After closing the month of April on a high note with the FBM KLCI closing at 1346.38, registering a two-year fresh high, stocks on Bursa Malaysia went through a volatile first week for the month of May. Is the market reacting to the axiom “Sell your share in May and go away”? It remained to be seen. However, external factors such as the deepening of the Greece’s sovereign debt problems, continued credit tightening measures imposed by the Chinese government to curb speculation in its property sector has weighed on the performance of the regional markets, and Bursa Malaysia cannot be spared too.
The FBM KLCI started last week with signs of heavy profit-taking when it couldn’t sustain its rise after hitting the intra-week high of 1349.92. The benchmark index went into a correction mode and hit the intra-week low of 1315.63 on last Friday after opening 16 points lower, reacting to the overnight plunge of the Dow on last Thursday, which actually fell as much as 1000 points during the trading session but managed to recover to close 348 points lower. However, the FBM KLCI was quite resilient, bargain-hunting activities actually helped to bring the key index off its low to register a small gain of 1.02 points to close last Friday at 1332.89, when the rest of the world are closing the week in deep red. Week-on-week, the key index posted a loss of 13.49 points, or 1%. Weekly turnover declined to 3.55 billion shares, valued at RM7.014 billion, from previous week's 4.39 billion shares worth RM5.71 billion.
On the weekly chart, the FBM KLCI formed a bearish black candlestick with a long lower shadow which indicates heavy selling pressure when the shadow registered a lower low compared with the previous week’s candlestick. For the first time in an eleven week rally, the key index has closed below its 5-week moving average (MA). If it cannot maintain above the 5-week MA which is now at 1337, it might further correct downward. The immediate support zone now lies at 1315 to 1330, if this zone is breach, then the key index is likely to move downward to test its next lower critical support zone at 1300 to 1308. The overhead resistance remained at 1350, which is not likely to be broken in the immediate term.
Weekly MACD again crossed below its trigger line, reflecting the current correction mode of the benchmark index. Weekly RSI(14) at 65.95 has crossed below the 70 level from its reading of 71 the previous week, indicating weakness in the brewing. Weekly Stochastic at 92 is short term overbought, has hooked down but is still above its slow Stochastic. Signals from the indicators are pointing towards a high possibility of correction in the immediate term.
For the short term, the FBM KLCI is currently below its 5, 10 and 30-day MA, hence it might face some downward selling pressure. The underlying medium and longer term trend, as indicated by the 50, 60, and 120-day MA, nonetheless, is still up. As the longer term trend is still remain up, any short term weakness should be viewed as an opportunity to accumulate quality shares at lower prices
For the coming week, in view of the negative external factors remain unsettled and a lack of fresh leads locally, the FBM KLCI is expected to continue its correction mode, and track the direction of regional bellwether indices. However, the expected improve economic data, and better corporate results may give some buffer to the correction.
As the Dow fell another 139.89 points or 1.33% to close at 10,380.43 on last Friday, the local market is expected to face some volatility today. This week, the FBM KLCI may trade within a range of 1283 to 1367, and for today it is likely to trade within a range of 1308 to 1345.
This week's expected range: 1283 – 1367
Today’s expected range: 1308 – 1345
Resistance: 1337, 1341, 1345
Support: 1308, 1315, 1324
Stock to watch: BJCORP, BJCORP-LC, BJTOTO, MPHB, TANJONG
An update of the stock picks:
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