Stock Index Chart Patterns – Jakarta Composite, Singapore Straits Times, Malaysia KLCI – Mar 09, ‘12

A month ago, the chart patterns of the Jakarta Composite, Singapore Straits Times and Malaysia KLCI indices were looking bullish, after recovering well from bear attacks. The bulls have been trying hard to regain control and momentum. But the bears are still reluctant to give up ground. In the process, some interesting chart patterns have been forming.

Jakarta Composite Index Chart

The Jakarta Composite index never entered a bear market technically. The 50 day EMA had bounced off the 200 day EMA back in Oct ‘11, and has been moving up since. After a sharp drop below the 200 day EMA and an equally sharp recovery, the index has been trading within an upward-sloping channel for the past four months.

The interesting thing to note is that the index faced strong resistance from the 4030 level, where it had earlier faced resistance in Jul, Aug and Sep ‘11. As a result, the index has not been able to make any headway for the last two months – though it is trading above its rising 200 day EMA and is technically in a bull market.

The technical indicators are mildly bullish. The MACD is barely positive and has merged with its signal line. The ROC has crossed above its 10 day MA into positive territory, but appears unable to decide which direction it wants to go. The RSI is resting at its mid-point. The slow stochastic has dropped from its overbought zone.

The bulls still have some work left to be able to test the Aug ‘11 top of 4196. 

Singapore Straits Times Index Chart

The Singapore Straits Times index climbed smoothly above all three EMAs. The ‘golden cross’ of the 50 day EMA above the 200 day EMA (marked by light blue oval) technically confirmed a return to a bull market. But the lower edge of the gap (at 3030 level) formed in Aug ‘11 is providing strong resistance to the bull rally.

After a short correction down to its rising 50 day EMA, the index has bounced up smartly. But the technical indicators are yet to turn bullish. The MACD is still positive, but has made a bearish ‘inverted saucer’ pattern and is falling below its signal line. The ROC has dropped into negative territory. The RSI is below its 50% level. The slow stochastic bounced up from the edge of its oversold zone, but is below its 50% level.

The bulls need to concentrate their efforts on closing the Aug ‘11 gap before they can hope to regain control.

Malaysia KLCI Index Chart

The Malaysia KLCI index chart is clearly trending up in a bull market, and looks the most bullish of the three indices. After coming within two points of its Jul ‘11 top of 1597, the KLCI index had to beat a slight retreat. Will the brief setback turn into a correction?

The technical indicators are suggesting the possibility. Volumes have reduced considerably and all four indicators touched lower tops (marked by blue arrows) as the index rose to test its previous top. The combined negative divergences may pull the index down some more.

Note that all three EMAs are rising in tandem and the KLCI is trading above them. That is a clear sign of a bull market. Do not make the mistake of shorting a rising index. Use any dips to add.

Bottomline? The Asian index chart patterns are back in bull markets. The bears haven’t given up the fight, but are slowly losing ground. Once the nearby resistance levels are overcome, the bulls will regain complete control. Add the dips and maintain trailing stop-losses.

Stock Index Chart Patterns – Jakarta Composite, Singapore Straits Times, Malaysia KLCI – Feb 10, ‘12

It has been almost two months since the Asian index chart patterns were last analysed, and it is quite interesting to see how they have fared during the global liquidity-led rally since then.

Jakarta Composite Index Chart

The Jakarta Composite index had been one of the best performers in 2011. Despite the sharp correction during Aug and Sep ‘11, the index did not technically enter a bear market – as can be seen from the behaviour of the 50 day EMA, which bounced off the 200 day EMA and started rising again. The ‘death cross’ that confirms a bear market never happened.

But the rally seems to have run into strong headwinds. The index has dropped to its 50 day EMA, and may fall some more. The technical indicators are looking bearish. The MACD is positive, but falling below its signal line. The ROC is below its 10 day MA and has dropped into negative territory. The RSI and the slow stochastic are sliding and are below their 50% levels.

Singapore Straits Times Index Chart

The Singapore Straits Times index technically fell into a bear market in Aug ‘11, as confirmed by the ‘death cross’ of the 50 day EMA below the 200 day EMA. The index has recovered smartly by rising above its 200 day EMA on strong volume support and formed a bullish pattern of higher tops and higher bottoms, but the 50 day EMA is still below the 200 day EMA. The big gap formed in Aug ‘11 hasn’t been filled yet, and may provide resistance to the rally.

