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Wednesday, April 15, 2009

DOW BELOW 8000 >>> Adverse effects on KLCI : Take Profits on KLCI

For the last 1-2 weeks, a fierce battle has been going on at the 8,000 level between the bulls and the bears. The bulls managed to numerically break this level on two occasions recently, but could not hold to those gains.

After breaking above the 8,000 level on Friday, the Dow bulls again lost ground with the bears dragging the Dow back towards their territory beneath 8,000. The bears have won the 8,000 level battle, at least for now. This will trigger a negative wave in global equities markets including the KLCI for these few days.
Next Support for Dow : 7,900
Luckily for the Dow bulls, there lies a mini support nearby (20 points away) at the 7,900 level. Could this level be strong enough to support the bulls’ resumption of the 8,000 battle with the bears? Only time will tell.
If the 7,900 level fails to hold, then the next support will be at the 7,500 level. The 7,500 support level will be critical in the days to come as it will be our threshold level to determine whether this downward move is merely a correction or a worrying reversal.
Strategy : Take Profits off KLCI
Considering the upward momentum of the KLCI, we think that traders would still have opportunities to take profit at strength in the early morning session. We advocate readers to take profits and to wait on the sidelines and monitor the 7,900 and 7,500 support levels of the Dow Jones.
For now, the important support level of the KLCI lies at the 936 level. There could possibly be a significant correction in the KLCI in these few days due to the fact that the KLCI has charted 4 consecutive days of 45.9 points recently.

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