Stocks on Bursa Malaysia ended last Friday on a bearish note dragged by China's inflation worries, heightened tensions between North and South Korea coupled with Ireland's debt woes. The FBM KLCI ended the day 4.44 points or 0.30% lower at 1492.05, after opening 2.19 points higher at 1498.68. Week-on-week, it lost 14 points or 0.93% from previous Friday’s close of 1506.05. Weekly turnover increased to 6.179 billion shares valued at RM11.315 billion compared with previous week’s 4.56 billion shares worth RM6.166 billion.
The FBM KLCI opened 0.67 of a point higher at 1506.72 on last Monday; it touched the intra-week high of 1510.13 but finally settled at 1503.20. On Tuesday, the key index slumped 15.67 points or 1.04% to end at 1487.53 on news that North Korea launched a bomb strike on a South Korean island which sent shock waves across the region’s stock market. On Wednesday, stocks on Bursa Malaysia rebounded to close mostly higher as Asian stocks stabilized, the FBM KLCI rose 1.01 points to close at 1488.54. The rebound continued into Thursday with the FBM KLCI gaining 7.95 points to close at 1496.49 on steadier sentiments spurred by the strong close on Wall Street overnight. The improved sentiment did not last long, after North Korea on Friday warned of a war if its clash with the South escalated, and that sent the regional market broadly lower on Friday.
On the weekly chart, the FBM KLCI formed a bearish black candlestick with long lower shadow which indicates heavy selling pressure but strong buying support lifted the key index to close off its intra-week low near the mid range. It is now closing right above the 10-week MA which is at 1489.47. On the daily chart, the FBM KLCI formed a bearish engulfing candlestick over Thursday’s candle which indicates renewed selling pressure on the key index after two days of technical rebound. It looks like the corrective down waves is going to continue its move downward with potential targets at 1465, 1453 and 1438.
Weekly MACD continued to slide lower which indicates a continued loss of its medium term upward momentum, nonetheless, it is still above its weekly signal line, and hence the medium momentum has not turned bearish yet. Daily MACD continued to move lower and is approaching its zero-line, indicating the continuation of the short term negative momentum.
Weekly RSI (14) at 70.4 has continued to slide lower, indicating the continued loss in the medium term market strength. Daily RSI (14) is at 46.9, has again hooked downward and is at the mildly bearish zone.
Weekly Stochastic is at 80.3, and has continued to slide lower, and is sitting right on the 80 level, a break below the 80 level will confirmed the medium term down cycle. Daily Stochastic at 28.2 has, however, crossed above its slow stochastic line. Signals from the indicators indicate that the FBM KLCI is currently in a short term correction mode, and may further consolidate or correct downward.
The short term trend of the FBM KLCI is currently down as it is below all the short term moving averages (MA), it is however, still supported by the medium term 60-day MA which is currently at 1480. A break below the 1480 will likely to see the key index sliding downward to the 1465 level. The longer term uptrend still remained intact. Immediate support zone for the FBM KLCI is at 1470 to 1476 while the overhead resistance zone is at 1500 to 1530.
For the coming week, the FBM KLCI is expected to continue with its consolidation while tracking developments in the region. The outlook for the local market over the medium term is still good, underpinned by healthy economic fundamentals and ample liquidity floating around globally.
The Dow fell -95.28 points or -0.85% lower to close at 11,092.00 last Friday. This week, the FBM KLCI may trade within a range of 1442 to 1526, and for today it is likely to trade within a range of 1472 to 1513.
This week's expected range: 1442 – 1526
Today’s expected range: 1472 – 1513
Resistance: 1499, 1506, 1513
Support: 1472, 1479, 1485
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