KLCI Technical Analysis for Week 3 of November 2022

Last week’s prediction according to the technical indicators was for a downward trend. The result of that analysis was that the KLIC market was up by 2.1% for the week, which means there are some learning lessons here. The takeaway from this week is that The KLCI market is expected to be flat for the week and trade range-bound between 1440 to 1470.

Take note of possibilities of stronger-than-expected economic growth data

First of, Malaysia’s GDP for 3Q 2022 came out much stronger-than-expected at 14.2% compared to the consensus of 11.7%. This makes Malaysia the strongest performer in the region with Vietnam second at 13.7%. The KLCI market rose by 1.3% on Friday when GDP news broke out, contributing to more than half the gains of the KLCI market. The signs were already there, industrial production and wholesale & retail trade came out very strong for the months of July to October 2022.

Bollinger band is starting to narrow from a widening trend last week

Bollinger band is starting to narrow slightly at the end of last week, even with the higher stock market performance on Friday. This means that we might be seeing a period where the market could be flat in a certain range. The prediction here is that KLCI for this week could be trading relatively flat at the 1440 to 1470 range, with no major economic news for the week. Since the election will only be held on this Saturday, major movements can be expected next week instead of this week. However, there could be some uncertainties leading up to it as politicians are known to say some outlandish things in the media in the run-up to the election and that could rattle markets.

The moving average line is also indicating relatively flat performance for the week.

The moving average line (blue line on candle stick chart) has been relatively flat from last week, with no indication that it is going in either direction. The previous trend in July and August shows that it might be entering a downtrend, after trending upwards to a flat territory in September 2022. Hence, there is a possibility that there could be a downtrend for this or next week, but for now, the verdict is for it to trade range-bound and flat for the week.

Relative Strength Index continues to be elevated, and at the highest in 3 months.

The relative strength index continues to be at elevated levels at 58.39, but remains below the highest of 65 traded in middle of August 2022. While there seems to be some room for KLCI to go up to 65, this remains unlikely considering that it was not successful at pushing past the 62 level before this even with GDP growth coming out stronger-than-expected. With no significant catalysts for this week, relative strength index is expected to trade between 55 to 60 levels.

While MACD shows an upward trend, the average directional index shows that the trend is not likely to be strong.

The blue line of the MACD touched the signal (red line) line slightly last week, before diverging upwards again indicating an upward trend due to the stronger-than-expected GDP. For now, the MACD still indicates a BUY signal but the average directional index is now trading at below 20 points, indicating that the upward trend does not have strong momentum moving forward. The average directional index has been easing since last week, and the market needs to perform much stronger for a stronger buy signal to emerge. What is crucial here is for the average directional index to trade above the 25 level.

Conclusion: The KLCI market is expected to be flat for the week and trade range-bound between 1440 to 1470.