Millionaire Trend Trader: FBM KLCI - lower with strong buying support seen

Thursday, November 3, 2011

FBM KLCI - lower with strong buying support seen

Stocks on Bursa Malaysia ended mixed yesterday as key heavyweights staged a rebound amid concerns on Greece's referendum plan that may threaten Europe's debt rescue plan. The market rebounded after Monday's sell-off, following the bounce in regional markets. The FBM KLCI declined 4.69 points, or 0.32%, to 1,470.95 after opening 7.84 points lower at 1,467.8. Gainers led losers by 374 to 363 while 285 counters were unchanged. A total of 1.56 billion shares valued at RM1.7 billion were traded compared with 1.19 billion shares worth RM1.29 billion on Tuesday.

Taking cue from the heavy losses on Wall Street overnight, the FBM KLCI opened with a down gap of 7.84 points at 1,467.80 and plunged to the intra-day low of 1,457.50 within the first forty five minutes. It rebounded at late morning and continued to move higher in the afternoon session to hit the intra-day high of 1,473.13 before easing to close at 1,470.95. Chart-wise, the FBM KLCI formed a white hammer candlestick, a bottom reversal candle pattern, which indicates strong buying support after the initial selling on fear, and the key index might continue its upward move today. Immediate resistance is at 1,475-point level.

MACD has turned downward, and the histogram also getting shorter, indicating a weakening of the momentum. Nonetheless, as the MACD is still above the signal-line and the zero-line, the current weakness may just be part of a short term correction. RSI (14) fell lower to 58.5, indicating the relative strength is turning weaker, but is still in the mildly bullish zone. Stochastic continued to slide lower to 88.7, reflecting the pullback correction. Readings from the indicators showed that the FBM KLCI is currently undergoing a pullback correction, and the technical picture has not turn bearish. The key index might continue its upward move after the correction is over.

The short and medium term trend of the FBM KLCI is up, while the long term trend remained bearish. The key index has tested the support of the 10-day moving average (MA) and rebounded off it, but is now below the 5-day MA. Hence, the FBM KLCI is likely to be range-bound today unless it can break above the 5-day MA at 1,478, then it may rally higher to retest the recent high of 1,493. With volume remained above the 1 billion shares mark, the market is likely to see active rotational play on second and third liners while the heavyweights may continue its consolidation.

Overnight, the Dow rose +178.08 points or +1.53% to close at 11,836.04. Today, the FBM KLCI is likely to trade within a range of 1,445 to 1,489.

This week's expected range: 1432 – 1529
Today’s expected range: 1445 – 1489

Resistance: 1477, 1483, 1489
Support: 1445, 1451, 1461

Stocks to watch: MEGB

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Thursday, November 3, 2011

FBM KLCI - lower with strong buying support seen

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