As indicated by A, the KLCI rebounded 3.21 points on Tuesday after being supported by the Bollinger Middle Band as well as the 869 WinChart Automatic Fibonacci Retracement. This shows that the support for the KLCI is still at 869 WinChart Automatic Fibonacci Retracement followed by the Bollinger Middle Band dynamic support, while the resistance is at 885 WinChart Automatic Fibonacci Retracement.

As shown on the chart above, the Bollinger Bands Width contracted another 10%, suggesting that the KLCI is still consolidating. Generally, the volatility of the KLCI is lower during a contraction of the Bollinger Bands Width.

As indicated by B, total market volume increased 5.2% on Tuesday, with volume still above the 40-day VMA level. This suggests that the market participation is still relatively sufficient. This is an important element if the KLCI should attempt to rally again.

As circled at C, the Stochastic does not decline further after breaking below 70%, this shows that the Stochastic is suggesting a beginning of a technical correction signal, but not a short term bearish signal. Nevertheless, if the Stochastic should return to above 70% level in the near term, the KLCI is expected to resume its short term bullish biased movement.

The contraction of the Bollinger Bands Width suggests that the KLCI is now consolidating while preparing for a new movement. From the Technical Analysis stand point, the best consolidation would be a sideways low volatility movement. If the KLCI should move sideways above 960 level, it is likely to form a higher-low, which is an important bullish reversal signal for the KLCI.

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