Stocks on Bursa Malaysia finally succumbed to profit-taking pressure last Friday after rising consecutively for six straight weeks as Asian markets plunged on concern over possible further monetary tightening in China, and renewed worries concerning the Euro-zone crisis as investors fretted over the possibility of Ireland defaulting on its sovereign debt. The FBM KLCI fell 13.89 points or 0.92% to close at 1499.81 on last Friday, and week-on-week, it lost 11.93 points compared with 1511.74 the previous week. The total weekly turnover soared to 8.204 billion shares valued at RM11.334 billion from 5.075 billion shares valued at RM6.168 billion the previous week.
The FBM KLCI opened last Monday with an up gap of 5.27 points at 1517.01 and surged to the intra-day high of 1522.77 in the morning, and close at 1519.84, charting a new record close for the key index. The FBM KLCI continued to chart another record high when it closed 6.68 points higher at 1526.53 on last Tuesday. And on Wednesday, the benchmark FBM KLCI gained 1.48 points to post a second consecutive historic high of 1528.01 but was off its intra-day high of 1531.99. The key index saw its main decline last Thursday when it lost 14.31 points to close at the lowest level of the day at 1513.70, and Friday was a continuation of the downtrend which saw panic selling sending the key index to the intra-day low of 1488.06 before rebounding to close the week at 1499.81.
On the weekly chart, the FBM KLCI formed a bearish engulfing candlestick which confirmed the weakness signal issued by the previous week’s black spinning-top candlestick. With this bearish candle formation, the market is expected to further correct itself. On the daily chart, the FBM KLCI formed another bearish candlestick but with a long lower shadow, which indicates buying support from the bargain-hunters. Having closed below the 1500 psychological level will trigger further selling activities which will send the key index further southward. Nonetheless, the underlying longer term uptrend is still strong, and the key index may get good support at the 1480 to 1465 level provided by the 50 and 60-day moving average (MA), and the critical support will be at 1450.
Weekly MACD had started to turn downward, indicating a loss in the upward momentum, nevertheless, it is still above its weekly signal-line, and hence, it could just well be a short term correction. Daily MACD, on the other hand, had just made a dead-cross over its daily signal-line, and hence, the short term correction is expected to continue.
Weekly RSI (14) has hooked downward to 75.5 from an extremely overbought reading of 80.7 the previous week. Daily RSI (14) is at 52.1, had plunged further downward into the neutral zone from a reading of 63.1 on last Thursday, indicating bearish momentum is gaining strength.
Weekly Stochastic at 93.5 has just crossed below its weekly slow stochastic line, indicating the beginning of a medium term correction. Daily Stochastic, however, has plunged downward to 58.1, indicating the short term down cycle is picking up in momentum.
On the trend side, the FBM KLCI has closed below all its short term 5, 10 and 20-day MA, indicating the short term trend has begun to turn downward. The medium term uptrend, as indicated by the 30, 50 and 60-day MA is still intact, and is expected to provide good support to the key index when it corrects itself. And the long term uptrend is basically un-spoilt.
For the coming week, the benchmark FBM KLCI is expected to further correct itself with support zone expected at 1488 to 1465, while the immediate resistance zone is at 1500 to 1512. The Dow fell -90.52 points or -0.80% lower to close at 11,192.58 last Friday. This week, the FBM KLCI may trade within a range of 1450 to 1528, and for today it is likely to trade within a range of 1463 to 1524.
This week's expected range: 1450 – 1528
Today’s expected range: 1463 – 1524
Resistance: 1512, 1516, 1524
Support: 1463, 1475, 1488
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