Double Bottom at 1,474 Low Confirmed by Breakout Rally
The KLCI rallied to a record high of 1,576.95 on 6 January, established a double-top peak at the 1,576.42 high on 18 January, then pulled back into a two-month correction phase within a down-trend channel and re-built support above the 1,474.38 low on 28 February (Chart below).
This is the lowest level seen since 29 November last year, setting up a double-bottom for the index. A dip to a higher low of 1,476.24 on 15 March was stalled as the external tone improved to fuel a bullish reversal and trigger breakout rally for a firm close by the end of the first quarter.
Fibonacci Projection Upside Targets
(1,655/1,704/1,743/1,782/1,831)
The end March rally has reversed the weekly MACD indicator from its previous bearish stance, with its signal line hooking up to suggest further upside ahead on the weekly chart (Chart above). As such, a breakout above 1,576 is imminent, which would lift the index up to record heights. Using the Fibonacci Projection method, upon a successful breakout, the subsequent upside targets are 1,655, 1,704, 1,743, 1,782 and 1,831, which are the respective 23.6%FP, 38.2%FP, 50%FP, 61.8%FP and 76.4%FP of 1,243 low (27 May 2010) to 1,576 high (6 Jan 2011). These projected upside targets are likely to be met as the market trade towards 2012.
HAPPY TRADING
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