Stocks on Bursa Malaysia closed sharply higher last Friday with the benchmark FBM KLCI surging 15.69 points to close at 1299.78, the highest level since January 25, 2010. On a weekly basis, the FBM KLCI gain 29 points or 2.28% from 1270.78 the previous Friday. The week's turnover increased to 4.42 billion shares valued at RM7.636 billion from 2.78 billion shares valued at RM4.98 billion the previous week.
Last week, the market started off on high note, bolstered by announcement of the country's better than expected fourth quarter economic growth of 4.5% last year. However, the market drifted lower on Wednesday and Thursday ahead of Bank Negara Malaysia''s monetary policy committee meeting on Thursday evening. This follows by Thursday’s announcement of an increase in the overnight policy rate (OPR) to 2.25% which was within expectation against the backdrop of an improving economy. Gains in banking stocks, led by Maybank, propelled the market indices.
On the weekly chart, the FBM KLCI formed a bullish white candlestick which staged a breakout from the 1280 resistance level posted by the 10-week moving average. It was mentioned in last week’s report that a break above the 1280 level will lead into a re-test of the 1300 level, in fact, it did. The 10-week MA has all this while supported the bull-run of the FBM KLCI from 840 points, since April, 2009 to current level of 1300. Hence, with the bullish close last week above the 10-week MA, the FBM KLCI may continue to rise further to re-test the high of 1308.52 registered on January 21, 2010, and if successfully break through, it may move on the test the 1340 level in weeks to come.
Weekly MACD has started to curve up with its histogram turning shorter, indicating a pickup in upward momentum of the benchmark index. Weekly RSI(14) at 66.9 continued to move higher in the bullish zone. Weekly Stochastic at 61 has crossed its 50 level, indicating a continuation of the upward strength.
The short term trend is up as indicated by the 5-week MA which has started to curve up, albeit still below the 10-week MA. The medium term trend is sideway, while the underlying long term trend of the FBM KLCI remained up.
With positive expectation on the improving economy and the soon-to-be-unveiled new economic model may provide a strong catalyst for the local stock market.
This week the FBM KLCI is likely to trade within a range of 1260 to 1330, and for today it is likely to trade within a range of 1286 to 1312.
This week's expected range: 1260 – 1330
Today’s expected range: 1286 – 1312
Resistance: 1304, 1308, 1312
Support: 1286, 1293, 1296
Stock to watch: BSTEAD, D&O
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