Saturday, February 02, 2013

Are We To Have a Chinese New Year Rally?

The above is a weekly chart of the FBM KLCI dated back to July 1, 2008. What is prominent in the chart is that a green candle will appear before an uptrend begins. This does not mean that when a green candle appears after a few red candles, the trend will begin. But it does mean that the trend will not commence without a green candle in place. A square is always a 4-sided figure, but not all 4-sided figures are squares. This is an analogy.

The chart shows 4 weekly red candles in the last 4 weeks. For the trend to reverse, a green weekly candle must appear first. So keep watching for this to happen. If you don't see any green candle in place, you have to assume that the downtrend will continue. This is likely as the stochastic is also trending down

Going by the chart, some support will come in at 1590, and if this is breached, the next likely support will be 1527.

So, are we going to have a Chinese New Year Rally? I don't think so. My opinion is that there will not be much fanfare until the GE13 is over. But if there is political chaos in the country over the GE13, and foreign funds pull out, the market will take a dive.

Good luck and Happy Trading. Always bet at your own risk.