FBM KLCI - consolidation likely to extend

Stocks on Bursa Malaysia ended last week on a mixed note with follow-through interest in selected heavyweights, especially CIMB and Maybank. The decision by the country's two largest banks, Maybank and CIMB, to call off talks with RHB Cap on a possible merger attracted relief buying interest in the stocks. The FBM KLCI rose 1.47 points or 0.09% to 1,564.66 after opening 0.77 point higher at 1,563.96. Week-on-week, the key index gained 1.23 points from previous Friday’s close of 1,563.43. Market breadth was bullish with 434 gainers compared with 286 losers. Volume increased to 1.08 billion shares worth RM1.72 billion as compared to Thursday's 875.69 million shares valued at RM1.43 billion, and weekly volume increased to 4.6 billion shares worth RM7.64 billion from 4.12 billion shares worth RM7.81 billion the previous week.

The FBM KLCI was basically in consolidation mode last week; it kicked off the week on an easier note in line with losses in regional markets to close 4.24 points lower at 1,559.19 on Monday after hitting the intra-week low of 1,557.52, The key index rebounded on Tuesday to close 1.60 points higher at 1,560.79 after drifting aimlessly throughout the day. On Wednesday, the FBM KLCI staged a breakout from its consolidation to close 6.56 points higher at 1,567.35 on last minute buying of selected blue-chip stocks. However, the breakout Wednesday did not sustain, and the key index fell 4.16 points on profit-taking to close at 1,563.19 on Thursday. The benchmark FBM KLCI rebounded marginally to close the week 1.47 points higher at 1,564.66 on last Friday.

On the weekly chart, the FBM KLCI formed a small white spinning-top candlestick. The appearance of this candlestick after an up move indicates the market was hesitant to move higher and is taking a breather. On the daily chart, the key index also formed a small white spinning-top candlestick which indicates consolidation after a downward move on Thursday. The FBM KLCI is basically in consolidation mode from both weekly and daily chart perspective. Immediate strong overhead resistance zone is at 1,566 to 1,577, while the immediate downside support zone is at 1,560 to 1,550.

Weekly MACD had just made a golden-cross over the signal line, issuing a buy signal for the FBM KLCI. Daily MACD was marginally higher, but the histogram continued to turn shorter, indicating a lack of momentum, despite the MACD staying positive. Weekly RSI (14) was marginally higher at 60.97 from 60.72 for the previous week. Daily RSI (14) has hooked up to 60.3 from 59.3. Both weekly and daily RSI value showed that the FBM KLCI is mildly bullish. Weekly Stochastic is higher at 93.7, same goes with the daily Stochastic which is now at 90.4, and both are tapering off, indicating a weakening in the short term market strength, nonetheless, the short term up cycle is still intact. Readings from the indicators showed that the momentum and strength of the FBM KLCI is positive but is not strong. Therefore, the key index is likely to continue with its current consolidation mode.

The underlying trend of the FBM KLCI is up. However, the momentum is not there, as can be seen from the tight daily trading range and the relatively low volume. The signals from the candlestick and the indicators showed that the FBM KLCI is likely to remain range-bound this week with an upward bias, targeting a re-test of the historical peak of 1,576.95, of which a breakout would send the benchmark to the uncharted territory.

Last Friday, the Dow fell -115.42 points or -0.96% to close at 11,934.58. This week, the FBM KLCI is likely to trade within a range of 1,540 to 1,577, and for today it is likely to trade within a range of 1,559 to 1,569

This week's expected range: 1540 – 1577
Today’s expected range: 1559 – 1569

Resistance: 1566, 1567, 1569
Support: 1559, 1560, 1562