Stocks on Bursa Malaysia ended broadly higher last week despite Raya holiday mood and the Malaysia Day holiday on last Thursday with the benchmark index continuously charting new high for the year. The FBM KLCI rose another 29.19 points or 2.03%, week-on-week, to close at 1466.97 on last Friday after hitting an intra-week high of 1479.59, as overall market sentiments weakened on Friday due to profit-taking activities. Weekly turnover rose to 3.575 billion shares worth RM7.460 billion from 2.442 billion shares worth RM4.493 billion the previous week.
The benchmark FBM KLCI opened last Monday on a positive note with an up gap of 1.48 points at 1439.26 which became the intra-week low and traded higher to close at 1456.96, advancing 19.18 points. The key index continued its bullish momentum on Tuesday to make another strong gain of 17.48 points to close at 1474.44, a record close for the year which was last seen 32 months ago in January 2008. It took a breather on last Wednesday when it ended slightly lower on mild profit-taking to close 1.49 points lower at 1472.95. Bursa Malaysia was closed last Thursday for Malaysia Day celebration, and on Friday, the benchmark index opened on a positive note to touch the intra-week high of 1479.59 before buying momentum fizzled out as investors lock-in profits after recent sharp gains ahead of the weekend to close the week at 1466.97, losing 5.97 points from Wednesday’s close.
On the weekly chart, the FBM KLCI formed a bullish white candlestick which indicates a continuation of the weekly upward trend. On the daily chart, it however, formed a bearish black inverted-hammer candlestick on last Friday, which is a top reversal signal. Its formation confirmed the possible reversal signal indicated by the Doji candlestick formed last Wednesday. The key index may continue to correct or consolidate in the coming week; nevertheless, a brief or shallow correction is expected as the undertone of the market still remained bullish. Immediate support zone is expected at 1449 to 1461 provided by the very short term 5-day moving average (MA) at 1461 and the short term 10-day MA at 1449. Overhead resistance zone is at 1480 to 1500.
Weekly MACD continued to climb higher, indicating a strong medium term upward momentum for the FBM KLCI. Daily MACD, however, has tapered off, as shown by its shorter histogram, indicating a loss in the daily upward momentum. Weekly RSI(14) at 79.6 is in a very bullish state, nonetheless, is entering the overbought zone. Daily RSI(14) at 79.3 continued to move lower from the reading of 86.4 charted on Tuesday, reflecting the current correction. It, however, is still in the short term overbought zone, hence, is expected to further correct downward. Weekly Stochastic at 95.6 continued to move lower and has crossed below its weekly slow Stochastic, and daily Stochastic at 94 has also crossed below its slow Stochastic, indicating possible further downward correction. Signals from the indicators are telling an overbought situation for the FBM KLCI, a pullback is imminent.
The underlying uptrend of the FBM KLCI remained bullish as indicated by the short, medium and longer term moving averages that are all pointing northeast. Hence, any correction or pullback in the key index is expected to be shallow, and should be viewed as an opportunity to accumulate quality shares at lower price level, as the index is expected to move higher after the correction. Immediate support zone is at 1449 to 1461, while overhead resistance zone is at 1480 to 1500.
The overall market is expected to trade higher this week amid anticipation of positive news from the key announcement by the government on the details of the Economic Transformation Program (ETP) and the Entry Point Projects (EPPs). Besides that, there is also Budget 2011 coming up on Oct 15, 2010, which may come up with more goodies. So, for the next few weeks there are enough positive impetus to spur the market to move upwards.
The Dow rose +13.02 points or +0.12% higher to close at 10,607.85 on last Friday. This week, the FBM KLCI may trade within a range of 1403 to 1520, and for today it is likely to trade within a range of 1450 to 1492.
This week's expected range: 1403 – 1520
Today’s expected range: 1450 – 1492
Resistance: 1475, 1484, 1492
Support: 1450, 1458, 1462
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