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Thursday, May 20, 2010

FBM KLCI - to test critical support


Stocks on Bursa Malaysia ended broadly lower yesterday in line with losses in regional markets, taking cue from overnight’s heavy losses on Wall Street and the European markets amid fresh worries over the debt crisis in Euro zone.

The FBM KLCI ended 21.94 points or 1.65% lower at 1308.23, the largest single day drop since January 2010. It had opened 1.12 points lower at 1,329.05 with selling pressure intensifying as the day progressed. The sharp drop of RM1.02 or 5.8% in PPB share have further dampened the market sentiments. Losers overwhelmed gainers by 689 to 135 while 175 counters were unchanged. Turnover was slightly higher at 781 million shares worth RM1.403 billion from 690 million shares worth RM1.144 billion the day before.

Chart wise, the FBM KLCI formed a bearish long black candlestick that closed near the low of the day. This indicated heavy selling pressure when coupled with an increase in volume. The key index is currently resting on the support at 1308, and judging from the strong down move, it might continue its down move to test the critical psychological support level at 1300.

MACD continued its slide southward and has just crossed the zero-line, indicating the end of the bull move since March. RSI(14) at 33 has moved into the bearish zone, and is expected to slide down further. Stochastic at 31 continued to slide downward, indicating the pickup in downward momentum. Signals from the indicators point towards more weaknesses to come for the benchmark index.

The FBM KLCI has now closed below the 5, 10, 30 and 60-day moving averages (MA), it might continue its down move to test the longer term 120-day MA which is now at 1297. The long term 200-day MA is currently at 1265.

In view of the relatively bearish outlook in the global market with the Euro zone debt woes still unsettled, there could be more down side to come for the FBM KLCI.

Overnight, DJIA closed 66.58 points or 0.63% lower at 10,444.37

Today, the FBM KLCI is likely to trade within a range of 1280 to 1321.

This week's expected range: 1290 – 1361
Today’s expected range: 1280 – 1321

Resistance: 1312, 1315, 1321
Support: 1280, 1292, 1300

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