05 Jun5-June KLCI Index, 20D Moving Average is moving Downward

5-June KLCI Index, 20D-Moving Average is moving downward

Date: 5-June-2012

Malaysia KLCI Index: 1560 point

Malaysia KLCI Index Overview

Today KLCI index rise 0.3% after yesterday drop 1.2%.  We received several email last week about the KLCI index.  Most of the investors are asking why the index after touching 20D moving average and breakthrough the resistance of moving average trend line?

KLCI seems strong rebound last week from price action, and many investors were worry if the index will continue shooting up?  Our point of view is very simple, the rebound seems strong last week, but reversal a pattern may need other signal for conformation.

This week, we are seeing a huge slash in worldwide market, HK Hang Seng index move down 1.7% and China A-Share also drop 2.7%, whereby Malaysia KLCI index drop 1.2%.

How do we examine Malaysia KLCI index?  Let us examine the index by standardize stock analysis procedure.

Below trend chart is Malaysia KLCI index trend chart on 5/June

 

Moving Average

From set of moving average, we could se that the index is located within 60D and 120D moving average trend line.  The 120D moving average is moving upward but the support is getting weaker.

More importance is the 20D moving average trend line.  Even on 29/May, the KLCI index manage to breakthrough the 20D Moving Average, however it does not change the moving down trend of 20D-MA.  The 20D-MA still the main trend line controlling the KLCI index movement.

Investor, who has the knowledge about analysis set of moving average trend line, should very cautious on the crossover between 20D and 120D-MA.  Very soon the index is moving downward and the crossover between 20D and 120D will bring adverse effect in the overall KLCI index performance.

Volume Analysis

The daily transaction volume also shrinks since last Friday.  The daily transaction volume is reported at 0.64B.  The 20D-Volume Moving Average reported at 0.98B, and it will further moving downward until reaches 0.72B before we could see another stronger rebound.

The 20D-Volume Moving Average is moving downward, this also indicates the strong rebound shown last week is without new investor.

Stochastic & MACD Indicator

The MACD crossover pattern on 28/May is just a rebound, even the rebound seems a little stronger, but now it goes back to it original trend, which is moving downward.

Malaysia KLCI Index Summary

The Malaysia KLCI index shows strong rebound last week, but from trend analysis, it still consider as a rebound.  The index resume it original trend.  The 20D Moving Average trend line is moving down, under this circumstances, there is no sign of reverting the trend from moving downward to moving upward.

Malaysia KLCI Index Trading Strategy

Looking at the coming crossover between 20D moving average and 120D moving average, this is the market not for most investor unless you are a risk taker.