Millionaire Trend Trader: FBM KLCI - pullback on profit-taking

Wednesday, August 17, 2011

FBM KLCI - pullback on profit-taking

Stocks on Bursa Malaysia closed mixed yesterday on profit-taking in line with the lower regional bourses despite a firmer Wall Street overnight. The market was strong in the early session but weakened towards the end as profit-taking was seen among blue chips and small-capitalized stocks. The FBM KLCI declined 1.5 points, or 0.1%, to 1,498.24 after touching an intra-day high of 1,510.54. Gainers edged losers by 411 to 393 while 285 counters closed flat. Volume rose to 1.29 billion shares worth RM1.97 billion from 1.07 billion shares worth RM1.45 billion on Monday.

The FBM KLCI opened with an up gap of 4.4 points at 1,504.14 and surged to the intra-day high of 1,510.54 within the first forty minutes. The key index then moved sideways for a while before succumbing to profit-taking activity that pulled it to close in the red. Chart-wise, the FBM KLCI formed a bearish black inverted hammer candlestick and a dark-cloud-cover pattern. The inverted hammer in dark-cloud position coupled with higher volume is a strong top reversal signal which indicates heavy liquidation. The FBM KLCI is expected to further pullback to the 38.2% Fibonacci retracement level at 1,490-point, after hitting the resistance at 50% Fibonacci retracement level at 1,510-point level earlier. The short term 5-day moving average (MA) at 1,487 and the long term 300-day MA at 1,483 may provide some cushion to the pullback.

MACD was marginally higher and the histogram was shorter upward, indicating a reduction in the downward momentum. Nonetheless, it is still below the zero-line, indicating the FBM KLCI is still bearish. RSI (14) hooked down marginally to 35.6 from 36 previously, reflecting the mild pullback, and the key index is still in the very bearish zone. Stochastic continued to move higher to 50.5, indicating the short term up cycle is in continuation. Mixed signals from the indicators showed that the FBM KLCI is still in a bearish mode and is likely to go into sideways consolidation for the immediate near term.

The main trend of the FBM KLCI remained down. However, it is now closing above the short term 5-day MA, which is currently at 1,487 but continued to close below the 10-day MA at 1,502, hence, the key index is likely to be range-bound today. An important support level to watch is the 1,483-point level provided by the 300-day MA, if this level is breached, then the FBM KLCI may re-visit the critical 1,474-point support level.

Overnight, the Dow fell -76.97 points or -0.67% to close at 11,405.93. Today, the FBM KLCI is likely to trade within a range of 1,480 to 1,524.

This week's expected range: 1433 – 1525
Today’s expected range: 1480 – 1524

Resistance: 1507, 1516, 1524
Support: 1480, 1488, 1493

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Wednesday, August 17, 2011

FBM KLCI - pullback on profit-taking

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