The KLCI stands for the Kuala Lumpur Composite Index. It is the weighted market value of 30 largest stocks listed on Bursa Malaysia. To name a few, these stocks include Axiata Group Bhd, Malayan Banking Bhd and PETRONAS Gas Bhd. It is the performance summary and often used as a representation of Bursa Malaysia.

The quickest way to determine the price trend of KLCI over the long term is to use the SMA-200.

The SMA-200 stands for the Simple Moving Average of the last 200 trading days. It calculates the average price of the last 200 days of the KLCI. The average is calculated and updated on a daily basis. This would smoothen out the daily ups & downs in KLCI and thus, forming a meaningful pattern on the long-term trend of the KLCI.

It looks like this:

Source: Marketwatch.com

The actual KLCI line is drawn in blue.

Meanwhile, the SMA-200 of the KLCI is drawn in green.

To Confirm an Uptrend

Source: Marketwatch.com

There are a few observations to make in order to confirm a long-term uptrend in the KLCI. They include:

    1. Both the KLCI and the SMA-200 lines are sloping upwards.
    2. The KLCI line is above the SMA-200 line.
    3. Focus on the Yellow Dots. They are the lowest points of the KLCI. The latter Yellow Dot is higher than the previous Yellow Dot. This symptom is a signal of an uptrend.
    4. Also, we may focus on the Red Circles. They are the highest points of the KLCI. The latter Red Circle is higher than the previous Red Circle. This symptom is also a signal of an uptrend.

Here, we found that the KLCI had moved on an Uptrend from 2011 to Mid-2014.

To Confirm a Downtrend

Source: Marketwatch.com

From the chart above, the KLCI is confirmed to be on a long-term downtrend. This is because:

    1. Both the KLCI and the SMA-200 lines are sloping downwards.
    2. The SMA-200 Line is currently above the KLCI Line.
    3. Focus on the Yellow Dots. They are the lowest points of the KLCI. The latter Yellow Dot is lower than the previous Yellow Dot. This symptom is a signal of a downtrend.
    4. Also, we may focus on the Red Circles. They are the highest points of the KLCI. The latter Red Circle is lower than the previous Red Circle. This symptom is also a signal of a downtrend.

Hence, the KLCI is now moving on a Downtrend

How to Confirm a Switch in Price Trend?

From 2011 to mid-2014, the KLCI continues to have ups and downs despite moving on an overall long-term uptrend.

During the period, the SMA-200 line is also acting like a ‘Support’ Line. Focus on the Yellow Dots. We find that the KLCI would bounce upwards after hitting the SMA-200 line.

The change in price trend happens if the KLCI crosses ‘Below’ the SMA-200 line as pointed by the ‘Red Arrow’. The KLCI may continue to move up and down. However, the overall trend has shifted to a downtrend.

Since mid-2014, the SMA-200 line is now acting like a ‘Resistance’ Line. Focus on the Red Circles. We find that the KLCI would drop downwards after hitting the SMA-200 line.

This is what the KLCI is experiencing today.

Is this a time to panic?

Or, it this a time for jubilee?

Perhaps, this is a great time to search for undervalued stocks as the market continues on a downtrend. Before you invest, you may grab a limited free copy of 13-page ebook on ‘7 Steps You Need to Know to Profit from a Market Crash’.

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This article is written by Ian Tai, Creator of Bursaking, The No.1 Stock Data Fanatic in Malaysia.

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    3 replies to "How to Determine Where the KLCI is Heading?"

    • jason

      hi sir, do u knw how to get market cap data per quarter of top 30 firms in klci ???

    • Francis Leong

      I want my ebook on ‘7 Steps You Need to Know to Profit from a Market Crash’

      • KCLau

        Francis, you can follow the link in the article to get the ebook by Ian.

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