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Monday, March 14, 2011

FBM KLCI - further consolidation ahead




Stocks on Bursa Malaysia ended sharply lower last Friday on extended selling pressures, triggered by investor concern about the crisis in Libya and the massive earthquake in Japan. The FBM KLCI dropped 21.29 points or 1.4%, to 1,495.62, and week-on-week, the key index fell 26.99 points, or 1.8%, from 1,522.61 the previous Friday. Decliners outnumbered advancers by 678 to 118 while 207 were unchanged. Turnover fell to 1.02 billion shares worth RM1.85 billion from 1.09 billion shares worth RM1.56 billion on Thursday. Weekly volume fell to 5.50 billion shares, valued at RM8.50 billion from 5.84 billion shares valued at RM8.7 billion recorded the previous week.

After registering a huge gain of 2.2% the previous week, the FBM KLCI opened last Monday on a weak note, falling 1.27 points to 1,521.34 due to an apparent profit-taking, spooked by geopolitical uncertainty, and ended Monday at 1,515.74, down 6.87 points. On Tuesday, the FBM KLCI rebounded to close 1.92 points higher at 1,517.66 despite a weaker close on Wall Street overnight. The key index continued to rise another 6.03 points to 1,523.69 on Wednesday, taking cue from strong overseas markets, and increased interest on sectors related to the Economic Transformation Programme (ETP) initiatives. In the absence of compelling news on the horizon, the key index retraced 6.78 points to 1,516.91 on Thursday. On Friday, the FBM KLCI shed a further 21.29 points to 1,495.62 on follow-through liquidation.

On the weekly chart, the FBM KLCI formed a bearish Harami candlestick pattern, which is a reversal pattern, and hence, the key index is likely to continue with its correction and consolidation process this week. In fact, the FBM KLCI has been in the consolidation for the last four to five weeks trading within a range of 1,474 to 1,529, and might continue to do so. The key index is now below its 5, 10 and 20-week moving averages (MA), but was supported by the 30-week MA which is currently at 1,494, and a close below this level on the weekly chart is likely to see the key index sliding further southward.

On the daily chart, the FBM KLCI has again fallen back into its downtrend channel, and closed below the short, medium, and the important 120-day long term MA, signaling a resumption of the downtrend. The critical support level for the FBM KLCI this week will be the 1,474 level. If this level could not be defended, there is a high likelihood that the key index will slip further downward to test the 1,450 support level.

Weekly MACD has resumed its downward slide after a slow down last, as shown by the weekly histogram. Daily MACD has hooked downward after rising for a week, signaling the resumption of the bearish momentum, and confirming our view that the rise of the key index could be just a technical rebound, as mentioned in previous analysis.

Weekly RSI (14) has hooked downward, fell from the previous week’s reading of 57.3 to 51.6, moving into the neutral zone, and reflecting the consolidation. Daily RSI (14) has fell drastically to 41.3 from 50.5, signaling the key index has turned bearish on the daily chart.

Weekly Stochastic has again hooked downward, and is at 27.6, signaling the continuation of the down cycle. Daily Stochastic has crossed below its slow stochastic line and is at 68.5, signaling the end of the short term up cycle triggered by the technical rebound, and the beginning of another down cycle.

Readings from the technical indicators on both the weekly and daily charts are pointing towards a bearish outlook, and hence, the FBM KLCI is likely to continue with its correction and consolidation process.

As the FBM KLCI is currently closing below its short, medium and long term MAs, the trend is down. Immediate overhead resistance zone is at 1,509 to 1,530, while the immediate downside support zone is at 1,489 to 1,474.

Last Friday, the Dow rebounded to gain +59.79 points or +0.50% to close at 12,044.40. This week, the FBM KLCI is likely to further consolidate and may trade within a range of 1,453 to 1,537, and for today it is likely to trade within a range of 1,475 to 1,515.

This week's expected range: 1453 – 1537
Today’s expected range: 1475 – 1515

Resistance: 1499, 1505, 1515
Support: 1475, 1484, 1490

1 comment:

rajabrooke said...

glad to have found a techincal based site on the malaysian mkt-keep up the good work