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Monday, April 20, 2009

RSI for KLCI >>> Will a correction arrive for KLCI?

The huge rally in the last 1-2 weeks has pushed the KLCI again to overbought territory of above 80%. The risk reward ratio right now seen its balance tilted to the “risky” side. How do traders manage the risk factor due to the overheating KLCI?
Two ways of using RSI
The Relative Strength Index (RSI) can be used in two ways. The first way is to measure the strength of the bull rally. Looking at the KLCI charts, the RSI is still trending upwards as the current high exceeds the previous high on the 6th of April. It looks like this bull is still has some reserves left in its tank and will be venturing higher in these 1-2 days.

The 2nd way is to measure how overbought the KLCI is. We used this method to successfully call for a minor correction on the 7th of April. Considering that the current “overbought” level exceeds the level on the 6th of April, the chances of an incoming correction has increased significantly. It seems that KLCI futures traders are currently pricing in a potential correction with the KLCI Spot Futures (March) trading at a 7 point discount to “cash” (KLCI Index).

Strategy : Waiting for corrections or consolidations at the 970 level We are calling for the KLCI to venture marginally higher in these 1-2 days to the 970 resistance level. We opine that the KLCI may have trouble breaking the 970 resistance which could trigger a small correction to alleviate the “overbought” pressure of the KLCI.

Traders are recommended to wait for corrections before entering in additional long trades in the KLCI.

In the last FKLI article (today), MACD parameters settings 6 12 6 wasn't used to showboat ZL knows how to parameterize the MACD. This rarely used 6 12 6 setting is to bring forth any "incoming below the radar" waves the can elude the "biasa" default 12 26 9 settings. This lastest article on RSI KLCI will reinforced ZL's vision of the FKLI next few days fluctuations. So far so good >>> the FKLI went nowhere from 8.45am opening. If such scenario persist, the normal default MACD 12 26 9 will spot the imminent Death Cross in a day or 2 two. We'll definitely know soon >>> ASAP.

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