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Friday, November 20, 2009

Stock Index Chart Patterns - Shanghai Composite, Hang Seng, Malaysia KLCI - Nov 20, '09

Shanghai Composite index chart


The Shanghai Composite chart shows that the bulls are charging again and the bears have retreated. The index is yet to regain its Aug '09 high of 3478. But the bullish cross of the 20 day EMA above the 50 day EMA indicates that a new high may not be too far away.

All the three EMAs have resumed their up moves and the index is well above them. The correction is fading into history. The technical indicators are supporting the bullish fervour.

The slow stochastic is well inside the overbought zone. The RSI has just entered the overbought zone. The ROC is in positive territory, though it has moved down from its recent peak. The MACD continues to move up in positive territory and remains above the signal line.

A few FIIs have recently sold in the Indian markets and invested in China. That explains the sluggishness in the BSE Sensex and the buoyant mood in the Shanghai Composite.

Hang Seng index chart


The Hang Seng index chart not only shook off the bear attack but also made a new high of 23100 on Wed, Nov 18 '09. The index could not sustain above the 23000 level and closed almost 650 points below the new high, and about 100 points lower for the week.

Any further fall in the index is likely to find support at the 50 day EMA, which has not been penetrated since July '09. All three EMAs are moving up, so the bull rally is likely to continue. Volumes remain a disappointment.

The slow stochastic is about to drop from the overbought zone with a bearish cross of the %K below the %D. The RSI is looking quite positive as it moves up towards the overbought zone. The ROC is in positive zone though its upward momentum has slowed. The MACD is positive and above the signal line, but has started to drop.

The index may correct a bit more next week. The negative divergences in the technical indicators are also a concern. As long as the Hang Seng index keeps making higher tops and bottoms, the bull rally will remain intact.

Malaysia (KLCI) index chart


The Malaysia (KLCI) index chart pattern looks the most bullish of the three. Since June '09, the rally has got firm support at the 20 day EMA, and made a new high of 1288 on Tue, Nov 17 '09.

All three EMAs are moving up, as the index makes higher tops and bottoms. The upward momentum is slowing. Volumes remain low. The slow stochastic is about to drop from the overbought zone, even as the RSI is trying to enter its overbought area. The ROC is in positive zone but moving sideways. The MACD has stopped rising and is touching the signal line.

Bottomline? Continued bullishness in the Shanghai Composite index chart pattern can have a beneficial effect on other Asian bourses. But this is the time of year when FIIs are likely to start booking profits. Investors may want to do likewise, and wait for better opportunities to re-enter.

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