Stocks on Bursa Malaysia traded mixed last week with the benchmark index rose for a second consecutive week to close at a new 31-month high while most second and third liners were in correction mode. The FBM KLCI advanced 16.03 points or 1.15%, week-on-week, to 1,411.05, compared with previous week’s closing of 1,395.02, lifted by the encouraging results of the banking sectors, Genting, Axiata and that of Sime Darby. Weekly turnover decreased to 4.02 billion shares worth RM7.55 billion from 4.9 billion shares worth RM7.78 billion the previous week.
The FBM KLCI opened last Monday with an up gap of 4.85 points at 1399.87 and closed the day above the psychological resistance level of 1400 at 1403.15. It continued to close at new high on Tuesday at 1405.77 despite heavy profit-taking activities. Wednesday saw heavy profit-taking activities which sent the key index to close below the 1400 psychological level at 1396.97. However, a strong rebound on Thursday sent the index to close 11.03 points higher at 1,408.00 on renewed buying interest and another 3.05 points to 1,411.05 on follow-through buying on last Friday.
On the weekly chart, the key index formed a bullish short white candlestick which indicates a continuation in buying interest. The smaller candle body as compared with the previous week’s candle indicates a reduction in upward momentum capped by profit-taking activities at levels above 1400. The index is likely to continue its momentum to test the higher resistance zone at 1415 to 1436, and a stronger resistance lies at the 1450 level.
Weekly MACD continued to climb higher, indicating the medium term upward momentum is gaining strength. Daily MACD also continued to climb higher, however, its histogram turned shorter, which is a divergence to the MACD line, and indicates the daily upward momentum is possibly waning off.
Weekly RSI(14) at 73 is higher and indicates that the medium term upward strength is very bullish, nonetheless, has entered the mildly overbought zone. Daily RSI(14) at 76.6 is very bullish, but is in divergence to the price, this indicates a weakening in the upward strength and may forewarn of a possible correction ahead.
Weekly Stochastic at 96.7 continued to move higher, indicates a continuation of the medium term up cycle. Daily Stochastic at 93, however, continued to slide lower and is below its slow stochastic, is also in divergence to the price, indicates a gradual loss in upward strength.
Signals from the indicators indicate that the weekly or medium term momentum and upward strength of the key index is still strong. However, the daily or short term signals are showing a number of divergences, and may forewarn of a possible correction ahead.
The underlying short, medium and long term trend of the FBM KLCI as indicated by its moving averages (MA) are all strongly pointing up, hence, any short term correction maybe well supported by the medium and longer term MAs. Immediate overhead resistances lies at 1415, 1423 and 1436, which was the February 14 2008 peak, Immediate support upon a correction is seen at 1,400, with subsequent support at 1,392, then 1,380, followed by the August 3, pivot high of 1,370.
For the coming holiday-shorten week, the market is likely be range-bound as the release of corporate results has ended, while weak external economic indicators might continue to influence sentiment on the local bourse.
The Dow rose +164.84 points or +1.65% higher to close at 10,150.65 on last Friday. This week, the FBM KLCI may trade within a range of 1370 to 1445, and for today it is likely to trade within a range of 1390 to 1428.
This week's expected range: 1370 – 1445
Today’s expected range: 1390 – 1428
Resistance: 1417, 1423, 1428
Support: 1390, 1396, 1403
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