Stocks on Bursa Malaysia were in correction mode last week, with the benchmark FBM KLCI ended the week lower amid bearish market sentiments as most investors booked profits after the recent strong run-up. The FBM KLCI closed last Friday 19.08 points or 1.22% lower at 1,547.43 after opening 6.89 points lower at 1,559.62. On a Friday-to-Friday basis, the FBM KLCI fell 22.46 points from previous Friday’s 1,569.89 to 1,547.43. Total weekly volume fell to 7.133 billion shares valued at RM9.585 billion from 12.254 billion shares worth RM13.678 billion the previous week.
The FBM KLCI opened last Monday with an up gap of 3.58 points at 1,573.47 and closed the day at its day’s high of 1,574.49, charting another new record close. The key index hit the intra-day high of 1,576.42 on Tuesday before heavy profit taking activities sent it to close lower at 1,570.04. The FBM KLCI continued its correction last Wednesday to close another 3.53 points lower at 1,566.51, and on Friday the FBM KLCI opened with a huge gap of 6.89 points and slid lower throughout the day on heavy selling pressure, doing a catch-up on regional weakness as Bursa Malaysia was closed for Thaipusam celebration on Thursday.
On the weekly chart, the FBM KLCI formed a long black candlestick which confirmed the top reversal signal generated by the hanging-man candlestick formed the previous week. With this candlestick formation, the key index is likely to further correct itself this week to find its support or bottom. On the daily chart, the FBM KLCI formed a bearish long black candlestick with a huge down gap at 1559.62, and the formation of this candlestick indicates heavy liquidation by the big players as the volume surged above its 30-days average. Consequently, the key index is likely to continue with its correction and consolidation this week. Key support is expected at 1538, the 38% Fibonacci retracement level; 1532, the pivot high and 1528, the close formed on November 10, 2010.
Weekly MACD has hooked down after making a golden-cross two weeks ago, indicating a correction or pull-back after a strong up move. It is, nonetheless, still above its weekly signal line. Daily MACD, on the other hand, has made a dead-cross, which indicates a strong correction of the key index, and the correction is expected to continue.
Weekly RSI (14) slid lower to 70.3 from 79.2 a week ago, reflecting the heavy correction and may continue its downward momentum to slide lower. Daily RSI (14) plunged to 52 from 65.7, and has moved into the neutral zone.
Weekly Stochastic at 87.1 has also hooked down, but is still above its slow stochastic line, reflecting the pullback, while daily Stochastic has plunged below the 80 level to 72.4, indicating the beginning of another down cycle and weakening of the market strength.
The FBM KLCI is now closing below its 5, 10 and 20-day moving averages (MA), hence, the short term trend is down. The MAs are expected to continue exerting selling pressure onto the key index, and is likely to slide towards the 30-day MA which is currently at 1535. The main support zone would be at 1538 to 1528. The medium to longer term uptrend is, however, still intact.
The local bourse is likely to be in a consolidation or base-building phase this week as investors would prefer to be on the sideline before a long holiday. Next week has only one day trading on Monday and half a day on the Chinese New Year eve. Nonetheless, while the key index stocks may take a breather this week, the second and third liners may remain active on rotational play mode. One should look at the correction as an opportunity to buy into quality shares as the market may reverse its short term downtrend post Chinese New Year holiday.
Last Friday, the Dow rebounded +49.04 points or +0.41% higher to close at 11,871.84. This week, the FBM KLCI may trade within a range of 1508 to 1605, and for today it is likely to trade within a range of 1530 to 1572.
This week's expected range: 1508 – 1605
Today’s expected range: 1530 – 1572
Resistance: 1556, 1564, 1572
Support: 1530, 1538, 1543
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