Stocks on Bursa Malaysia ended last week on a positive note with sentiment boosted by gains on Wall Street and confidence over economic growth. The FBM KLCI rose by 8.28 points or 0.63% to close at 1,324.31 on last Friday, lifted by gains on banking stocks following the increase in Overnight Policy Rate by 25 basis points to 2.75% on last Thursday. The key index gained 16.87 points or 1.29%, week-on-week, to 1,324.31 compared with 1,307.44 the previous Friday. Weekly turnover decreased to 2.808 billion shares valued at RM5.018 billion compared with 3.024 billion shares worth RM4.822 billion the previous week.
The FBM KLCI opened last Monday on a weak note and traded lower. It hit the intra-week low of 1294.37 on Tuesday, but reversed strongly in late afternoon to close at the day’s high. From there, the key index continued to move higher for the next three days to touch the intra-week high of 1327.27 on Friday, nonetheless, profit-taking activities set-in which trimmed gains, and the key index finally settled the week at 1324.31. On the weekly chart, the benchmark index formed a bullish piercing-line candlestick, which is a bottom reversal pattern. With this, the key index is expected to move higher to possibly re-test the 1350 psychological resistance level. It will, however, encounter strong resistance at the 1330 to 1350 zone. Immediate support zone lies at 1305 to 1315 levels.
Weekly MACD has stopped falling and turned flat with the histogram turning shorter, this indicates that the medium term downward momentum is waning off. On the daily chart, the daily MACD has made a golden-cross, signifying the short term momentum has turned positive. Weekly RSI(14) at 57.5 has hooked up, and is moving back into the mildly bullish zone from the neutral zone last week. Daily RSI(14) at 58.3 continued to move higher towards the bullish zone. Weekly Stochastic at 71 continued to move higher, indicating a continuation of the up cycle.
Last week, we mentioned that the FBM KLCI was in the process of forming the bearish Head-and-shoulder chart pattern. If in the coming weeks the key index is able to move higher and break above the 1335 and 1350 levels, then the threat of forming a bearish Head-and-shoulder pattern would be removed.
The FBM KLCI is now staying above all the short, medium and long term moving averages. It will continue to move higher to challenge the higher target levels, with immediate target at 1335 and the following critical target at 1350. If the key index is able to break above the 1350 resistance level, it has a potential to reach 1380.
In view of the rate hike which would help boost bank’s earnings, and given the positive market sentiment, the key index is expected to gain further this week. The Dow gained +59.04 points or +0.58% higher to close last Friday at 10,198.03 for a fourth consecutive days. This week, the FBM KLCI may trade within a range of 1283 to 1360, and for today it is likely to trade within a range of 1311 to 1339.
This week's expected range: 1283 – 1360
Today’s expected range: 1311 – 1339
Resistance: 1329, 1334, 1339
Support: 1311, 1317, 1322
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