Stocks on Bursa Malaysia went into a consolidation mode last week, after the FBM KLCI surged on last Monday in response to China's move to allow more flexibility in the Yuan exchange rate. Week-on-week, the FBM KLCI went up by 8.76 points to close at 1,326.45 on last Friday compared with 1,317.69 the previous Friday. Weekly turnover increased to 3.596 billion shares worth RM5.733 billion, up from 2.731 billion shares valued at RM4.486 billion the previous week.
The benchmark index opened the week with an up gap and hit the intra-week high of 1,335.31 on last Monday, it went into a consolidation mode thereafter due to profit-taking activities. It hit the intra-week low of 1,318.52 on last Wednesday, but rebounded quickly. On Thursday, the key index managed to hit the intra-day high of 1,333.49, but could not sustain the selling pressure and closed at the low of the day. And on last Friday, the key index was trading in a tight range in the negative territory throughout the day, but managed to close marginally higher by 0.58 point or 0.04% at 1,326.45 despite a bearish performance in most regional bourses.
On the weekly chart, the FBM KLCI formed a shooting-star like candlestick, a top reversal signal, which indicates selling pressure and distribution faced by the key index when it enters the resistance zone of 1330 to 1350. Hence, it might further correct downward if there’s no new impetus to support the short term uptrend. On the daily chart, the key index formed a pennant chart pattern, which reflected the correction and consolidation after last Monday’s up move. Technically, to continue the uptrend, the key index need to breakout from the consolidation and move above the recent high of 1335, then, there’s a good chance for it to re-test the 1350 level. On the other hand, if the key index continues to correct downward, then, it might form a head-and-shoulder pattern, which is a longer term top reversal chart pattern, and its formation can be quite bad for the FBM KLCI.
Weekly MACD was up marginally but is still below its weekly trigger-line, and its weekly histogram turned shorter upward, indicating a reduction in the downward momentum but has not fully turned bullish from the weekly perspective. Daily MACD continued to move higher, but its daily histogram turned shorter downward, indicating a reduction in the daily upward momentum. Weekly RSI(14) at 59 continued to move higher towards the bullish zone. Daily RSI(14) at 60 has however, turned flat reflecting the consolidation mode of the key index. The RSI is somehow at the borderline zone. Weekly Stochastic at 65 continued to move higher reflecting the short term technical rebound of the key index, while the daily Stochastic at 85 has crossed below its slow Stochastic and is in the short term overbought zone, and a break below the 80 mark will lead the key index into down cycle.
Currently, the short and longer term trend of the FBM KLCI is heading up, while the medium term trend is likely to be sideways. The benchmark index is now bound on top with a strong overhead resistance zone at 1330 to 1350, while its immediate downside support is at 1300 to 1318.
With no major market impetus, the benchmark FBM KLCI is likely to continue its sideways consolidation mode with a downward bias, and will track the performance of the regional markets.
The Dow closed -8.99 points or -0.09% lower on last Friday at 10,143.81. This week, the FBM KLCI may trade within a range of 1293 to 1352, and for today it is likely to trade within a range of 1318 to 1331.
This week's expected range: 1293 – 1352
Today’s expected range: 1318 – 1331
Resistance: 1328, 1329, 1331
Support: 1318, 1320, 1323
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