Stocks on Bursa Malaysia ended broadly lower yesterday on foreign selling as investors reduced their holdings amid the worsening European debt crisis. There were rumours in the market saying that Greece might default on its sovereign debt in few days as it might be unable to pay off two “sizeable” government bonds which are likely to be maturing in a couple of days. About US$1.2 billion foreign funds were taken out from Malaysia in August as foreign investors fled to safe-haven assets like the US dollar. The FBM KLCI dropped 17.81 points or 1.24% to close at 1,413.12, after opening 1.18 points higher at 1,432.11. Losers outnumbered gainers by 496 to 218 while 233 counters were unchanged. Turnover eased to 724.373 million shares worth RM1.352 billion from 729.269 million shares valued at RM1.529 billion on last Thursday.
The FBM KLCI opened 1.18 points higher at 1,432.11 and moved to the intra-day high of 1,433.81 within the first five minutes. Selling pressure immediately appeared and pushed the key index lower throughout the day with intermittent weak rebound to the intra-day low of 1,411.80 before settling at 1,413.12. Chart-wise, the FBM KLCI formed a long black candlestick which indicates heavy selling pressure and the bear was fully in control. The key index had broken the critical support at 1,423 as well as the 50% Fibonacci Retracement (FR) support level at 1,420, measuring from 1,243 on 27/5/2010 to 1,597 on 11/7/2011, and is likely to continue its southward journey to the next lower target levels at 1,400 and the 61.8% FR support level at 1,378.
MACD continued to slide lower after making the dead-cross, indicating an increase in the bearish momentum. RSI (14) fell lower to 27.6, indicating the short term relative strength is turning very bearish. Stochastic is at 2.96, had continued to slide deeply into the oversold zone, indicating a very weak market. Readings from the indicators showed a very bearish and weak FBM KLCI, and the correction process is likely to extend.
The trend of the FBM KLCI remained down and bearish. Now that it has broken the critical support at 1,423, it is likely to slide lower to test the next lower support zone of 1,400 to 1,378. Immediate overhead resistance zone is at 1,420 to 1,433. Overnight, the Dow fell -108.08 points or -0.94% to close at 11,401.01. Today, the FBM KLCI is likely to trade within a range of 1,383 to 1,456.
This week's expected range: 1380 – 1502
Today’s expected range: 1383 – 1456
Resistance: 1428, 1442, 1456
Support: 1383, 1397, 1405
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