The technical indicators are beginning to correct from overbought conditions. The MACD is positive and above its signal line, but starting to turn down. The ROC has dropped below its 10 day MA, which has made a bearish rounding top pattern. Both the RSI and the slow stochastic are in their overbought zones, but starting to slip down.

Malaysia KLCI Index Chart

The Malaysia KLCI index is technically back in a bull market. The ‘golden cross’ of the 50 day EMA above the 200 day EMA has confirmed that. After spending the month of Jan ‘12 in a rectangular sideways consolidation, the index broke out upwards on a rapid increase in volumes and filled the gap formed in Aug ‘11.

The MACD is positive and above its signal line. The ROC is above its 10 day MA in the positive zone, but turning down. Both the RSI and the slow stochastic are in their overbought zones. The rally may still have some steam left in it.

Bottomline? Strong liquidity-driven rallies have changed the technical complexion of the Asian index chart patterns. The bulls have gained the upper hand, but the bears are not yet out of the picture and may make a last ditch effort to turn around their fortunes. Use any dips to buy selectively.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Jan 6 ‘12

The chart patterns of the Asian indices, last analysed three weeks back, are showing clearly diverging moves. The Hang Seng index is moving sideways in a bear market; the Straits Times index is sliding down in a bear market; the KLCI Malaysia index is climbing up in a bull market.

Hang Seng Index Chart

Since touching an intermediate top at 20173 in Nov ‘11, the Hang Seng index has been consolidating sideways within a symmetrical triangle pattern. The index is trading well below its falling 200 day EMA, so the logical break out of the triangle should be downwards. But triangles can be unpredictable. The index may break out upwards or continue to trade sideways.

The technical indicators are bullish, but showing signs of weakness. The MACD is above its signal line and trying to enter the positive zone. The ROC is positive and above its 10 day MA, but turning down. The RSI is above its 50% level, but its upward movement has stalled. The slow stochastic has dropped down from its overbought zone.

A break below the triangle could lead to a test of the Oct ‘11 low.

Singapore Straits Times Index Chart

The Singapore Straits Times index is in a bear market, and has been trading within a downward-sloping channel for the past couple of months. Note the falling volumes, which is typical in down trends.

The technical indicators are giving contrasting signals. The MACD is rising above its isgnal line, but is still in negative territory. The ROC is positive and above its 10 day MA, but has turned around sharply. The RSI has climbed towards its overbought zone. The slow stochastic has already entered its overbought zone.

The index may make another attempt to cross above the downward channel. Whether it will be successful or not is a moot point.

Malaysia KLCI Index Chart

The KLCI Malaysia index appears to have shaken off the bears as it climbed above all three EMAs. The index is trading within an upward-sloping channel. The 20 day EMA has crossed above the 200 day EMA. The 50 day EMA is all set to follow suit – the ‘golden cross’ will confirm a return to a bull market.

The bears have not been vanquished yet. Note the progressively lower volume peaks as the index has moved up. There are negative divergences visible in the MACD and ROC, which failed to touch higher tops with the index. The technical indicators are correcting from overbought conditions.

A drop to the lower edge of the channel is a possibility, but the up trend may not get reversed.

Bottomline? The three Asian index chart patterns are moving in three different directions. The Hang Seng index is consolidating within a triangle; await the break out. The Singapore Straits Times index is in a down trend; sell the rallies. The KLCI Malaysia index is in an up trend; buy the dips.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Dec 16 ‘11

The Asian stock indices were in the middle of rallies two weeks ago, and had moved above their respective resistance levels. But the rallies didn’t look convincing, and investors were warned that bears may use the rallies to sell. That is exactly what they did.

Hang Seng Index Chart

The Hang Seng index chart closed 6 straight sessions above its 50 day EMA, but failed to move much higher. Eventually, it dropped and closed below both the 50 day and 20 day EMAs. The only saving grace for the bulls is that the Nov ‘11 low of 17613 has held so far. But may not be for long. Once the index drops below its Nov ‘11 low, a bearish pattern of lower tops and lower bottoms will get formed. The Oct ‘11 low of 16170 will then be under threat of being tested and broken.

The technical indicators are looking bearish. The MACD has crossed below its signal line in negative territory. The ROC is also negative, and below its 10 day MA. The RSI is just above its 50% level, but has started sliding down. The slow stochastic has fallen sharply below its 50% level and is about to enter its oversold zone.

