Friday, May 4, 2012

Stock Index Chart Patterns – Jakarta Composite, Singapore Straits Times, Malaysia KLCI – May 04, ‘12

In the previous post two months back, chart patterns of the Jakarta Composite, Singapore Straits Times and Malaysia KLCI indices had returned to bull markets but the up moves were facing resistances. Buying the likely dips was advised, but with suitable stop-losses – because the bulls had not regained complete control.

The technical conditions of the three Asian indices haven’t changed a whole lot in the intervening period. The bears are grudgingly giving up ground, but have not yet been routed. The bulls still have a little more work to do.

Jakarta Composite Index Chart


The Jakarta Composite index is in a clear bull market and trading within an upward sloping channel for the past 6 months. Note the hesitation of the index as it rose close to its Jul ‘11 top of 4196. On Apr 3 ‘12, the index breached the previous top by touching a new intra-day high of 4233 – only to drop below the 4196 level, where it stayed for the rest of the month despite several attempts to move higher.

A resistance (or support) level gets weakened if tested several times during a short span of time. No wonder the index has climbed above the 4196 level in May ‘12, though the breach hasn’t been a convincing one yet. Today’s (May 4 ‘12) trade shows a high-volume ‘reversal day’ pattern as the index touched a new intra-day high of 4235, but closed a bit lower.

All four technical indicators are looking bullish, but have touched lower tops while the index reached a slightly higher top. The combined negative divergences is likely to cause a correction or consolidation, which may provide an entry opportunity. If the index falls below its rising 20 day EMA, it should get support from its 50 day EMA.

Singapore Straits Times Index Chart

Straits Times_May0412

The Singapore Straits Times index is struggling to cross above the 3030 resistance level, which is the lower edge of the large gap on the chart formed in Aug ‘11. Three attempts in the last 3 months to cross into the gap area has been thwarted by the bears. Will the fourth attempt be the lucky one?

Technically, it appears likely. The index has formed a bullish ‘ascending triangle’ pattern (flat top, rising bottom) from which the likely break out is upwards. Volumes have reduced during the past two months’ consolidation within the triangle, which is to be expected. But any upward break out should be accompanied by significantly higher volumes.

Mixed signals are emanating from the technical indicators – again, to be expected during consolidations. The MACD and RSI are neutral. The ROC is slightly bearish. The slow stochastic is bullish. Add on the likely upward break out.

Malaysia KLCI Index Chart

KLCI Malaysia_May0412

The Malaysia KLCI index is showing a lot of similarities with the Jakarta Composite index. It is in a bull market; crossed briefly above its Jul ‘11 top of 1597 to touch a new intra-day high of 1609; and formed a ‘reversal day’ pattern. The subsequent correction dropped the index below its 50 day EMA, where it found support from the Feb ‘12 top of 1567.

The index has bounced up smartly and looks ready to test its previous top. The technical indicators are turning bullish after correcting from oversold conditions. Note that the previous break out above the 1597 level in early-Apr ‘12 was not accompanied by a surge in volumes. No wonder the upward break out turned out to be a ‘false’ one.

Bottomline? The Asian index chart patterns are trying to shake off the bears, who are refusing to give up the fight. All three indices are in bull markets, so dips can be used to add.

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