FBM KLCI - lower with the formation of Hammer candlestick

Stocks on Bursa Malaysia ended lower yesterday on continued selling, as investors were worried over the sustainability of the global economic recovery. The FBM KLCI fell 3.58 points or 0.27% to 1,349.33 after opening 4.19 points lower at 1,348.72. Losers led gainers by 383 to 298 while 261 counters were unchanged. Volume, however, increased to 798 million shares worth RM1.088 billion from 769 million shares worth RM1.169 billion on Wednesday.

The FBM KLCI opened with a down gap of 4.19 points and traded lower to the intra-day low of 1342.07, losing 10.84 points at the worst, on panic selling taking cue from the overnight hefty loss on Wall Street. The key index managed to recover some loss ground in the second half of the day and rebounded to close off high of 1350.20 at 1349.33. The price action of the key index led to the formation of a hammer pattern candlestick, which is a bottoming signal.

As mentioned in previous analysis, the 30-day moving average (MA) provided a strong support to the key index when it rebounded strongly off it. As the key index did not manage to close above the 1350 psychological resistance level, this resistance level will continue to post as a strong resistance to the up move of the key index.

MACD continued to slide lower, indicating the pick up in downward momentum. RSI(14) at 53.3 continued to slide lower into the neutral zone, indicating the continued loss in market strength. Stochastic at 48.2 continued to slide lower and has cross below the mid range indicating a weak market and the down cycle will continue.

For the short term, the FBM KLCI has turned downtrend, while the medium and long term remained in the uptrend. Now that the key index is closing below the critical 1350 psychological level, the next important lower support is at 1340 which coincide with the 30-day MA, if this level could not hold, then the key index might come down to the 1320 level. With the currently weak technical reading, the FBM KLCI is expected to remain in a correction and consolidation mode.

Overnight, the Dow fell -58.88 points or -0.57% to close lower at 10,319.95. Today, the FBM KLCI is likely to trade within a range of 1336 to 1358.

This week's expected range: 1339 – 1383
Today’s expected range: 1336 – 1358

Resistance: 1352, 1355, 1358
Support: 1336, 1339, 1344