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Friday, September 11, 2009

Stock Index Chart Patterns - Shanghai Composite, Hang Seng, Malaysia KLCI - Sep 11, '09

Shanghai Composite index chart

The previous week's big fall followed by a recovery took the Shanghai Composite index chart pattern close to its descending 20 day EMA. Let's look at the 3 months bar chart pattern of the Shanghai Composite index to see how far the recovery progressed:-


After initial resistance from the 20 day EMA during the early part of last week, the index managed to move and close above the short-term moving average, only to face resistance from the 50 day EMA. It closed the week below the psychological 3000 mark.

The medium-term average has started to slip down, but the 20 day EMA has flattened and the 200 day EMA is still rising. The EMAs are giving conflicting signals - short-term neutral, medium-term negative and long-term positive.

The technical indicators have improved some what. The RSI is at the 50% level. The slow stochastic has moved sharply moved above the 50% level. THe MACD is still negative but has risen above the signal line. The ROC is at the '0' mark.

Hang Seng index chart

Looks like happy days are here again for the Hang Seng index, which has taken off with a renewed surge upwards. On Thur, Sep 10 '09, it made a new intra-day high of 21322 and today (Fri, Sep 11 '09) it made a new higher close at 21161. Volumes have also picked up over the previous week.

Let us see how much stronger than its big brother the 3 months bar chart pattern of the Hang Seng index is looking:-


The Shanghai index is facing resistance from its 50 day EMA, but the Hang Seng got support from it before moving up. All three EMAs are moving up together confirming the bull market.

The slow stochastic is nudging the overbought zone - quite a jump in a week. The MACD has not only turned positive, but has moved above its signal line. The ROC is in the positive zone, and the RSI is above the 50% level.

The fly in the ointment is the negative divergences in the technical indicators, that have failed to make new highs with the index.

Malaysia KLCI index chart

A first look at the Malaysia index shows that it is looking even stronger than the Hang Seng index.

The 3 months bar chart pattern of the Malaysia KLCI index was well supported by the 20 day EMA during the recent correction before making a new high above the 1200 level:-


The onward march of the KLCI seems unstoppable now, with the index at a 52 week high - a level last seen in Jun '08. Both the RSI and slow stochastic are about to enter overbought zones. The MACD is positive and above the signal line. The ROC is in positive territory.

There are a couple of concerns though. Like in the Hang Seng technical indicators, the KLCI indicators are showing negative divergences. The 50 day EMA has moved a 100 points away from the 200 day EMA. A bigger correction may be round the corner.

Bottomline? The Shanghai Composite index chart pattern holds the key to the future of the Asia-Pac regional bourses. If it resumes its upward journey, it may light a fire under the Hang Seng and KLCI indices. But if it drops back down, then the bull rally in the regional markets could end.

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