The stock market made a great start for 2011. The KLCI index is up 54 points for the point, a move of 3.5%. The question is whether this is just the Capricorn effect or is it an indication of better times.
The index is now clinging onto the upper band of the Bollinger charts. And the last 2 days we see 2 black candles and the last black candle looked like a hammer. The appearance of a hammer in an uptrend is usually dangerous as it will point towards short term correction depending on whether the price can stay above the low of the hammer which is in our case at 1572.
Trend wise, the market still has positive momentum. The MACD indicator is safely above its signal line and the ADX indicator is approaching 40 level with +DI above –DI. All these points to a high probability of a continuing uptrend. The Force index is also favouring the bullish investors and traders.
With indicators pointing towards further strength, it will be wise to load up during pull back phase. The support is at 1530 and any pullback towards this region is a good time to pick up some index stocks.