Share prices on Bursa Malaysia moved into a post-Budget correction mode last week in tandem with the weak performances of Wall Street and rest of regional bourses. Week-on-week, the FBM KLCI declined 23.87 points, or -1.88% to close at 1243.23 on last Friday. Weekly volume was slightly lower at 4.7394 billion shares traded compared with 5.0438 billion shares the previous week. In view of lack of fresh news and four upcoming IPOs that may suck away a substantial amount of liquidity from the market, Bursa Malaysia may continue to consolidate further in the coming week.
On the technical front, the short term weekly trend is still up as indicated by the 10-weeks simple moving average (SMA). The 10-weeks SMA has been providing good support to the current uptrend. Currently the 10-weeks SMA support for the FBM KLCI lies at 1220, not until the index close below the 10-weeks SMA, the trend is still considered intact, and weaknesses are just part of correction and consolidation process after a 430 points run up from 840 point level since late March 2009. The neckline of the Head-and-Shoulder pattern may also provide support at 1210 level.
Weekly MACD has weakened slightly as indicated by the lower histogram, indicating a slowing in momentum. RSI(14) has hook down to 70.4 from 77.7 the previous week. Weekly Stochastic too has hook down to 93.46, as long as it is still above 80, it is just indicating a short term correction is taking place.
Let’s now take a look at the scenario as it is portray on the daily chart.
(FBM KLCI daily, Click on image to enlarge)
On the daily chart, FBM KLCI rebounded on last Friday following a strong rally of 199 points gain overnight of the DJIA on Thursday, October 29. However, the rebound was not convincing as it opened with a gap up of 4.36 points but closed lower than the opening at 1243.23 with a 1.48 points gain, forming a black candle. The price action indicated the bear was in control, taking the opportunity to sell down.
The FBM KLCI has closed below its 10-days SMA indicating a short term correction. The 10-days SMA now at 1256.87 is forming an overhead resistance. However, the 30-days SMA at 1234.10 may provide support to the correction, as it has been for the current uptrend. The underlying longer term trend, i.e. the 60 and 120 days SMA, is still up.
The daily MACD has crossed below its trigger line, and the histogram is negative indicating a correction mode. RSI(14) has come near the 50 line, is now at 54. The RSI 50 level has been providing good support to the current uptrend since late march. However, a break below the RSI 50 mark or 1237 will trigger heavy selling on fear and may bring the index further down. Stochastic has slip below its 50 level, indicating possible further weakness ahead.
As the Dow fell 249 points to close at 9712.73 on last Friday, it may further drag the regional indices down today. Today, the FBM KLCI is expected to trade within the range of 1229 to 1251, with immediate support at 1237, 1234 and 1229. Overhead resistance is expected at 1245, 1247 and 1251.
This week's expected range: 1200 – 1271
Today's expected range: 1229 – 1251
Resistance: 1245, 1247, 1251
Support: 1229, 1234, 1237
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