As indicated by A, the KLCI formed a Hanging Man candlestick pattern, suggesting a technical correction is likely to take place as the KLCI is over-heated. Despite the KLCI closing above 905 WinChart Automatic Fibonacci Retracement, it has not confirmed a valid break out.

As shown on the chart above, the 14, 21, 31 EMA is still the dynamic support for the KLCI while the T1 uptrend line remains intact.

As indicated by B, total market volume increased another 11.5%. Coupled with the Hanging Man candlestick, the increased of volume actually suggests an increased of selling pressure as investors are taking advantage of the KLCI rally to take profit or break even. Nevertheless, if volume should remain above the 40-day VMA level, it suggests that the market participation is still sufficient to absorb the selling pressure, thus a positive element for the KLCI to sustain its uptrend.

As circled at C, the Stochastic started to retreat after breaking above 90% level, this suggests a possible technical correction for the KLCI. Nevertheless, with the Stochastic still above the 70% level, the market movement for the short term is still bullish biased.

It is rather normal to see some profit taking activities as the KLCI is still testing the important 909 psychological level. Nonetheless, provided that the rising 14, 21, 31 EMA is still supporting the KLCI with volume above the 40-day VMA level, the uptrend for the KLCI is still intact.

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