Millionaire Trend Trader: FBM KLCI - consolidation likely to extend

Monday, July 18, 2011

FBM KLCI - consolidation likely to extend

Stocks on Bursa Malaysia ended last week lower in quiet trading as investors stayed on the sidelines on concerns about the global economy. The downtrend was expected as global sentiment was not good amid US and Italian debt problems. The FBM KLCI fell 2.59 points or 0.16% to close at 1,577.25. Week-on-week, the barometer dropped 17.49 points or 1.10% to 1,577.25 from 1,594.74 points the previous Friday. Losers led advancers by 432 to 250, while 343 counters were unchanged. Daily turnover fell to 697.71 million shares valued at RM1.43 billion from 713.17 million shares valued at RM1.37 billion on Thursday, and weekly volume dwindled to 3.798 billion shares valued at RM7.22 billion from 4.66 billion shares valued at RM8.63 billion the previous week.

The FBM KLCI opened at 1,595.14 and charted another new record intra-day record high of 1,597.08, but heavy selling pressure due to profit-taking sent the key index 6.16 points lower to 1,588.58 on Monday, as foreign funds selling across the region in response to news of weak global development weighed down the local bourse. The FBM KLCI continued its downtrend on Tuesday and fell another 10.48 points to close at 1,578.10. The benchmark index rebounded on Wednesday in tandem with regional markets to close 2.57 points higher at 1,580.67. On Thursday, the key index staged a mild pullback in very quiet trading to close 0.83 point easier at 1,579.84, and the downtrend continued into Friday with the FBM KLCI losing another 2.59 points to end last week at 1,577.25

On the weekly chart, the FBM KLCI formed a bearish engulfing candlestick pattern which is a top reversal pattern and it indicates sellers were dominant throughout the week. With the appearance of the bearish engulfing pattern, the FBM KLCI is likely to continue its downward move this week to test the 10-week moving average (MA) support at 1,562. The critical support is at 1,538-point level provided by the 30-week MA. On the daily chart, the FBM KLCI formed a hammer candlestick pattern which indicates a possible temporary bottom, as the key index continued to close above the resistance turned support level of 1,577. The key index is currently closing below the 5 and 10-day MAs but was supported by the 20-day MA, and selling pressure exerted by the short term 5 and 10-day MA is likely to push the FBM KLCI lower to test the 30-day MA support at 1,568, if the current support level does not hold.

Weekly MACD has turned downward, indicating a loss in the weekly momentum, and nonetheless, it is still above the weekly signal line. Daily MACD, however, continued to slide lower and is below the daily signal line, indicating weakness is developing. Weekly RSI (14) was lower at 60.8 from 66.8 the previous week, indicating a continuous loss in the weekly relative strength. Daily RSI (14) was lower at 54.7, indicating the daily relative strength of the FBM KLCI has turned weak mildly bullish from mildly bullish. Weekly Stochastic is at 91.7, and has hooked downward to cross below the weekly slow stochastic line, indicating the possible beginning of a weekly down cycle. The high reading of 91.7 indicates it is still in the weekly overbought zone and there are lots of rooms for correction. Daily Stochastic continued its slide to 51.2, indicating the daily down cycle is still in continuation and has not reach the oversold zone yet. Deteriorating technical signals from the indicators showed that the current correction is likely to extend.

The short term trend of the FBM KLCI is down, and however, the medium and long term uptrend remained intact. Immediate downside support zone is at 1,573 to 1,566, if the 1,566 support level cannot hold, then there is a strong likelihood that the key index will slide towards the 1,550-point psychological support level, which happens to be where the 60-day MA is located currently. Overhead resistance zone is at 1,580 to 1,585.

Last Friday, the Dow rose +42.61 points or +0.34% to close at 12,479.73. This week, the FBM KLCI is likely to trade within a range of 1,544 to 1,606, and for today it is likely to trade within a range of 1,567 to 1,587.

This week's expected range: 1544 – 1606
Today’s expected range: 1567 – 1687

Resistance: 1580, 1584, 1587
Support: 1567, 1570, 1573

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Monday, July 18, 2011

FBM KLCI - consolidation likely to extend

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