The Hang Seng index is in a bear market. All rallies are providing selling opportunities to bears. There are no signs of a bottom formation as yet.

Singapore Straits Times Index Chart

The Singapore Straits Times index is looking rather weak. It managed to close above its falling 50 day EMA on four occasions before falling well below its 50 day and 20 day EMAs. The index dropped below its Nov ‘11 intra-day low of 2644 – thereby forming a bearish pattern of lower tops and lower bottoms.

The technical indicators are all bearish. The MACD is negative and falling below its signal line. The ROC is negative and below its 10 day MA. The RSI failed to move above its 50% level and has started to fall. The slow stochastic has dropped into its oversold zone.

The Oct ‘11 low of 2522 may be tested and broken soon.

Malaysia KLCI Index Chart

The Malaysis KLCI index has been in a bull rally since it touched an intra-day low of 1311 in Sep ‘11. Note the higher tops and higher bottoms touched during the rally. But the volume peaks are moving lower – indicating that the rally is losing strength. All four technical indicators are showing negative divergences – touching lower tops in Dec ‘11 as the index touched a higher top. The index has dropped below its slowly sliding 200 day EMA, and is technically in a bear market.

The technical indicators are weakening but haven’t turned bearish yet. The MACD has slipped below its signal line but is still positive. The ROC has dropped below its 10 day MA into negative territory. The RSI is rising above its 50% level. The slow stochastic has fallen just below its 50% level.

The bulls appear to be fighting hard, but the bears are slowly regaining control.

Bottomline? Counter-trend rallies in the Asian index charts appear to have ended. The Hang Seng and the Straits Times indices are in bear markets. The Malaysia KLCI index is desperately struggling to extricate itself from a bear grip. There is unlikely to be a quick end to the bear markets. Stay in cash.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Dec 2 ‘11

Two weeks back, the chart patterns of the Asian stock indices were in bear grips after a spirited rally during Oct ‘11 that raised prospects of trend reversals. Hopes of a resolution of the Eurozone debt crisis had triggered the rally. Realisation dawned that the funding required for bailing out some of the beleaguered nations may not be readily forthcoming.

Another rally started this week. The US decided to offer dollar loans under less stringent conditions to the Eurozone nations. That raised hopes of cobbling together the necessary bail-out fund. Short covering helped the cause of the mauled bulls. Will the rallies continue or fizzle out?

Hang Seng Index Chart

The Hang Seng index chart had dropped to a low of 17613 a week ago. The technical indicators indicated oversold conditions, so a brief pullback was on the cards. The news of monetary easing in China and the likely availability of US dollars triggered a gap up jump above its 20 day and 50 day EMAs on good volume support.

Note that the index is trading below its recent (Oct ‘11 and Nov ‘11) tops, and well below its falling 200 day EMA. It is technically in a bear market. Even if the current rally takes the Hang Seng above the 200 day EMA, bears are unlikely to give up their control.

The technical indicators are turning bullish, and hinting at a continuation of the rally next week. The MACD has just crossed above the signal line in negative territory. The ROC has risen sharply above its 10 day MA into positive territory. But such sharp moves do not sustain for long. The RSI climbed out of its oversold zone, but failed to cross its 50% level and turned down. The slow stochastic has climbed vertically out of its oversold zone, and managed to cross its 50% level.

Don’t try to chase the rally. Talk of resolution doesn’t mean actual resolution of a deep-seated debt problem in Europe.

Singapore Straits Times Index Chart

The Singapore Straits Times index has been following the footsteps of the Hang Seng index of late – including the gap-up jump above its 20 day and 50 day EMAs. It is also trading below its recent tops and well below its 200 day EMA. Note today’s volume bar. The index closed 11 points higher than yesterday (Dec 1 ‘11) on half the volume. A bearish sign.

The technical indicators are turning bullish. The MACD is negative but has just crossed above its signal line. The ROC has risen too sharply above its 10 day MA into the positive zone. The RSI has turned down before reaching its 50% level. The slow stochastic has just about managed to climb above the 50% level.

The rally may provide the bears with another selling opportunity.

Malaysia KLCI Index Chart

The Malaysia KLCI index seems to be extricating itself from the bear’s grip. It rose above its 200 day EMA and its recent tops to its highest level in more than 3 months. Note that the rally has been accompanied by rising volumes, and the index has formed a bullish pattern of higher tops and higher bottoms.

