Millionaire Trend Trader: FBM KLCI

Thursday, August 11, 2011

FBM KLCI - a weak rebound

Stocks on Bursa Malaysia closed higher yesterday on technical rebound in line with overnight gains on Wall Street, with shares of Malaysia Airlines (MAS) and AirAsia in the limelight during the whole trading session. The national carrier and the low-cost carrier, which topped the actives list, saw the former gained 12 sen to RM1.72 and the latter lost 41 sen to RM3.54. Most analysts said MAS would be the bigger winner from the swap share deal. The FBM KLCI rose 8.38 points, or 0.569%, to close at 1,480.52 in moderate trading. Gainers thumped losers by 590 to 292 while 264 counters were unchanged. Total volume declined to 1.59 billion shares valued at RM3.298 billion from 1.896 billion shares valued at RM3.598 billion on Tuesday.

Due to some technical glitch, the FBM KLCI was not displaying any reading for the first twenty six minutes. It showed a reading of 1,494.89 when resumed operation. The key index touched the high of 1,495.65 and slid lower throughout the day, but remained in the positive zone to end the day 8.38 points higher at 1,480.52. Price action of the FBM KLCI showed that profit-taking activity dominated the day, and the key index was on an intra-day downtrend, despite closing in the positive. The chances of continued consolidation are still high. The FBM KLCI is now sitting right on the long term 300-day moving average (MA), and is above the critical horizontal support level of 1,474. The 38.2% Fibonacci retracement support level is at 1,462. A close below these two immediate support levels will likely see the key index sliding towards the 360-day MA support at 1,453-point level.

MACD continued to slide lower, indicating the downward momentum is still strong. RSI (14) has hooked up to 22.6, indicating the short term relative strength is still very bearish. Stochastic, however, is higher at 33.6, reflecting the technical rebound. Overall readings of the indicators showed that the FBM KLCI is currently still very weak and may continue to consolidate.

Despite the rebound over the last two days, the FBM KLCI remained in a downtrend, and the long term outlook has turned bearish if it continues to stay below all the long term moving averages. As such, any rally should be viewed as an opportunity to liquidate, as no one can see how long the current bear trend will last until there are clear signs of trend change.

Overnight, the Dow fell -519.83 points or -4.62% to close at 10,719.94. Today, the FBM KLCI is likely to trade within a range of 1,446 to 1,519.

This week's expected range: 1453 – 1553
Today’s expected range: 1446 – 1519

Resistance: 1493, 1506, 1519
Support: 1446, 1459, 1469

Stock to watch: MUHIBAH

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Thursday, August 11, 2011

FBM KLCI - a weak rebound

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