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Friday, August 12, 2011

Stock Index Chart Patterns – Jakarta Composite, Korea KOSPI, Taiwan TSEC – Aug 12 ‘11

Jakarta Composite Index Chart

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The Jakarta Composite index has been an outperformer in the APAC region, touching its all-time high of 4196 on Aug 2 ‘11. But it formed a ‘reversal day’ pattern (higher high, lower close) and started to correct before the index got hit by last Friday’s (Aug 5 ‘11) global sell-off. Usually, a reversal day marks the end of an intermediate top (or bottom); sometimes it can mark the end of a primary trend.

The comparative strength of the index can be observed from the rising 200 day EMA. The index did fall below the 200 day EMA intra-day on Tue. Aug 9 ‘11, but found support at the level of the Mar ‘11 top and closed well above the long-term moving average. The index nearly recovered its weekly loss – falling short by 31 points (less than 1%).

The technical indicators are bearish, but showing signs of recovery. The slow stochastic dropped below the 50% level after spending the entire month of Jul ‘11 inside the overbought zone. The MACD is well below the signal line and is falling in negative zone. The ROC bounced up a bit but is still deep inside negative territory. The RSI has turned around after dropping below the 30% level.

Expect some consolidation, and a probable test of the recent low.

Korea KOSPI Index Chart

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The Korea KOSPI index has been consolidating within a ‘pennant’ (a narrow triangle) since bouncing up from the 200 day EMA back in Mar ‘11. The 20 day and 50 day EMAs had become entangled in the process. The index broke down below the ‘pennant’ with a gap on Wed. Aug 3 ‘11 on a volume spike. That was the first warning of a bear attack.

On Thu. Aug 4 ‘11, the KOSPI closed below the 200 day EMA for the first time in more than a year. The selling on Fri. Aug 5 ‘11 on a volume spurt caused another gap. This week the index dropped like a stone on a huge volume surge and has closed below the 1800 level for the week – its lowest close in 15 months.

The technical indicators are very bearish, and looking oversold. Any bounce up can be used to sell.

Taiwan TSEC Index Chart

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The Taiwan TSEC index is attempting a recovery but is in pretty bad shape technically. It was struggling to stay above its 200 day EMA for the past 2 months, closing below the long-term moving average on several occasions.

Last Friday’s heavy selling caused a big gap in the chart. This week’s selling has been on increased volumes that has pushed the index into a bear market – confirmed by the ‘death cross’ of the 50 day EMA below the 200 day EMA.

All the technical indicators are bearish. That means the correction is going to continue for a while.

Bottomline? The chart patterns of the Korea KOSPI and Taiwan TSEC indices have been mauled by the bears. Both economies are heavily dependent on exports to the western world. The chart pattern of the Jakarta Composite has not been hurt by the bears as badly – yet. Time for investors to stay on the sidelines.

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