Does that indicate a change of trend? Not yet. The 20 day EMA and the 50 day EMA need to cross above the 200 day EMA; the 30 point gap (between 1509 and 1539) has to be filled; and the KLCI has to breach the Jul ‘11 top of 1584. The bears won’t give up the fight that easily. Today’s trading bar indicates bull’s are hesitating – the index opened and closed at almost the same level on a high volume day.

The technical indicators are bullish. The MACD has crossed above its signal line in positive territory. The ROC has risen above its 10 day MA into positive zone. The RSI has moved above its 50% level. The slow stochastic has reached the edge of its overbought zone.

Bottomline? The Asian index chart patterns have started counter-trend rallies once again. The Hang Seng and the Straits Times indices are still in bear markets. The KLCI is trying to re-enter a bull market. Next week’s trading should be interesting. Bears may become active again. Conserve your cash till a clearer picture emerges.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Nov 18 ‘11

The sharp bear market rallies on the Asian index chart patterns are clearly over, and the bears are regaining their control with a vengeance. Three weeks back, the strong upward momentum on the indices, backed by good volumes, had hinted at possible trend reversals. Those hopes have been belied.

Hang Seng Index Chart

The big gap in the Hang Seng chart – marked by the blue dotted rectangle – remains unfilled. The 200 day EMA has fallen below the gap. The two together are likely to provide strong resistance to any up moves in the near future.

Note that the 20 day EMA became entangled with the 50 day EMA, but failed to cross above it. The Hang Seng index is again trading below all three EMAs after spending some time above the 50 day EMA, and is technically in a bear market.

All four technical indicators have turned bearish. The MACD is below its signal line, and about to drop into the negative zone. The ROC is below its 10 day MA, and both are falling in negative territory. The RSI is ready to enter its oversold zone. The slow stochastic has already done so. A test of the Oct ‘11 low of 16170 is a distinct possibility.

Singapore Straits Times Index Chart

There are two gaps on the Straits Times index chart – marked by dotted rectangles – which remain unfilled, and the 200 day EMA has slid below both gaps. Note how the two rallies in Aug ‘11 and Oct ‘11 stopped short of the lower (smaller) gap.

Like on the Hang Seng chart, the 20 day EMA failed to cross above the 50 day EMA despite the STI spending several days above the medium-term moving average. The index is trading below all three EMAs and is in a bear market.

The technical indicators are looking bearish. The MACD is still positive, but is falling below its signal line. The ROC is below its 10 day MA, and inside negative territory. The RSI has dropped to the edge of its oversold zone. The slow stochastic has entered the oversold zone. The Oct ‘11 low of 2522 may be tested.

Malaysia KLCI Index Chart

The gap on the KLSE index chart formed well above the 200 day EMA, and remains unfilled. The index made a valiant effort to cross above the long-term moving average, but failed to do so convincingly despite strong volume support. The index retraced almost 64% of its fall from the Jul ‘11 top of 1597 to the Sep ‘11 bottom of 1311, and the 20 day EMA crossed above the 50 day EMA.

But the last two days’ selling by the bears seems to have undone all the good work by the bulls. The technical indicators are turning bearish, which means a deeper correction is likely. The MACD is positive, but has crossed below its signal line. The ROC has entered the negative zone, and is below its falling 10 day MA. The RSI and the slow stochastic have fallen sharply below their 50% levels. The index is trading below all three EMAs and is technically in a bear market.

Bottomline? The Asian index chart patterns have returned to their bear markets, after sharp counter-trend rallies last month raised the prospect of trend reversals. All rallies and up moves are being used by bears as selling opportunities. Time to conserve cash. A long winter is ahead, but the bears are not in a hibernating mood.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Aug 19 ‘11

Two weeks back, downward gaps occurred in the Hang Seng, Straits Times and KLCI chart patterns. Since the gaps were below support levels and accompanied by strong volumes, they were ‘breakaway’ gaps – signalling deeper corrections. I had suggested that investors should not try to be brave, and should sit out the corrections. Fortunately, the suggestion turned out to be judicious and timely.

Hang Seng Index Chart

The Hang Seng index chart dropped sharply on rising volumes to an intra-day low of 18868 on Aug 9 ‘11. Such sharp falls are usually followed by upward bounces, which are used by the bears to sell. The index couldn’t even reach its rapidly falling 20 day EMA, before heading downwards. Note that volumes reduced during the few days of rally, indicating that the rally would be short-lived. Today’s gap-down day on higher volumes has put paid to any lingering hopes of recovery by the bulls.

