Stocks on Bursa Malaysia went through a second week of correction taking cue from the weak performances of the US and regional bourses, spurred by worries about sovereign debt woes in the Euro zone and tightening of liquidity in China, on top of the rising unemployment data in the US.
Share prices on Bursa Malaysia ended lower last Friday with the key barometer FBM KLCI falling to its lowest point since November 4 last year to close the first week of February 11.26 points or 0.89% lower at 1247.90, dragged down by losses in heavyweights. Weekly turnover dropped to 3.33 billion shares worth RM4.99 billion from 5.23 billion shares worth RM7.66 billion the previous week.
On the weekly chart, the FBM KLCI formed a bearish black inverted hammer candlestick indicating there might be further downside. The benchmark index has now comes below its 10-week moving average confirming its short term down trend.
Weekly MACD continued its downslide, indicating the weakening of momentum. Weekly RSI at 55 has comes into the neutral zone, and weekly Stochastic at 47 has turned weak. Weaknesses of the indicators indicated that there might be further downside on the key index.
The fact that the index has closed below the psychological support of 1250 on last Friday may trigger further panic selling in the heavyweights.
Immediate support of the FBM KLCI lies at the 1230 to 1244 level. If these two levels are breached, one may see the index sliding further southward. The downside target would be the 1197 to 1200 level which is the 23.6% Fibonacci retracement of the total length from the low of March 2009 to the high of 1308 registered on Jan 21, 2010; and a 38.2% retracement would mean a downside target of 1128.
From the weekly chart perspective, the FBM KLCI is into its correction mode and may continue to further consolidate for the short term. The longer term trend as indicated by the long term moving averages is still up. In fact, one should view the current correction as an opportunity to accumulate quality stocks at lower level. The medium to longer term target for the FBM KLCI of 1350 to 1400 is still intact.
For this week, the FBM KLCI is likely to trade within a range of 1220 to 1288. As for today, it may trade within a range of 1238 to 1258.
This week's expected range: 1220 – 1288
Today’s expected range: 1238 – 1258
Resistance: 1251, 1255, 1258
Support: 1238, 1241, 1245
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