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Tuesday, January 31, 2012

FBM KLCI - beginning of short term downtrend


Stocks on Bursa Malaysia closed mixed yesterday in the absence of promising market leads locally and from abroad, with major US equity indices having closed mixed last Friday. The negative movement on the local bourse was in line with the weaker performance of Asian markets, after the US reported less-than-favourable economic growth data, which hurt investors’ sentiment. The FBM KLCI closed 7.35 points or 0.48% lower at 1,513.55, after opening 1.99 points lower at 1,518.91. Gainers led losers by 460 to 387 while 310 counters were unchanged. Total turnover rose to 2.307 billion shares worth RM1.841 billion from the 2.278 billion shares worth RM1.85 billion transacted last Friday.

The FBM KLCI opened 1.99 points lower at 1,518.91 but rebounded to the intra-day high of 1,523.91 within the first thirty minutes, and profit-taking activity which set in pushed the key index lower for the rest of the day with weak intermittent rebound to settle near the low of the day. Chart wise, the FBM KLCI formed a black inverted hammer candlestick which indicates the bulls were initially strong in attempting to push the key index higher but the bears later surfaced and took control. With the price action yesterday, the FBM KLCI had broken the lower support of the triangle pattern and further down move is expected. On top of that, the key index had also closed below the short term 5, 10 and 20-day SMA, which means the short term correction has started, and the key index is likely to slide lower towards the lower support zone at 1,509 to 1,498.

MACD continued to slide lower with the histogram increased in length southward, indicating an acceleration of the downward momentum. RSI (14) dropped further to 53.1, indicating the short term relative strength has turned weaker and is moving further into the mildly bullish zone. Stochastic also slid lower to 59.5, indicating the weakening of the market strength and continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI has gone into a correction mode, and is likely to slide lower until the oscillators shows signs of reversal.

The FBM KLCI has started to turn downtrend for the short term as the key index is now closing below the short term 5, 10 and 20-day moving averages. The medium and long term trend is however, still up. The FBM KLCI is likely to see good support at the 1,505 to 1,498 support zone provided by the cluster of long term moving averages. With a lack of fresh leads, the index-link counters are likely to further consolidate while the lower liners are likely to continue dominating the active scene as can be seen from the volume which is above the 2 billion shares mark.

Overnight, the Dow fell -6.74 points or -0.05% to close at 12,653.72. Today, the FBM KLCI is likely to trade within a range of 1,497 to 1,536.

This week's expected range: 1507 – 1538
Today’s expected range: 1497 – 1536

Resistance: 1521, 1529, 1536
Support: 1497, 1504, 1509

Stocks to watch: CYPARK, MUDAJYA, KINSTEL, PRESBHD, POS, KIMLUN

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