FBM KLCI sees ‘shooting star’ formation

Written by Chan Tien Hin
Thursday, 22 October 2009 11:28

KUALA LUMPUR: The benchmark stock index, FBM KLCI, may fall after its candle chart showed a “shooting star” formation on Tuesday, signalling a potential end to a rally that lifted the measure to a 17-month high, RHB Research Institute said.

The bearish candlestick pattern “suggests a possible reversal from the recent upswing”, RHB said in a report yesterday morning.

A candlestick chart displays a security’s high, low, open and close for each day, and can signal a reversal of a trend or a continuation.

A “shooting star” candle, a short real body with a long upper shadow, forms on a day when a security that has been rising previously has an open, close and low that are close together and far from the high for the day.

The FBM KLCI rose 0.4% to 1,270.34 as of 10.16am, set for the highest level since May 30, 2008. The measure has gained 45% this year.

The index’s relative strength index has been above 70 for the past six days, the threshold that some investors use as a signal to sell.

After surpassing the 1,250 level, the immediate-term target for the index has been raised to 1,300, RHB said in the report. “Strong support is seen near 1,250,” it said.

‘Shooting star’ formation signals potential end to a rally on Bursa. Photo by Bloomberg

The FBM KLCI failed to stay in positive territory at the close, ending 5.68 points lower at 1,260.06 following a regional trend that was lacking in strong catalysts.

Regionally, the lack of fresh leads and less than rosy pictures from the latest US economic data weighed on markets. China’s Shanghai Composite Index fell 13.86 points to 3,070.58, while Hong Kong’s Hang Seng Index declined 66.85 points to 22,318.11.

Tokyo’s Nikkei 225 slipped 3.45 points to 10,333.39, Singapore’s Straits Times Index was down 18.54 points to 2,692.55 and the Jakarta Composite Index tumbled 25.41 points to 2,476.79. — Bloomberg


This article appeared in The Edge Financial Daily, October 22, 2009.