Profit-taking depressed local market. But Dow should stage rebound on Tuesday night.
Technically speaking:
1. As at Tuesdays close at 1366.99 the KLCI was lower by 10.14 points or 0.74%. Losers led gainers 648 to 286.
2. The lower close is a dampener especially after a breakout into new highs last Friday.
3. But as chartists one should expect the unexpected. In other words, if the KLCI should fall further to and violate its lower Bollinger band, one should consider exiting the market at 1348 or lower.
4. But until then, it is possible for the KLCI to stage a rebound.
5. Until the present circumstance, we would be cautious and not buy further.
6. We would wait-and-see and wait for a rebound before adding more positions.
7. Stocks-to-watch for today will, understandably be low. They are: LMCEMT and YTLCMT.
8. We were right about TRANMILE going down to hit the floor. We hope you have exited this stock as based on technical analysis it can make lower lows.
9. We observed that the local stock market moves in tandem with the strength of the ringgit. For the market to rally we would want to see a stronger ringgit. Right now the ringgit is weak.
CONCLUSION: Although it is too early to call a trend reversal, the local market has taken a beating from sellers as funds sell out for fear of further weakness from the U.S. markets. But the technical of the Dow do not seem to suggest that a market plunge is near. Instead we are seeing a Dow rebound. If so, we expect the KLCI to rebound in tandem.
Long-term Upside Targets:1492 (Target amended on 15/6/07).
Immediate downside targets: 1334/1291/1222
Fred Tam is the owner of http://www.fredtam.com and http://www.picapital.com.my F1 Trader Online - Know when to enter & exit the markets.