The technical indicators are bearish. The ROC crossing above its 10 day MA is a slight positive. The low of 18868 was a ‘panic bottom’, which means it is unlikely to hold. If you are still holding on, brace yourself for another 1000 point fall.

Singapore Straits Times Index Chart

The Singapore Straits Times index chart has two gaps – as if one wasn’t bad enough! The sharp fall on high volumes was followed by a ‘dead cat bounce’, which failed to prevent the ‘death cross’ of the 50 day EMA below the 200 day EMA. Today’s gap-down day on a volume spike means that the bears are taking complete control.

All four technical indicators are bearish, to the point of being oversold. That doesn’t mean that they can’t remain oversold for a while. The index has entered a strong support zone between 2700 and 2740. If it drops below 2700, the next support level is at 2430.

Malaysia KLCI Index Chart

The Malaysia KLCI index has exhibited a classic break down and pullback pattern. The drop below the support of the 200 day EMA was accompanied by a sharp rise in volumes, which means that the support would turn into a strong resistance. And so it did, when the index bounced up from its ‘panic bottom’ of 1423 (touched on Aug 9 ‘11).

The upward bounce led to the ROC crossing above its 10 day MA and the slow stochastic climbing above its 50% level. But the MACD failed to cross above its signal line and the RSI has slipped back into its oversold zone. The 50 day EMA is still 23 points or so above the 200 day EMA, but the ‘death cross’ appears inevitable. Time to head for the exit door.

Bottomline? The chart patterns of Asian indices bounced up from ‘panic bottoms’, but the worst isn’t over. Sentiments have taken a huge hit, and the FIIs are leaving in droves. Await lower levels to re-enter.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Aug 05 ‘11

Asian indices got hit by a ‘Black Friday’. The apparent reason for the high volume selling was the big sell-off in the US markets on Thu. Aug 4 ‘11. Such reasons are put forth to try and explain the unexplainable. Some times a market just gets tired and falls off due to its own weight.

Hang Seng Index Chart

In last month’s update of the Hang Seng index chart pattern, I had observed that the index was in trouble as it had dropped below the downward sloping channel. The ‘death cross’ of the 50 day EMA below the 200 day EMA meant that the index had fallen into a bear market. Investors were advised to book profits on any attempt by the index to cross above the 200 day EMA.

The index made two unsuccessful attempts to climb above the 200 day EMA. Today’s gap-down day below the channel, followed by a close below the 21000 level on strong volumes was the culmination of a 9 months long down trend. All four technical indicators are bearish, which means any bounce up is going to be met with more selling. Those who are still invested can use any bounce towards the lower edge of the channel to exit.

Singapore Straits Times Index Chart

The technical indicators of the Straits Times index chart had pointed to a likely break out above the blue down trend line. But the actual break out happened on volumes that were lower than the volumes just prior to the break out. That was a warning that the break out may be a ‘false’ one.

The pullback – typical after a break out – gapped down below the down trend line but received support from the 200 day EMA. Today’s high volume selling caused a big gap down below the 200 day EMA. The ‘death cross’ hasn’t occurred yet, but it may be just a matter of time. The technical indicators are looking bearish, and the index is likely to test and possibly break the Mar ‘11 low of 2920.

Malaysia KLCI Index Chart

The Malaysia KLCI index chart pattern had broken above the blue down trend line in mid-Jun ‘11. But I had noticed some dark clouds. Note that the moving average of the volume bars do not show any volume surge during the break out. The technical indicators were showing negative divergences – all four failed to reach new highs while the index touched a new peak in Jul ‘11.

The subsequent correction pushed the index below its 20 day and 50 day EMAs, but the index found good support from the down trend line. Today’s selling caused a gap down below the down trend line. Though the index fell below the rising 200 day EMA intra-day, it managed to close above the long-term moving average. The bull market is intact, but the technical indicators are bearish. A drop below the long-term support level of 1475 can cause a much deeper correction.

Bottomline? The Asian indices have suffered serious bear attacks and have fallen in apparent sympathy with the US and Eurozone indices. Technical indicators are pointing to deeper corrections. This isn’t a good time to be brave. Let the corrections run their course.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Jul 08 ‘11

The wheat is getting separated from the chaff in the chart patterns of the Asian stock indices. The Hang Seng index is in real danger of falling into a bear market. The Straits Times index has averted a bear market so far, but is still struggling in a down trend. The KLCI index has broken above its down trend line, as was expected in last month’s post.

