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Friday, November 19, 2010

FBM KLCI - lower with strong buying support


Stocks on Bursa Malaysia closed lower yesterday as investors remained sidelined due to lack of market-stimulating news, and continued selling of blue-chips dragged the key index to finish the day in the negative territory. The FBM KLCI finished 6.89 points easier at 1496.65 after opening 3.23 points lower at 1500.31. Advancers led decliners by 404 to 362 while 288 counters were unchanged. Turnover declined to 1.124 billion shares worth RM1.737 billion compared with Tuesday's 1.325 billion shares valued at RM1.736 billion.

The FBM KLCI opened 3.23 points lower at 1500.31 and plunged to the intra-day low of 1487.21 within the first thirty minutes, losing 16.33 points at its worst. Thereafter, the key index gradually recovered its lost ground to close the day 6.89 points lower at 1496.65. Chart-wise, the FBM KLCI formed a hammer candlestick, which is a bottoming signal. It indicates strong buying support from the bulls which helped to push the price far up from its low. The key index have tested the 1487-1488 level twice and rebounded strongly off it, and hence is likely to have seen its bottom for the current correction.

MACD continued to slide lower, indicating the continued loss in momentum of the key index. RSI (14) at 49.4 has hooked downward and move into the mildly bearish territory. Stochastic at 28.9 continued to move lower but is tapering off, indicating a slow down in the downward momentum. Readings from the indicators are indicating a relatively weak market, and hence, the key index may continue to consolidate in the near term.

The short term trend of the FBM KLCI is currently down, while its medium to longer term trend is still up. The key index is currently closing below the 30-day moving average (MA), which is now at 1499.08, and is also below its other short term MAs; they may continue to exert selling pressure on the key index, however, the medium term MAs will continued to provide support for the key index when it corrects. Immediate support zone is at 1470 to 1487 and the overhead resistance zone is at 1500 to 1532.

As the current correction is just part of a bigger uptrend, one should view it as an opportunity to accumulate quality shares at lower price level. Overnight, The Dow rebounded strongly by +173.35 points or +1.57% higher to close at 11,181.23. Today, the FBM KLCI is likely to trade within a range of 1476 to 1513.

This week's expected range: 1450 – 1528
Today’s expected range: 1476 – 1513

Resistance: 1503, 1508, 1513
Support: 1476, 1481, 1487

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