Investors should expect profit-taking pressure on blue chips while trading momentum should stay focused on low-priced lower liners on active rotational plays, says a head of research


Technical momentum indicators for the FBM KLCI are flashing initial overbought conditions, but trend indicators improved on their bullish readings, highlighted by an imminent weekly MACD buy signal on further strength. Hence, even as the market trend stayed positive following last week's bullish breakout to a new 29-month high, expect profit-taking and selling to check gains, as such investors and market players are encouraged to realise short-term trading profits.


Immediate resistance for the FBM KLCI remains at 1,370, and then 1,392.18, the 24 July 2007 pivot high. It is important that the index hold above the breakout level of 1.349.92, the May 4 peak, to prevent a deeper profit-taking correction in the short-term. Otherwise, expect further correction to 1,345, the previous Friday's closing high, then at 1,335, the June 21 pivot high, and next at 1,325, the 76.4 per cent Fibonacci Retracement (FR) of the 1,349 peak to the 1,243 trough. As such, expect profit-taking pressure on blue chips while trading momentum should stay focused on low-priced lower liners on active rotational plays.


The subject above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.