Millionaire Trend Trader: FBM KLCI - down on selling pressure

Tuesday, May 31, 2011

FBM KLCI - down on selling pressure

Stocks on Bursa Malaysia ended lower yesterday on selling pressure in selected blue chips, particularly plantation and finance related counters. Among the factors that contributed to the loss was investors' concern over the outlook of the US economy, rising commodity prices and the European debt woes. The FBM KLCI fell 5.85 points or 0.38% to close at 1,542.84 after opening 1.38 points higher at 1,550.07. Losers led gainers by 518 to 242 while 272 counters were unchanged. Turnover declined to 681.366 million shares worth RM1.241 billion compared with last Friday's 947.812 million shares valued at RM1.689 billion.

The FBM KLCI opened 1.38 points higher at 1,550.07 and was immediately subjected to heavy profit-taking activities which pulled the key index into the negative territory and stayed there for the rest of the day, it finally closed at the day’s low of 1,542.84. Chart-wise, the FBM KLCI formed a bearish Marubozu engulfing candlestick which indicates heavy selling pressure faced by index-related counters. The black Marubozu engulfing candlestick is a strong top reversal pattern and the FBM KLCI may further correct downward. The price action yesterday showed that the resistance at 1,550 is not easy to break through, and the key index may continue its consolidation within the triangle.

MACD was higher but is tapering off, and the histogram has also turned shorter, indicating a loss in the upward momentum. RSI (14) has pulled back to 55.9 after touching the 60 mark, indicating the key index has moved back to the mildly bullish zone. Nevertheless, Stochastic is at 82.5, and has moved into the short term overbought zone. Readings from the indicators showed that the FBM KLCI is showing a first sign of reduced upward momentum and may take a pause from its recent up move.

The short term trend of the FBM KLCI remained up as it still close above all the short term moving averages. The medium term trend remained sideways while the long term uptrend is still intact. Immediate downside support zone is at 1,540 to 1,530 while the overhead resistance zone is at 1,550 to 1,565. With the drastically reduced volume, the FBM KLCI is expected to continue with its consolidation mode.

US market was closed for Memorial Day holiday on Monday. Today, the FBM KLCI is likely to trade within a range of 1,533 to 1,557.

This week's expected range: 1508 – 1576
Today’s expected range: 1533 – 1557

Resistance: 1548, 1553, 1557
Support: 1533, 1538, 1540

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Tuesday, May 31, 2011

FBM KLCI - down on selling pressure

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