The market continued to consolidate for the fourth consecutive trading day after the most recent 5- day winning stretch. So far, the market has been consolidating with marginal losses. In fact, the consolidation phase has been very constructive considering that the market has gained some 85 pts over the last 19 trading days.
Nevertheless, the index is now trading at the steeper uptrend line as is being portrayed in the above daily chart. Should this steep uptrend line be violated, there is a possibility that the market will start to retrace with bigger losses and the current consolidation phase prolong.
Anyhow, whether the steep uptrend line will be taken out or not is not our main concern. The market’s near-term technical outlook will remain bullish as long as it stays above the longer uptrend line stretching from the low in May.
We have been saying the same thing since Monday - that it is logical to expect the index to start consolidating - but the market still has the potential of rallying further without further consolidation despite weakness in the FBM KLCI over the last three sessions. This is because the index is showing no sign of reversing its strong upward momentum. Moreover, the daily RSI still closed below the overbought territory at the 80 pt-level.
Immediate resistance is still seen at last Friday’s high of 1,441.8 pts, followed by the 1,445 pt-level, which is the historic close for the index charted in 2007. The psychological 1,500 pt-level would be the next resistance. To the downside, there is immediate support at the 1,431 pt-level, followed by the 1,422 pt-level.