Millionaire Trend Trader: FBM KLCI

Tuesday, August 16, 2011

FBM KLCI - bullish rebound

Stocks on Bursa Malaysia ended higher yesterday on bargain hunting in line with the regional bourses which bounced back amid Wall Street’s recovery last Friday. Gains in construction companies, short listed for the Klang Valley Mass Rapid Transit (MRT) project, further lent a hand for the positive domestic sentiment. The FBM KLCI rose 16.07 points or 1.08% to 1,499.74 after opening 2.37 points higher at 1,486.04. Gainers overwhelmed losers by 627 to 190 while 233 counters closed unchanged. Volume decreased to 1.07 billion shares valued at RM1.45 billion compared with 1.21 billion shares worth RM1.87 billion last Friday.

Taking cue from the positive gain on Wall Street last Friday, the FBM KLCI opened 2.37 points higher at 1,486.04 and climb higher throughout the day, with mild profit-taking, to end the day at the highest point. Chart-wise, the FBM KLCI formed a bullish white Marubozu candlestick which indicates the bulls were in full control for the day. With this bullish up move, the key index is likely to continue to move higher today. Technically speaking, yesterday’s up move is just a technical rebound within a bearish downtrend, as the very short term trend, represented by the 5 and 10-day moving averages (MA) has not even reverse up yet. Immediate strong overhead resistances are envisaged at 1,508, 1,515, 1,519, and 1,530-point levels.

MACD has hooked up, indicating a pause to the bearish downward momentum amid a rebound. RSI (14) continued to move higher to 36, from 26.6 on last Friday, indicating an improvement in the short term relative strength to the positive side, despite still being in the very bearish zone. Stochastic continued to climb higher to 44.6, indicating a continuation of the short term up cycle and an improvement in the market strength. Readings from the indicators showed that the bearish momentum of the FBM KLCI has taken a pause, and sign of mild bullishness is appearing. However, one has to be cautious that this could be just a technical rebound, which could be short live.

The main trend of the FBM KLCI is still down or bearish. However, the key index has for the first time in two weeks close above the very short term 5-day MA, sending out first sign of a possible short term trend reversal, and it will have to close above the 10-day MA which is currently at 1,508 to stage a short term uptrend. If that happened, the FBM KLCI is likely to rally towards the next resistance zone at 1,520 to 1,530.

Overnight, the Dow rose +213.88 points or +1.90% to close at 11,482.90. Today, the FBM KLCI is likely to trade within a range of 1,476 to 1,514.

This week's expected range: 1433 – 1525
Today’s expected range: 1476 – 1514

Resistance: 1505, 1509, 1514
Support: 1476, 1481, 1490

Stocks to watch: AIRASIA, SCABLE, WCT

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Tuesday, August 16, 2011

FBM KLCI - bullish rebound

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