Yesterday’s 5-pt rebound keeps alive the possibility of the FBM KLCI trending sideways. There is still potential for the market to consolidate between the 1,474 pt-level and the 1,530 pt-level. We will stick to this view until either one of these two levels is violated. As we mentioned yesterday, although the recent violation of the short-term uptrend line wrote off the possibility of the index creating a new uptrend in the near-term, it is still possible that the impressive rebound on 28 Feb 2010, which resulted in the creation of the “Long Lower Shadow Line”, could still overturn the previous downtrend channel into a sideways trend.
We would still like to highlight the importance of the 1,474 pt-level. As shown by the four circles in the above daily chart, every previous test of the 1,474 pt-level had been followed by a strong rebound subsequently. It was also apparent from the latest test of the 1,474 pt-level on 14 March 2010 when the index fell by about 15 pts at the day-low but rebounded when it was trading about 6 pts away from the critical 1,474-pt horizontal support line. That day, the index even bounced back with marginal gains but eventually ended the day with a loss of 0.27-pts.
Meanwhile, we maintain our bullish bias. Within the potential sideways range, look for an immediate resistance at the 1,509-1,517-pt “Downside Gap”. Next resistance is situated at the 1,530 pt-level but to the downside, there is immediate support at the 1,490 pt-level, followed by the critical 1,474 pt-level
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