Stocks on Bursa Malaysia ended lower yesterday after an eight-day rally as investors concern that the global economic recovery could be derailed amid dismal economic data in the United States and Europe. The FBM KLCI fell 8.8 points or 0.63% to close at 1396.97 dragged down by losses in Sime Darby and Axiata, after struggling to stay above the 1400 level. Losers overwhelmed gainers by 585 to 186 while 268 counters were unchanged. Turnover was lower at 873 million shares worth RM1.732 billion from Tuesday’s 894 million shares worth RM1.651 billion.
The FBM KLCI opened with a down gap of 2.67 points at 1403.10 and traded lower for the rest of the day. It hit the intra-day low of 1396.41 and managed to rebound to 1401.97 but the bear continued to sell down and pushed the key index to close near the low. Chart-wise, the key index formed a bearish black candlestick which confirms the hangman reversal signal formed on Tuesday.
MACD has tapered off, as shown by the shorter histogram, indicating a slow down in the upward momentum. RSI(14) has dropped to 71.7 from 81.5 a day before, indicating strong reversal strength. Stochastic at 93.6 continued to move lower and has crossed below its slow stochastic line, reflecting the correction mode of the key index. Signals from the indicators indicated that a reversal of the key index has taken place and might further correct downward.
The FBM KLCI is now closing right below the 5-day moving average (MA), and is likely to correct further downward to test the support of the 10-day MA at 1383. Immediate support zone lies at 1370 to 1383 while the overhead resistance is at 1400. The underlying short, medium and long term uptrend, however, remained intact at the moment. Hence, the correction should be viewed as an opportunity to accumulate quality stocks at lower price level.
Overnight, the Dow rebounded +19.61 points or +0.20% higher to close at 10,060.06. Today, the FBM KLCI is likely to trade within a range of 1385 to 1414.
This week's expected range: 1347 – 1436
Today’s expected range: 1385 – 1414
Resistance: 1403, 1408, 1414
Support: 1385, 1391, 1394
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