Hang Seng Index Chart

The Hang Seng index seems to be in trouble. The index not only dropped below the 200 day EMA last month, but broke below the 8 months long downward-sloping channel. The subsequent sharp bounce re-entered the channel and climbed up to the 200 day EMA, where it is facing resistance.

The bad news for the bulls is that the 50 day EMA has slipped below the 200 day EMA – the dreaded ‘death cross’ that signals a bear market. The technical indicators are looking bullish and showing positive divergences. The MACD is negative, but has risen above the signal line. The ROC is positive and above its 10 day MA. RSI and slow stochastic have entered their overbought zones. ROC, RSI and slow stochastic have reached higher tops, while the index has reached a lower one.

The Hang Seng may make an effort to cross the 200 day EMA next week, which can be an opportunity to book some profits. The drop below the channel is not a good sign for bulls.

Singapore Straits Times Index Chart

A deeper correction and a test of the Mar ‘11 low was expected in last month’s analysis. But the Straits Times index recovered quickly to climb above all three EMAs, before encountering strong resistance form the blue down trend line.

Technical indicators are looking bullish and all four are showing positive divergences – reaching higher tops while the index reached a lower one. Today’s volume uptick is a sign that the index may break above the down trend line next week. Buy on the break out, and add more on any pullback.

Malaysia KLCI Index Chart

The KLCI index tried for several days in June ‘11 before breaking above the blue down trend line. It has reached a new all-time high, but there are some dark clouds on the horizon.

Volumes were not all that great during the break out and the subsequent climb to a new high. A bull market without volume support is suspect. Also note the negative divergences in all four technical indicators, which reached flat or lower tops even as the index rose higher (marked by blue arrows).

A correction down to the blue down-trend line can be expected. That may be a buying opportunity.

Bottomline? The bears are still active in the chart patterns of the Hang Seng and Straits Times indices. The bulls have regained full control of the KLCI index. Buying is not advised till the down-trend lines in the Hang Seng and Straits Times indices are convincingly breached.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Jun 10 ‘11

The chart patterns of the Asian indices are still struggling in down trends. The Hang Seng and Straits Times indices are trading below their rising 200 day EMAs. The Malaysia KLCI index is in better shape, and is ready to break above its (blue) down trend line.

Hang Seng Index Chart

In last month’s analysis, I had written that the Hang Seng ‘may trade for a while longer’ within the downward sloping channel. The index dropped briefly below the 200 day EMA, but didn’t fall down to the lower edge of the channel. A sharp rally above all three EMAs, supported by good volumes, seemed encouraging for the bulls.

Bears stopped the bull charge. High volume selling has pushed the index below the 200 day EMA again. The technical indicators are bearish, suggesting that worse may follow. The MACD has crossed below the signal line in negative territory. The ROC has dropped below its 10 day MA into negative zone. The RSI is falling towards its oversold zone. The slow stochastic has slipped into its oversold zone.

Maintain a strict stop-loss at 21800.

Singapore Straits Times Index Chart

The Singapore Straits Times index oscillated between the down trend line and the 200 day EMA, till it breached the support from the long-term moving average on Fri. Jun 10 ‘11. That is not good news for the bulls.

The technical indicators are bearish, which means a deeper correction is likely. The MACD is below its signal line and has entered the negative zone. The ROC is below its 10 day  MA and has dipped into negative territory. The RSI bounced off the edge of its oversold zone, but is below the 50% level. The slow stochastic has dropped into its oversold zone.

A drop below 3040 could test the Mar ‘11 low.

Malaysia KLCI Index Chart

The technical indicators of the Malaysia KLCI index were looking bullish last month, and I had mentioned the ‘possibility of another test – and even a break – of the down trend line’. The down trend line has held firm so far, despite several attempts by the bulls to breach it. The index is trading above all three EMAs – which is the sign of a bull market.

Bears will not give up the fight as long as the down trend line holds. The rally from the May ‘11 low of 1508 has seen decreasing volumes. The technical indicators are bullish, but showing signs of weakness. The MACD is positive, but touching the signal line. The ROC is barely positive, and has crossed below its 10 day MA. The RSI has risen to its overbought zone. The slow stochastic is above its 50% level.

