Tech Talk Bursa Malaysia WW35

Let's recall back previous week's tech talk which was my first attempt.

1. RSI shows appearance of overbought signal. 40-50 support line is still unbroken; no swing test expected. Possible new divergence to bearish again as RSI is now at above 70 region.
2. MACD project performance far away from the centerline. A crossover is not imminent. Indicator tells us that investors are still bullish, no signs of bearish activity.
3. Resistance level is at 1400 points while support level at 1350 points. 

KLCI broke the psychological 1400 barrier this week WW34, bravo! This is thanks to good announcement of quarterly results by some heavyweight counters such as banks, Celcom Axiata and Sime Darby (where investors think the worst is over for the conglomerate).

Relative Strength Indicator (RSI)

Chart Setting: SMA 1, RSI (14, 20), Feb'10 to Aug'10

High area of overbought signal which is greater than previous week WW34. Strong bullish activities. No swing test and no divergence signal.

Moving Average Convergence Divergence (MACD)

Chart Setting: EMA 12, EMA 26, MACD (26, 12, 9), Feb'10 to Aug'10

Once again high signal level of overbought. This is higher than in mid March and mid April in which both resulted in some minor correction. KLCI not performing anywhere near centerline and thus crossover again is not expected for the coming week.

Resistance and Support Level

Chart Setting: Feb'10 to Aug'10 (6 months)

New resistance now set at 1430-1450 points while support level is now at 1390-1370 points in tandem with the rise of the index. I have changed to a +/- 20-40 points tolerance after finding out that there is a range of resistance/support level.

So What?

I maintain my stand that valuations are expensive at this point. It gets increasingly hard if not almost impossible to get a value buy on fundamentally strong listed equities especially blue chips. A very good time for profit taking, hold liquidity and wait to pounce. There is weak external economic data particularly in the US last week and Bursa should be poised for some correction in the coming week if it does react to such news which it usually does.