Malaysia Rally May Pause After Evening Star: Technical Analysis

Bloomberg

 

September 02, 2010, 12:17 AM EDT

By Chan Tien Hin

 

Sept. 2 (Bloomberg) -- Malaysia’s stock market rally to the highest level in more than 30 months may pause after a chart of the benchmark index formed a so-called Evening Star, signaling a “bearish trend,” according to RHB Research Institute Sdn.

The candle-chart image comprising a line with a long “real body” followed by a line with a short body suggests the prior trend may end. The FTSE Bursa Malaysia KLCI Index, which closed at 1,432.95 yesterday, could retreat to “retest” the 10-day moving average of 1,405 and the “psychological” level of 1,400, RHB said in a report today.

“So long as it can sustain at above these levels with robust daily turnover at between 800 million shares to 1 billion shares, buying momentum can return swiftly to lead another rally,” RHB said. Trading volume averaged 810 million shares in the past six months, according to data compiled by Bloomberg.

The index, Asia’s second-best performer last month, has surged 15 percent since the May 26 low, approaching the 20 percent jump that defines as a bull market for some investors. Stocks will extend gains in September with government reforms and a stronger ringgit drawing investors, OSK Research Sdn. analyst Chris Eng said yesterday.

The stock index may rise to 1,500 by the end of the year, HwangDBS Vickers Research Sdn. said in a report today, raising its earlier forecast of 1,448 amid stronger earnings growth prospects.

The index today climbed for a fifth day, adding 0.1 percent to 1,432.97 as of 11:43 a.m. local time, set for its highest close since Feb. 14, 2008.

Candlestick charts show an index or security’s high, low, open and close each day, and may signal a reversal of a trend or a continuation. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

--Editor: Reinie Booysen, Linus Chua
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net
To contact the editors responsible for this story: Linus Chua at lchua@bloomberg.net

http://www.businessweek.com/news/2010-09-02/malaysia-rally-may-pause-after-evening-star-technical-analysis.html