A correction is a reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index to adjust for an overvaluation. Corrections are generally temporary price declines interrupting an uptrend in the market or an asset.
DEFINITION of ‘Uptrend‘ Describes the price movement of a financial asset when the overall direction is upward. A formal uptrend is when each successive peak and trough is higher than the ones found earlier in the trend.
In our previous post :Malaysia Stock Market Outlook Year 2018: Off to a great start!
We mentioned the historical high for the FBMKLCI stands at 1,896pts from the Year 2014 high and the market will consist of rallies and corrections. The last correction lasted at 1,812pts support and rallied towards 1,880pts high! But yet to hit it’s historical high 1,896pts.
Where does the FBMKLCI stands now?
- Retracing into a correction from 1,880pts high.
- Playing into the ‘sandwich box’ of 1,841pts range to 1,816pts SHALL 1,841pts support is broken down.
- A rebound from the 1,841pts support will bring the index to test it’s historical high of 1,896pts.
- A violation on the 1,841pts support will put the FBMKLCI into the ‘sandwich box’ trading at the range of 1,841-1,816pts.
- As long as the FBMKLCI did not fall out of it’s ‘sandwich box’, the bull run resumes.
As the broad market stocks have fallen into a correction mode for almost 2 weeks, they are mostly oversold. Looking into bargain buy looks lucrative now. As always, avoid downtrend stock and you will do well in Year 2018! (Read back previous post on how to differentiate an uptrend vs downtrend)
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