Stocks on Bursa Malaysia extended losses yesterday as investors continued to fear over the impact of Greece’s debt crisis and the contagion spreading to other countries with high public debts. On top of that, further credit tightening measures by the Chinese government also caused the Shanghai Composite index to tumble as much as 4.1% yesterday. The Nikkei index in Japan tumbled 3.3% upon resumption of trade after the exchange was closed for a three-day holiday.
The FBM KLCI opened lower but managed to climb into the positive territory in the morning session, but selling pressure that surfaced after lunch break sent the benchmark index into the negative territory to close 3.78 points or 0.28% lower at 1331.87. Losers overwhelmed gainers by 644 to 137 while 233 counters were unchanged. Volume traded was slightly higher at 899 million shares worth RM1.578 billion.
Chart wise, the FBM KLCI formed a bearish black spinning-top candlestick which indicates indecision of the benchmark index to move further after a strong rebound the previous day, and re-surfacing of the bears that pushed the index back to the negative territory. The key index however, managed to close above the 1330 support level.
MACD slid down further indicating the pickup in downward momentum. RSI(14) at 49.62 has slipped into the bearish zone, the first time in two month, indicating further weakness is ahead. Stochastic plunged to 54 from 73 the previous day, indicating the pickup in downward strength and the continuation of the down cycle. Signals from the indicators indicate more weaknesses is expected ahead for the FBM KLCI.
The short term trend has turned bearish as the key index is now below the 5, 10, 20 and 30-day moving averages (MA). The medium to longer term trend as represented by the 60 and 120-day MA is still up.
The important support level to watch is the immediate support at 1330 and 1324 levels which have given good support to the key index recently. If these two levels are broken, then, further downside is expected. The next lower support levels lie at 1321, 1312 and 1308.
In view of the 347 points or 3.2% plunge of the Dow Jones Industrial Average (DJIA) overnight, it is expected that the local market will face strong volatility.
Today, the FBM KLCI is likely to trade within a range of 1308 to 1340
This week's expected range: 1307 – 1372
Today’s expected range: 1308 – 1340
Resistance: 1334, 1337, 1340
Support: 1308, 1315, 1321
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