FBM KLCI - appearance of bottom reversal signal

Stocks on Bursa Malaysia closed higher Tuesday on late buying interest. The local bourse ended in tandem with higher regional markets after encouraging comments by Greek Prime Minister Lucas Papademos that significant progress was made in talks with private sector creditors about his country’s debt woes. The FBM KLCI jumped 7.74 points to close at its intra-day high of 1,521.29 after opening 3.47 points higher at 1,517.02. Gainers beat losers by 415 to 394 while 353 counters were unchanged. Turnover dropped to 1.78 billion shares from 2.307 billion shares while the value rose to RM2.18 billion from RM1.841 billion registered on Monday.

Despite the weak performance on Wall Street overnight, the FBM KLCI opened 3.47 points higher at 1,517.02 but heavy profit-taking activity pressed the key index lower throughout the morning session to the intra-day low of 1,509.49. The key index recovered gradually in the afternoon session and managed to close at the highest point of the day. Chart wise, the FBM KLCI formed a bullish white hammer candlestick which indicates the bears were initially dominant but the bulls later took control. The appearance of a hammer candlestick after two days of downtrend indicated that the short term correction is probably over and the FBM KLCI might stage an up move.

MACD continued to slide lower, but its histogram has turned shorter upward, indicating the downward momentum is weakening. As the MACD is still above the zero line, the current weakness is viewed as a short term correction is a longer term bull market. RSI (14) has hooked upward to 57.2, reflecting the rebound and indicated that the short term relative strength is still in the mildly bullish zone. Stochastic, however, continued to slide lower to 51.5, indicating a continuation of the short term down cycle and loss of short term market strength. Readings from the indicators showed that the FBM KLCI is still in the consolidation mode with a possibility of staging a follow through rebound.

The short term trend of the FBM KLCI is sideways as it is still trapped within the triangle chart pattern, while the medium and longer term trend remained up. Immediate overhead resistance zone is at 1,524 to 1,530, while the downside support zone is at 1,509 to 1,500. The key index is likely to stay sideways range-bound until it makes a firm breakout from this range-bound zone. Judging from the volume and value traded, the overall market is likely to continue be dominated by active trading in the lower liners while the index-link heavyweights may continue to consolidate.

Overnight, the Dow rose +83.55 points or +0.66% to close at 12,716.46. Today, the FBM KLCI is likely to trade within a range of 1,501 to 1,533.

This week's expected range: 1507 – 1538
Today’s expected range: 1501 – 1533

Resistance: 1526, 1530, 1533
Support: 1501, 1505, 1513

Stocks to watch: COASTAL, MUDAJYA, PELIKAN, SEG, GTRONIC