Stocks on Bursa Malaysia closed on a positive note last Friday on bargain-hunting activities across the board despite rising fears over the global economy. The FBM KLCI closed 7.21 points, or 0.49%, higher to 1,483.67. Week-on-week, it dropped 40.76 points to 1,483.67 from 1,524.43 previously. Advancers led decliners by 536 to 265, while 269 counters were unchanged. Total volume declined to 1.21 billion shares worth RM1.88 billion from Thursday's close of 1.14 billion shares valued at RM2.3 billion, while total weekly volume increased to 7.776 billion shares valued at RM14.682 billion from 6.020 billion shares worth RM9.858 billion previously.
The FBM KLCI opened with a down gap of 9.24 points at 1,515.19 last Monday and plunged to the intra-day low of 1,476.24, losing 48.19 points at its worst, before rebounding to close 27.44 points lower at 1,496.99 on news of US credit rating being downgraded. The benchmark index continued with its downtrend on Tuesday to hit the intra-week low of 1,423.47 before rebounding to close 24.85 points lower at 1,472.14. The FBM KLCI rebounded on Wednesday to close 8.38 points higher at 1,480.52 in moderate trading. Taking cue from the heavy losses on Wall Street overnight, the FBM KLCI, which opened 13.29 points lower at 1,467.23 on Thursday, ended the day 4.06 points lower at 1,476.46. On Friday, the FBM KLCI continued its rebound to close 7.21 points higher at 1,483.67.
On the weekly chart, the FBM KLCI was down for the fifth consecutive week after touching the record high of 1,597.08, and fell to the low of 1,423.47, losing as much as 174 points within five weeks. The key index formed a black hammer candlestick, which is a bottom reversal candlestick pattern. As mentioned in previous Monday’s analysis that the key index may pullback to the target of 1,410, the 23.6% Fibonacci retracement level, it actually came very close to it and rebounded strongly. It is now closing above the 60-week moving average (MA) and also the critical 1,474 horizontal support level. The FBM KLCI may continue its rebound to move higher this week; however, it will have to close above the 30-week MA at 1,537 in order to reverse its current down trend. Otherwise, it may just consolidate or continue its downtrend.
On the daily chart, the FBM KLCI formed a small gravestone Doji candlestick on last Friday after opened with an up gap of 7.68 points, and traded in a narrow range. It showed investors confidence level were still fragile with active profit-taking activity before the weekend. The FBM KLCI is now closing above the 300-day MA and the 5-day MA, and it may stage a rebound to move higher today. Immediate overhead resistance zone is at 1,496 to 1,515 with 1,500 being an important psychological barrier. The trend of the FBM KLCI had turned bearish as it is now below the long term 200 and 240-day MAs. In order to reverse the downtrend, the key index will have to move back above the 200-day MA which is currently at 1,530.
Weekly MACD continued to slide lower, indicating an increase in the weekly downward momentum. Daily MACD was lower; however, its histogram has turned shorter upward, indicating a reduction in the daily downward momentum, or a rebound. Weekly RSI (14) was lower at 38.2, indicating the weekly relative strength has turned bearish, while daily RSI (14) was higher at 26.6, indicating an improvement in the daily relative strength despite still in the very bearish zone. Weekly Stochastic was lower at 33.5, indicating the continuation of the weekly down cycle and the weakening of the weekly market strength. Daily Stochastic, however, continued to move higher to 39.9, indicating a continuation of the daily up cycle and improvement of daily strength. Readings from the indicators showed that contrasting signals between the weekly and daily indicators. The weekly indicators are showing a bearish scenario, whereas the daily indicators showed a potential rebound ahead.
The trend of the FBM KLCI has turned bearish, in line with all major indices in the world. However, indications are there that the FBM KLCI may stage a rebound, or a bear market rally. If that happened, it would be an opportunity to liquidate. The market will take a while to settle as now is just the beginning of the bear trend. Immediate overhead resistance zone is at 1,496 to 1,519 while the immediate downside support zone is at 1,480 to 1,450.
Last Friday, the Dow rose +125.71 points or +1.13% to close at 11,269.02. This week, the FBM KLCI is likely to trade within a range of 1,433 to 1,525, and for today it is likely to trade within a range of 1,475 to 1,494.
This week's expected range: 1433 – 1525
Today’s expected range: 1475 – 1494
Resistance: 1487, 1490, 1494
Support: 1475, 1477, 1480
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