Millionaire Trend Trader: FBM KLCI

Tuesday, July 26, 2011

FBM KLCI - reversed downward

Stocks on Bursa Malaysia ended broadly lower yesterday in line with the weak performance of regional bourses, with the FBM KLCI slipped below the 1,560-point level as regional markets were pulled down by the debt impasse in Washington which may trigger the first-ever US debt default. The FBM KLCI fell 5.46 points or 0.35% to 1,559.60 after opening 0.4 point better at 1,565.46. Market breadth was negative with losers outnumbering gainers by 505 to 203 while 291 were unchanged. A total of 857.415 million shares valued at RM1.361 billion changed hands compared with 1.166 billion shares worth RM1.993 billion last Friday.

The FBM KLCI opened 0.4 point higher at 1,565.46 and slipped lower throughout the day with intermittent weak rebound to hit the intra-day low of 1,558.51 before ending off low at 1,559.60. Chart-wise, the FBM KLCI formed a bearish black candlestick which indicates sellers were in control for the day. The appearance of this candlestick has served as a confirmation to the reversal signal generated by the hanging-man candlestick formed last Friday, and the FBM KLCI is likely to slide further downward. Immediate support for the key index is expected at 1,555-point level provided by the 60-day moving average (MA), and at 1,552-point level. The psychological support level at 1,550 is a critical support level, as a break below this level will likely see the FBM KLCI sliding towards the 1,543 to 1,537 area.

MACD continued to slide lower towards the zero-line and is currently just staying slightly above it, and a slip below the zero-line would officially mean the FBM KLCI has turned bearish for the medium term. RSI (14) has slipped lower to 42.9, indicating the short term relative strength of the key index is turning bearish. Stochastic is at 24.3 and has hooked downward, albeit still above the slow stochastic line, indicating weak market strength and a possible continuation of the down cycle. Readings from the indicators showed a weak and bearish looking FBM KLCI, and the weakness is likely to continue for the short term with extended consolidation.

The short term trend of the FBM KLCI remained down, and the medium term uptrend is facing a challenge. The long term uptrend, however, is still intact. Immediate downside support zone is at 1,555 to 1,550 while the overhead resistance zone is at 1,566 to 1,570. In view of a lack of catalyst locally coupled with a bearish external environment, the FBM KLCI is likely to further consolidate itself for the short term with more downsides to come.

Overnight, the Dow fell -88.36 points or -0.70% to close at 12,592.80. Today, the FBM KLCI is likely to trade within a range of 1,549 to 1,572.

This week's expected range: 1529 – 1600
Today’s expected range: 1549 – 1572

Resistance: 1564, 1569, 1572
Support: 1549, 1554, 1556

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Tuesday, July 26, 2011

FBM KLCI - reversed downward

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