Stocks on Bursa Malaysia went through a choppy week last week with the benchmark FBM KLCI swinging up and down in a sideways consolidation mode, but eventually making a positive gain of 8.93 points, week-on-week, to close last Friday at 1500.98 from previous Friday’s 1492.05. Weekly volume fell to 4.89 billion shares valued at RM9 billion from 6.18 billion shares valued at RM11.32 billion the previous week.
The FBM KLCI opened 3.48 points lower at 1488.57 on last Monday and fell to the intra-week low of 1474.02, losing as much as 18.03 points at its worst, but recovered gradually on bargain-hunting activities in line with the general recovery at key regional markets. The benchmark index fell by 10.72 points to close at 1485.23 on Tuesday in line with bearish sentiments across regional markets on talks China would raise interest rates.
On Wednesday, the FBM KLCI managed to recover from a low of 1,477.57 in morning trade to close up 0.19 point at 1485.42 in the slowest trade for the week of 886.2 million shares. The FBM KLCI staged a strong breakout rally on Thursday with blue-chips counters leading the index up on optimism stronger US economic reports would extend the global economic recovery. At the close, the FBM KLCI was 17.8 points or 1.2% higher to 1503.22, which was also the day's high.
On Friday, profit-taking activities which emerged ahead of the weekend capped gains and the FBM KLCI lost 2.24 points to end the week at 1500.98, off the opening high of 1,508.41.
On the weekly chart, the FBM KLCI formed a piercing-line candlestick which indicates the fight back of the bull after being pushed to the intra-week low of 1474.02. The key index is now closing right below its 5-week moving average (MA) which is currently at 1502.13 but is still above its 10-week MA which is at 1494.45. A weekly close above or below these two levels might see the key index continue moving in that direction.
On the daily chart, the FBM KLCI formed a dark-cloud-cover candlestick which indicates profit-taking by the bears after two days of rebound. The key index is closing right on the crucial psychological level of 1500 but is marginally below the 30-day MA which is currently at 1501.47. A close below the crucial 1500 level would see the index falling back to its sideways range and the consolidation might prolong; whereas a close above the 1508 level will like see the key index moving higher to re-test its recent historical high.
Weekly MACD had just made a dead-cross over its weekly signal line, indicating the continued loss in medium term upward momentum and beginning of the medium term consolidation which may see the key index prolonging its current consolidation process. Daily MACD, however, has continued its upswing to move higher after crossing above the zero-line, and its histogram also turned shorter, albeit still negative, indicating a gradual pick up in the momentum.
Weekly RSI (14) has hooked up and is currently at 71.9 after falling from the recent high of 80.7, and is still in the very bullish zone. Daily RSI (14) is at 53.1 and has hooked downward; it is currently in the neutral zone.
Weekly Stochastic is at 77.3 and has continued to move lower, a cross below the 80 level indicates the continued loss in momentum and also the continuation of the medium term down cycle. However, daily Stochastic has continued to move higher and is currently at 53.8, indicating the continuation of the short term up cycle which could mean a technical rebound under the longer term down cycle. Mixed and contradicting signals from the weekly and daily indicators indicate that the FBM KLCI is likely to continue with its consolidation until clearer and coherent signals are seen.
Short term trend of the FBM KLCI has turned sideways while the medium and long term uptrend is still intact. Immediate overhead resistance zone is at 1510 to 1532 while the immediate downside support zone lies at 1480 to 1474.
For the coming week, the FBM KLCI is expected to continue with its consolidation with an upward bias, given a better-than-expected US employment picture which would support further recovery in global markets on hopes the recovery in the global economy remains intact. 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 rose +19.68 points or +0.17% higher to close at 11,382.09 last Friday. This week, the FBM KLCI may trade within a range of 1446 to 1532, and for today it is likely to trade within a range of 1485 to 1519.
This week's expected range: 1446 – 1532
Today’s expected range: 1485 – 1519
Resistance: 1507, 1513, 1519
Support: 1485, 1491, 1496
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