Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Jun 10 ‘11

The chart patterns of the Asian indices are still struggling in down trends. The Hang Seng and Straits Times indices are trading below their rising 200 day EMAs. The Malaysia KLCI index is in better shape, and is ready to break above its (blue) down trend line.

Hang Seng Index Chart

In last month’s analysis, I had written that the Hang Seng ‘may trade for a while longer’ within the downward sloping channel. The index dropped briefly below the 200 day EMA, but didn’t fall down to the lower edge of the channel. A sharp rally above all three EMAs, supported by good volumes, seemed encouraging for the bulls.

Bears stopped the bull charge. High volume selling has pushed the index below the 200 day EMA again. The technical indicators are bearish, suggesting that worse may follow. The MACD has crossed below the signal line in negative territory. The ROC has dropped below its 10 day MA into negative zone. The RSI is falling towards its oversold zone. The slow stochastic has slipped into its oversold zone.

Maintain a strict stop-loss at 21800.

Singapore Straits Times Index Chart

The Singapore Straits Times index oscillated between the down trend line and the 200 day EMA, till it breached the support from the long-term moving average on Fri. Jun 10 ‘11. That is not good news for the bulls.

The technical indicators are bearish, which means a deeper correction is likely. The MACD is below its signal line and has entered the negative zone. The ROC is below its 10 day  MA and has dipped into negative territory. The RSI bounced off the edge of its oversold zone, but is below the 50% level. The slow stochastic has dropped into its oversold zone.

A drop below 3040 could test the Mar ‘11 low.

Malaysia KLCI Index Chart

The technical indicators of the Malaysia KLCI index were looking bullish last month, and I had mentioned the ‘possibility of another test – and even a break – of the down trend line’. The down trend line has held firm so far, despite several attempts by the bulls to breach it. The index is trading above all three EMAs – which is the sign of a bull market.

Bears will not give up the fight as long as the down trend line holds. The rally from the May ‘11 low of 1508 has seen decreasing volumes. The technical indicators are bullish, but showing signs of weakness. The MACD is positive, but touching the signal line. The ROC is barely positive, and has crossed below its 10 day MA. The RSI has risen to its overbought zone. The slow stochastic is above its 50% level.

Buy only on a convincing break above the down trend line. Without strong volume support, any break out may turn out to be a ‘false’ one.

Bottomline? The chart patterns of the Asian indices are struggling in down trends. Of the three, the Hang Seng and Straits Times are showing weakness and may face deeper corrections. The Malaysia KLCI is in a bull market, but facing headwinds. Good time to take some profits off the table.