Trader’s Note #98: Another down stroke for KLCI??
Market had a full energy rebound amid US declare to maintain the rate, most of the penny stocks are gaining after so many days of oversold status and index adds in more bull power because of the recovering of TNB after the rumours with 1 MDB.
However, initially we expect the slight flow in of foreign fund after the maintain of interest rate by Federal reserve, but the fact is, there is no flowing in of foreign fund nor any termination of selling to the KLCI component shares. This phenomena shows that the investors are really looks bad on KLCI amid political issues. Although EPF keep buying some of the bluechips but this can only maintain the index from severely down, tragedy take turns to happen and up to the final event, the U.S. interest rate hike, the market will bring down eventually after this announcement, especially the emerging market like KLCI.
On 22nd June, there is a strong rebound taken place, index reverse strongly above 1734 resistance,amid U.S. maintain the interest rate. However, the 1734 cannot hold very well and it violated immediate on the next day, this sets the index in its bearish pace again.
When I am writing this post, KLCI is falling from 1732 all the way down to 1716, this break the short term support point and KLCI is now set to break below 1700 anytime. At such, the put warrants have come into play with this market panic. The index will dip till 1700 point border to wait for the Fitch announcement, if Fitch downgraded the sovereign rating, KLCI will lost its 1700 points instantly.
Put warrants expect to stay strong on Monday, before the Fitch result, that’s the last chance to dispose if traders are not prefer to take on the risk. Put warrant especially KLCI-HG is overheated due to the speculation of Fitch rating, if the result is positive, or not been downgraded, put warrants will going to set into severe correction, so traders have to consider careful the impact of speculate in put warrants although the potential return can be huge.