Stocks on Bursa Malaysia had a good run last week, the first trading week of Year 2011, with the benchmark FBM KLCI continuously charting new record high, as investors bought into finance and plantation stocks, with telecommunications stocks joining the fray on Friday. The FBM KLCI closed last Friday at 1,572.21, up 3.84 points or 0.24%, maintaining its winning streak for the fifth consecutive day. Week-on-week, The FBM KLCI surged 53.3 points, or 3.5 per cent, to close at a historic high of 1,572.21, compared with the previous Thursday's closing of 1,518.91, it hit an intra-week high of 1,576.95. Total weekly volume surged to 10.7 billion shares worth RM15.255 billion from 3.624 billion shares worth RM5.355 billion the previous week.
Chart-wise, the FBM KLCI formed a bullish long white candlestick on the weekly chart, staging a strong breakout from its all time high resistance level of 1531.99, registered on Nov 10th, 2010. The formation of a long white candlestick coupled with good volume indicates a strong buying momentum which is like to propel the index to a higher level.
On the daily chart, the FBM KLCI has however, traced out a bearish hanging-man candlestick, a top reversal candlestick pattern, on last Friday despite closing at historical high. The hanging-man plus the black spinning-top candlestick which appeared on Thursday, together indicates a slow down in the upward momentum and a possible distribution. Hence, the FBM KLCI is likely to take a breather, to correct itself before resuming its uptrend to challenge new high level.
Weekly MACD had just made a golden-cross over its signal line, which is a very bullish sign when it happened on a weekly chart. The strong weekly upward momentum is expected to carry the key index into higher level. Daily MACD continued to surged higher, indicating a continuation in the upward momentum.
Weekly RSI (14) at 80.2 has again surged above the 80 level, which indicates a very bullish condition, and is overbought; hence, a pull-back is likely to take place. Daily RSI (14) continued to move higher and is at 77.1, indicates a very bullish condition of the benchmark index.
Weekly Stochastic is at 86.2 and had crossed above its weekly slow stochastic line, indicating a resumption of the weekly up cycle and strong market strength. Daily Stochastic at 92.3, has however, continued to slide lower indicating a loss in the daily market strength, and the possibility of a short term correction ahead.
Readings from the weekly indicators indicate the resumption of a strong upward momentum, while on the daily side; the indicators hinted a possible correction ahead.
The FBM KLCI has broken-out from its short term range-bound, and has resumed its upward trend. However, the appearance of the hanging-man candlestick may indicate a possible pull-back ahead. With the strong underlying uptrend, the pull-back is expected to be shallow and should be view as an opportunity to collect quality shares at lower price level.
For this week, the overall share prices are expected to continue their uptrend as investors are bullish on rosy outlook for global economic recovery, inflow of funds, a pre-Chinese New Year pent-up demand and the expectation of a general election. Last Friday, the Dow fell -22.55 or -0.19% lower to close at 11,674.76. This week, the FBM KLCI may trade within a range of 1485 to 1630, and for today it is likely to trade within a range of 1557 to 1583.
This week's expected range: 1485 – 1630
Today’s expected range: 1557 – 1583
Resistance: 1576, 1579, 1583
Support: 1557, 1560, 1566
Stocks to watch: ADVENTA, TIMECOM, MEGB, YEELEE, NOTION
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