FBM KLCI - a healthy correction

Stocks on Bursa Malaysia ended broadly lower yesterday with the market dragged down by losses registered mainly in heavyweight counters, including PLUS. Continuous losses in most heavyweight counters across the board offset gains in the plantation related stocks. The FBM KLCI fell 9.61 points or 0.61% to 1480.7 after opening higher at 1491.23. Losers outnumbered gainers by 468 to 299 with 298 counters unchanged. Turnover jumped to 1.33 billion shares worth RM1.61 billion from 1.02 billion shares worth RM1.65 billion last Friday.

As expected, the FBM KLCI continued its corrective move southward. The key index opened 1.37 points higher at 1491.23 and climb to the intra-day high of 1494.96 before selling pressure sent it down to the intra-day low of 1478.90, losing 10.96 points at its worst before late bargain hunting lift the key index off low to close at 1480.70. Chart-wise, the key index formed a bearish long black candlestick which indicates sellers were dominant throughout the day. The key index found its support at the 1480 level when it rebounded to close above it. However, the key index is now closing below the 5 and 10-day moving averages (MA), and is expected to slide lower towards the next support level at 1474 provided by the 20-day MA and next at 1467 by the 30-day MA.

MACD continued to slide lower, indicating a pick up in downward momentum. RSI (14) at 60.2 continued its slide downward, and is now at the edge of the mildly bullish zone, indicating the market strength is turning weak. Stochastic at 67.8 has slide below the 80 mark, indicating the continuation of the down cycle. Signals from the indicators are painting a short term bearish outlook, and the key index is likely to further consolidate.

For the short term, the FBM KLCI has started to turn downtrend. However, the medium to longer term uptrend still remain intact. The current correction is viewed as a healthy correction, technically, as the key index should take a breather after rallying upward for almost two months before it plan for its next attack to the level above 1500. For the longer term investors, this correction should be view as an opportunity to accumulate quality stocks at lower price level.

Overnight, the Dow rose +80.91 points or +0.73% higher to close at 11,143.69. Today, the FBM KLCI is likely to trade within a range of 1458 to 1501.

This week's expected range: 1461 – 1524
Today’s expected range: 1458 – 1501

Resistance: 1491, 1501, 1511
Support: 1458, 1468, 1474

Stock to watch: KINSTEL, LIONDIV, ANNJOO, INCKEN, DUTALND, PELIKAN