Buy only on a convincing break above the down trend line. Without strong volume support, any break out may turn out to be a ‘false’ one.

Bottomline? The chart patterns of the Asian indices are struggling in down trends. Of the three, the Hang Seng and Straits Times are showing weakness and may face deeper corrections. The Malaysia KLCI is in a bull market, but facing headwinds. Good time to take some profits off the table.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – May 15 ‘11

In last month’s analysis of the Asian indices, the concluding remarks were:

‘The down trend in the chart pattern of the Hang Seng index appears to have been reversed. The Singapore Straits Times and Malaysia KLCI haven’t quite reversed their down trends yet, but should be able to do so soon enough.’

Looks like ‘soon’ will take a bit longer! All three indices are still in down trends, which is bad news. But the good news is that all three indices are trading above their rising 200 day EMAs, which means technically they are in bull markets.

Hang Seng Index Chart

Last month’s down trend (dotted blue) line had been penetrated from below, but the Hang Seng couldn’t quite get past its Jan ‘11 top. The technical indicators were looking overbought, and I had expected the pullback to the down trend (dotted) line. Instead of bouncing up and resuming the rally, the index dropped down to its 200 day EMA.

The technical indicators are looking bearish, with just a hint of revival. The MACD is below its signal line, and both are in negative territory. The ROC is negative and below its 10 day MA, but trying to move up. The RSI has bounced up from the edge of its oversold zone, but is below the 50% level. The slow stochastic is struggling to emerge from its oversold zone.

The down trend in the Hang Seng index has been re-drawn as a downward-sloping channel, within which it may trade for a while longer.

Singapore Straits Times Index Chart

The Singapore Straits Times index dropped far enough below its 200 day EMA in Mar ‘11 to raise the spectre of a bear market. But the ‘death cross’ of the 50 day EMA below the 200 day EMA – which would have confirmed a bear market - never happened. The subsequent rally rose above all three EMAs, only to face strong resistance from the down trend line.

The technical indicators are less bearish than those of the Hang Seng index, but are giving mixed signals. The MACD is positive, but below its signal line. The ROC is negative but touching its 10 day MA. The RSI has dipped below the 50% level. The slow stochastic has moved above its 50% level.

Of late, the volumes on up days have been greater – a sign of accumulation. However, bulls should remain circumspect till the down trend line is convincingly broken.

Malaysia KLCI Index Chart

The technical indicators were looking overbought in the Malaysia KLCI index chart last month, and a correction to the 50 day EMA was expected. The index dropped a little below the medium-term moving average, only to move up again without coming anywhere close to the 200 day EMA.

The technical indicators are bullish, and there is a possibility of another test – and even a break – of the down trend line. The MACD is just above its signal line, and has entered positive territory. The ROC is barely positive, but above its 10 day MA. The RSI is above the 50% level and rising towards its overbought zone. The slow stochastic has entered its overbought zone.

Bottomline? The chart patterns of the Asian indices are still in their down trends, but are technically in bull markets. This is a good time to reallocate your portfolios by getting out of non-performers and switching to better stocks.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Apr 08 ‘11

In last month’s analysis of chart patterns of the Asian indices, the Hang Seng was trading just below its 200 day EMA; the Straits Times had dropped well below its 200 day EMA and the ‘death cross’ (50 day EMA crossing below the 200 day EMA) seemed imminent; the Malaysia KLCI was trading in a downward sloping channel below its 50 day EMA. Technical indicators were looking bearish, and I concluded that the corrections in the three indices were likely to continue.

Technical analysis deals with probabilities – not certainties. Interpretation of chart patterns is more art than science, as it is based on prior patterns repeating in future. When patterns don’t turn out as per expectations – is it technical analysis that is fallible, or is it the analyst who misinterpreted the patterns? In this case, mea culpa. I failed to observe the positive divergences in the technical indicators.

Hang Seng Index Chart

The Hang Seng index chart embarked on a sharp ‘V’ shaped recovery the very next day after I wrote my bearish post. Note that while the index slipped below the 200 day EMA to touch a lower bottom in Mar ‘11, the ROC made a flat bottom and both the RSI and slow stochastic made higher bottoms (marked with blue arrows). The positive divergences rang a warning bell for a probable trend change – I just didn’t hear it.

