Talking Stock With The Doc

This Blog has been created for the purpose of sharing my ideas on investing on Bursa Malaysia using Technical Analysis. Stock market investing is a science & TA a scientific tool used by investment professionals. TA also has its sceptics but this is an oportunity for you to follow TA based investing ideas. So welcome to my blog and may you "Live Long And Prosper".

Saturday, September 02, 2006

Budget Euphoria, CI Futures & KLCI

Budget 2007 presented by the PM on Friday is generally a good all-round budget. Nothing spectacular but it is an expansionary budget with goodies for everyone including corporations esp the reduction in Corporate taxes by 1% each year over next 2 years. This reduction is still quite minimal & will not have a significant impact on listed companies. But overall its another feel good budget which may see a 1 or 2 day euphoria before reality dawns & it falls back into a corrective mode. Longer term the Budget is very positive for the market & I see the CI hitting 1021 by February 2007.

Futures - In the meantime technically the CI Futures Index (FKLI) is hitting a strong resistance at 960. This level stopped the FKLI rise on 2 recent occassions on 3 Aug 2005 & 8 May 2006. It may do the same again this week. However some euphoria over the budget may see it rise temporarily but overall it will probably correct downwards. H'ever if it does break above 960 strongly for at least 3 days then it is possible for it to stage a run towards 1000 but I very much doubt this. The rise so far, since hitting the bottom at 876 on 17 July, has been very steep. When this happens a reversal to correct the overbought situation is normal & expected. Perhaps towards the end of the week this will happen.


KLCI itself should also see some euphoria & a short term rise to 970 is likely. After that we have to be very cautious of the correction because of the rising wedge I mentioned in Friday's article. The correction will be very steep. Pls refer there for the chart.

Friday, September 01, 2006

Dangerous Times for KLCI

I thought that headline would capture your interest .... 8))
But I am not kidding...read on.

KLCI - Is history going to repeat itself? I see a rising wedge (RW) pattern in the CI (X-Y-Z) that is almost a mirror image of the Wedge (A-B-C) that preceded the last major correction in May/June this year from a peak of 970 to a low of 883, an 83 point drop. A breakdown from a RW is bad news & almost always leads to a major correction.

This is what Edwards & Magee say about it. "A RW typifies a situation which is growing progressively weaker in the technical sense. Prices ...fluctuate within the Wedge's confines for at least 2/3 of the distance from the base to the apex, in many cases they rise clear to the apex & in some actually go a short distance beyond pushing on out at the top in a last-gasp rally before collapsing. Once prices break out of the Wedge downside, they usually waste little time before declining in earnest. The ensuing drop ordinarily retraces all of the ground gained within the Wedge itself & sometimes more".

What E&M say is that a RW indicates the potential of a price collapse & the drop will be fast & furious & it will lose all the gains made within the Wedge.

Thats what happened in May/June. It rose from 910 to 953 (just like now), then had a last-gasp rally (M) from 953 to 970 including a gap up of 7 pts & then it collapsed & dropped 50 points in 2 weeks. Then it fell further to 883 beyond the base of the Wedge (C) of 910.

There are 2 scenarios today:
a) Prices may rally beyond 958 to 970 (only 12 points) just like May/June & then collapse first to 940/930 then later on to 900 or worse 883.
b) Prices may not rise any further today but collapse nevertheless to 900 or 883.

We have been seeing market weakness for the last 2 weeks. While the index has been rising, on many days we have more losers than winners. Also Vol has been falling despite index rising, a very uncomfortable divergence. Also while index is rising, RSI & MACD have remained flat. Finally 970 is a very strong resistance & has stopped the index on numerous occassions in the past.

Taking it all together the overwhelming conclusion is that the RW will come true. We may see a small burst in activity & then I predict a fall to 900 or 883 (unless 930 holds it up - possible but unlikely).

If you follow Dow Theory then the only call to make is to sell asap & get out of the market until the RW formation clears itself. Time for me to take that long holiday I have been promising myself. Good luck everyone.

Monday, August 28, 2006

KLCI & Futures

KLCI is staying positive but it is coming up to a very strong resistance at 953. On a weekly basis it is very strong with a long white candle & positive RSI & MACD. On a daily basis MACD has just barely made a golden cross & RSI is just turning up. So if it can convincingly break 953 on higher vol then we may see a stronger rise to 980. CI will receive a boost since BNM has kept interest rates the same at its Friday meeting. But on the negative side oil prices may rise bec of hurricanes in the US Gulf Coast. H'ever with the Budget coming up on Friday interest will be kept up. So we may see a flat CI this week with a slight upside bias.


CI Futures - are also rising slowly. It is tracking the CI & at 951 is almost the same as the CI. There is strong resistance at 959. RSI & MACD are rising very slowly. Friday h'ever gave a spinning top candlestick formation. Nothing to be particularly worried about but if it opens below 951 Monday & closes below this then maybe a reversal will be indicated, then support is at 940 & 933. I believe interest will be kept low until the conclusion of the Budget on Friday.

Plantation Theme

Plantation stocks have been correcting for 2 weeks now in line with the fall in CPO prices. Soy Bean prices have also been falling for almost a month now & coupled with lower oil prices the past week this has led to a correction in plantation stocks. Oil prices may rise this week because of worries about hurricanes in the US Gulf, the latest being Ernesto. Its the season for hurricanes. There have also been press reports on worries that if CPO rises above RM1700 or RM1800 (differing reports) biodiesel may not be feasible & would be more expensive than oil. All these have kept CPO down & with it plantation stocks.

Plantation Index is still rising. It is above the 5,10 & 15 day & within the upper channel of the Bollinger Band (BB) so it is still positive. Daily MACD & RSI h'ever are negative. Weekly RSI & MACD are still positive. It will turn very positive if it can take out the recent high of 3742. Vol has fallen significantly. I think PI is being kept up by interest in the larger index stocks like IOI, KLK & PPB. Fundamentally if CPO prices keep falling I expect PI to also start correcting down, but if oil prices rise & soy prices also rise then CPO will rise & so will Plantation stocks.


Kulim is bucking the trend & rose strongly the last 2 days. It has stayed in the upper BB channel which is a positive sign & its also above the 5,10 & 15 day MAV. Resistance is at 4.88 & 5.20 but it has to break above the 4.60 recent high first. After falling, the daily RSI & MACD are starting to rise though the MACD has not yet made a golden cross. The weekly RSI is h'ever VERY overbought at 97 & may have to correct soon. Technically on a daily basis it looks like the rise will continue but it is hard to say for sure as I am concerned that it is rising when others in the industry are flat or falling & the weekly RSI is overdone. Anyone who buys at this time should only do so if it breaks 4.60 but be very cautious.


RSawit - is starting to flatten. Its right on the central line of the BB & also the 7, 14 & 21 day MAV. Vol has fallen considerably & RSI & MACD are sharply down. We may see a sideways trend this week & a rise will be dependent of CPO prices & the trends of the bigger stocks like IOI & KLK which have to lead the market again.


Other stocks - Most other stocks are following the trend of RSawit: so IJM Plantations, Kretam & PPB Oil are all correcting & then staying quite flat. IOI & Asiatic are rising very slowly but may turn flat soon.