R1: 1491; R2: 1500	Resistance: R1: 3045; R2: 3100
Initial Margin	-	RM5000	RM8500
World News	Stock market begins to feed economic fear. Bank of America cutting 3500 of jobs. BoJ may ease policy again.

DETAIL

KLCI


Downtrend Confirmed!

FBMKLCI closed lower last Friday, sending a clear message to us – downtrend confirmed! Why? There are a few indicators shown the clear message, included:-

a) Lower high1

b) Trading way below the SMA 200

c) Trading below the uptrend line

d) SMA 50 shown a clear downward trading

Now, the question is how bad it can be? In my view, coming 1 to 2 months will see the index follow the world indices and further major downward trading is expected. As mentioned before, the immediate important support should remain at 1474 level (recent reliable support level), failure for this level to be supported, the index will retrace to 1450 level.

Explanation:

1) Lower High: The high is getting lower

FKLI

Similar as FBMCKLI – Downtrend

Without hesitation, the FKLI remains downward trading and the overall technical landscape did not change with the immediate support is seen at 1467 level, followed by recent low of 1427 level. The downward trading supported by the same reasons as per mentioned in the FBMKLCI above. Investors can remain holding short position and fresh initiation of short position for those late comers shall only set in whenever there is any technical rebound.

Explanation:

1) Dark Cloud Cover: In Candlestick pattern, this is a bearish reversal pattern.

FCPO

Clear Direction will Reveal Soon!

The FCPO as per expected faced with the strong resistance at the 3080 level and retraced back to 3000 level. The overall technical landscape did not change as well if compared to the previous week. Let me recap on what I have mentioned last week:-

1) Long term market remains resilient above the trendline (shown below in Chart 1) and this shall serve as an important and reliable support, at least for now.

2) With the trendline serves as our stop loss level (for those risk averse investors, +/-20 points below 3000 can serve as your stop loss point), I can say that it is worthwhile at this level to take a long position even the fundamental is not that strong.

Besides, refer to chart 2 below, the FCPO currently is trading in the triangle, indicating the FCPO will have a clear direction (either way) in near term and this shall serve as an important reference level for near to mid-term trading. Immediate support is seen at RM3000/MT, followed by recent low of RM2915/MT level and the resistance is seen at RM3045/MT level (Fibonacci of 23.6% level), followed by the downtrend line of RM3080 – RM3100/MT level.

Chart 1:

Chart 2: