Will History Repeat Itself?

Wait-and-See

• On August 9^th, FTSE Bursa Malaysia KLCI Index traded lower by inches to close at 1,671.71, following its first closing above EMA200 in over three months a day earlier.

• From a technical standpoint, the last closing above the 200-day average signals a reversal of the present bearish trend. However, we view the breakout as a premature reversal call given the presence of a twice-tested resistance ahead (black).

• In addition, the retrospective breakouts of EMA200 illustrated that the bullish trend indicated by them was unsustainable and was swiftly vaporised by a retracement from the trendline resistance (black). 

• Therefore, to avoid false breakouts, the reversal signal can only be reinforced by an upward breakout of the trendline resistance (black). Failing which, we recommend to wait for a clearer downward crossover of the MACD oscillator to confirm a resumption of bearish trend.

• Currently, the MACD line is vacillating very close to both the signal line and the zero line, which makes it unable to provide an unambiguous indication of the price direction.

• To sum up, we look out for either an upward breakout of the trendline resistance (black) or a retracement from it to confirm the trend. 

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