The Hang Seng quickly climbed above its 50 day and 200 day EMAs on good volume support, and has broken out above the down trend line joining the Nov ‘10, Jan ‘11 and Mar ‘11 tops. The technical indicators are now signalling an overbought condition, which could lead to a pullback to the down trend line. The 50 day and 200 day EMAs are rising, and the 5 months long correction appears to be over.

Singapore Straits Times Index Chart

The Singapore Straits Times embarked on a sharp ‘V’ shaped recovery that managed to prevent the ‘death cross’. Note that all four technical indicators touched higher bottoms in Mar ‘11 while the index made a lower bottom.

The volume support wasn’t strong enough to propel the index above the down trend line. The technical indicators are looking overbought, and the ROC has already changed direction. A pullback to the 50 day EMA is likely before the down trend line can be convincingly breached.

Malaysia KLCI Index Chart

The Malaysia KLCI index didn’t even get close to its rising 200 day EMA. The correction started two month’s later, and the bull market wasn’t under any threat. The ROC, RSI and slow stochastic were making flat or higher bottoms during the past three months, while the index was touching lower bottoms. The MACD made a bullish rounding-bottom pattern.

After the index moved above its 50 day EMA, there was a rapid up move on a spike in volumes. But instead of testing or crossing its Jan ‘11 peak, the KLCI seems to have run out of breath. The technical indicators are overbought and hinting at a correction. A pullback to the rising 50 day EMA may precede a breach of the down trend line.

Bottomline? The down trend in the chart pattern of the Hang Seng index appears to have been reversed. The Singapore Straits Times and Malaysia KLCI haven’t quite reversed their down trends yet, but should be able to do so soon enough. All three indices are near their previous tops. Part profit booking after the sharp up moves may be a good idea.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Mar 18 ‘11

The previous analysis of Asian stock indices was written three months ago. The Hang Seng and Straits Times indices had formed bearish head-and-shoulders topping patterns, while the KLCI was moving in a downward sloping channel. This is what I had concluded:

‘The chart patterns of the Asian indices are undergoing corrections. The Hang Seng and Straits Times indices may test or even breach their 200 day EMAs. The KLCI looks more bullish and may not face as deep a correction.’

Hang Seng Index Chart

The Hang Seng index chart had formed a head-and-shoulders pattern during Oct-Dec ‘10. But instead of falling further after breaching the ‘neckline’ briefly, it bounced upwards. Note the low volumes during the end-Dec ‘10 bounce up – which was a sign of underlying weakness. Volumes picked up in Jan ‘11. The RSI made a higher top, but it was not supported by the other three indicators.

The Hang Seng started trading in a bearish downward sloping channel and received good support from the rising 200 day EMA during Feb ‘11. It has finally broken down below the long-term moving average on high volumes. All four technical indicators are bearish. The index is all set for a decent correction. Note that the 50 day EMA is falling, but remains well above the 200 day EMA. The ‘death cross’ will confirm a bear market.

Singapore Straits Times Index Chart

The Singapore Straits Times index had also formed a bearish head-and-shoulders pattern during Oct – Dec ‘10, but bounced upwards without penetrating the ‘neckline’. Upward bounces from a support level can be used to add, provided there is volume support. Note the volume bars in end-Dec ‘10 – they were lower than the volumes during the earlier part of the month.

The break down in the Straits Times index, which was one of the better performers among Asian indices in 2010, has been sharper. The index breached the 200 day EMA in Feb ‘11, bounced up to find resistance from the falling 50 day EMA, and has dived below the long-term moving average on strong volumes. The technical indicators are bearish, and another 10% drop from current levels won’t be a surprise. The ‘death cross’ is imminent.

Malaysia KLCI Index Chart

The Malaysia KLCI index, which was looking the strongest of the three indices 3 months back, proved its strength by breaking above the downward sloping channel on strong volumes. It reached a new high in Jan ‘11, but could not sustain there very long.

The index is below its 50 day EMA, and trading in a downward sloping channel once again. However, it has still not tested support from the 200 day EMA. The technical indicators are less bearish. The index may continue to trade within the downward sloping channel for a while.

Bottomline? The chart patterns of the Asian indices are undergoing varying degrees of corrections. Take some profits home, if you haven’t done so already. Technical analysis remains an art, and not a science. The point to note is that once bearish patterns develop, they indicate a sign of weakness – even if that weakness does not lead to an immediate crash. Volumes and technical indicators often act like a window to the unfolding scenario.