Robust Demands Boost CPO >>> Mild Resistance Seen @ 3100

FCPO Daily technical analysis:

 
The FCPO active month contract ended sharply higher and it was able to maintain its upward posture throughout the day as the market sentiment was boosted by positive palm oil export figure released by ITS.

Moreover, tight supply outlook for vegetable oil markets had pushed up the FCPO price rose to nearly 9.2% from the lowest level in just three days. At the close, the FCPO price was up 116 pts or 3.92% to 3,078.

From the daily chart, price gapped higher once it opened as it was buoyed by overnight CBOT soybean oil price soared more than 3%. As we can see in the chart, a long positive candle formed on Wednesday where it indicated that buyers were aggressive throughout the day. Trend remains positive and this was also confirmed by the MACD indicator. However, there are two downside gaps left uncovered at the moment. Since it had successfully formed up a double bottom pattern, the next step is to keep an eye whether it is able to form up a ‘W’ shape in the long term trend.

Referring to the MACD Histogram, it successfully builds up in the positive zone. Meanwhile, the MACD line is crossing above the signal line where the bullish sentiment is building up in the medium term. As always, intraday support and resistance levels will be eyed.

Technical indicators:

MACD= Positive

ADX= Positive

Intraday technical support & resistance for 23rd Aug 2012:

1st support 3000

2nd support 2960-30

1st resistance 3130

2nd resistance 3170-3195

BURSA MALAYSIA ENDS WEEK WITH A BANG

FBM KLCI climbs to historic high 07 July 2012

The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) moved broadly higher over the week, hitting its intra-week high of 1,620.35 yesterday. The index recorded an intra-week low of 1,599.67 on Monday before rebounding to its all-time historical high of 1,620.55 yesterday, giving a trading range of 20.88 points.

Of the FBM KLCI's 30 index-linked components, gainers overwhelmed losers by 25 to five. 

ACE Market and lower-priced counters on the Main Market rose in tandem with other Main Market counters. The FBM Small Cap Index and the FBM ACE Market Index's week-on-week gains of 2.37 and 1.02 per cent, respectively, reflected the sectors' outperformance.

The FBM KLCI closed at its all-time high of 1,620.55 yesterday, posting a week-on-week gain of 21.40 points, or 1.34 per cent.

The following are the readings of some of its technical indicators :

Moving Averages: The FBM KLCI continued above its 10-, 20-, 30-, 50-, 100- and 200-day moving averages yesterday 

Momentum Index: Its short-term momentum index continued to stay above the support of its neutral reference line.

On Balance Volume: Its short-term OBV trend continued to stay above the support of its 10-day exponential moving averages.

Relative Strength Index: Its 14-day RSI stood at the 68.53 level.

FBM KLCI Technical Outlook

The FBM KLCI hit its intra-week low of 1,599.67 on Monday, staying way above the confines of this column's envisaged resistance zone (1,560 to 1,594 levels). 

Subsequent technical rebounds sent the index to its intra-week high of 1,620.55 yesterday, moving into the confines of this column's envisaged support zone (1,603 to 1,637 levels).

AirAsia, UMW, KLK and Genting's week-on-week gains of 6.72, 6.13, 4.62 and 4.45 per cent, respectively, accounted for the bulk of the FBM KLCI's week-on-week gain of 21.40 points, or 1.34 per cent. UMW replaced YTL as the week's top performer with a year-to-date gain of RM2.60, or 36.67 per cent.

The FBM KLCI's weekly chart continued to stay above its intermediate-term support (see weekly chart: A1:A2) during the week. It continued to stay decisively above its intermediate-term uptrend (A3:A4).

Chart-wise, the FBM KLCI's daily price chart continued to stay above its intermediate-term uptrend (see daily chart: B3:B4) yesterday. Also, it continued to stay above its intermediate-term uptrend support (B1:B2). Its daily and weekly fast MACDs (Moving Average Convergence Divergence indicators) continued to stay above their respective slow MACDs. However, its monthly fast MACD continued to stay below the support of its monthly fast MACD. 

The 14-day RSI stayed at the 68.53 per cent level yesterday. Its 14-week and 14-month RSI stayed at 63.15 and 65.12 per cent levels last Friday. 

Next week, the FBM KLCI is likely to re-write its all-time high, with heavyweight index-linked counters expected to continue providing the momentum thrust. The index's envisaged resistance zone is at the 1,624 to 1,658 levels, while its immediate downside support is at the 1,582 to 1,616 levels.

HAPPY TRADING

My Trading Strategy

Using Indicators
ZL almost always base decisions on the price/volume chart. All an indicator does is summarize the information already visible on the chart. While useful for highlighting patterns in price and volume behavior, indicators can never replace the depth of information on the original chart. When you summarize data, you sacrifice some of the attributes in order to highlight others — so an indicator never gives the full picture. Indicators have two main purposes:

#1. To act as a filter when screening stocks; and
#2. To act as a form of executive summary before you examine the price/volume chart in detail.

Do The Charts Discount Everything?
You will often see technical analysts repeating the mantra: the charts discount everything — and all information available to the market is reflected in the current price. ZL believe that the market often takes time to react to new data. We are not dealing with a vast super-computer that can detect and analyze the full implications of a minute change in market conditions. The market is driven by mass psychology and pulses with the ebb and flow of human emotions. Emotions may respond rapidly to extreme events, but normally change gradually over time. Individuals are seldom comfortable acting alone: the market is dominated by a vast herd instinct.

The Economy
By appraising yourself of market conditions you can learn to anticipate the broad movement of the market. Study general market conditions, especially the supply and demand for money (the Ringgit?), which drives market prices. If there is no money to buy stocks, prices will fall. Likewise, if the market is awash with money, prices are likely to rise. The value of the MYR is vital to the intraday market sentiments.

Predictions
Try to avoid making predictions. The market can go up or down at any time — it is only the probability (of each move) that varies. When you make predictions, you may lock yourself into a position and be less open to evidence that you are wrong. Attempt to eliminate bias by presenting both possible signals (bull and bear) wherever practical. That's one reason why ZL is consistently bottomish instead of bearish. A pessimistic trader seldom create optimistic opportunities.

Technical Analysis Not An Exact Science
We never know the outcome of a particular pattern or series of events in the market with 100 per cent certainty. The best that we can hope to achieve is a probability of around 80 per cent for any particular outcome. That means something unexpected will occur at least one in five times. My approach is to assign probabilities to each possible outcome. Assigning actual percentages would imply a degree of precision which, most of the time, is unachievable. Terms used are more general: "this is a strong signal"; "this is likely"; "expect this to follow"; "this is less likely to occur"; "this is unlikely"; and so on. Bear in mind that there are times, especially when the market is in equilibrium, when we may face several scenarios with fairly even probabilities. Analysis is also separated into three time frames: short, intermediate and long-term. While one time frame may be clear, another could be uncertain. Obviously, we have the greatest chance of success when all three time frames are clear.

A Simple Formula

The market is a dynamic system. ZL often compare trading to a military operation, not because of its oppositional nature, but because of the complexity, the continual uncertainty, the conflicting intelligence reports, and the element of chance that can disrupt even the best made plans. Prepare thoroughly, but allow for the unexpected >>> "expect nothing but be prepared for everything." The formula is simple: trade when probabilities are in your favor and apply proper risk (money) management — and you will succeed.

DIFFERENT STROKES FOR DIFFERENT FOLKS