FBM KLCI - likely to be range-bound with an upward bias

Stocks on Bursa Malaysia closed mixed last Friday as traders firmed their position ahead of the weekend. Although strong interest from foreign investors was seen in the market, profit taking had offset earlier gains. The benchmark FBM KLCI inched up 0.64 of a point to close at 1,579 after having moved between 1,577.23 and 1,582, while on a weekly basis, the FBM KLCI fell 4.78 points from 1,583.78 previously. Decliners led advancers by 388 to 369 while 344 counters closed unchanged. Total volume amounted to 1.306 billion shares valued at RM1.367 billion compared with 1.769 billion shares valued at RM1.763 billion registered on Thursday. Weekly volume declined to 7.556 billion shares valued at RM8.631 billion from previous week’s 8.560 billion shares worth RM9.87 billion.

The FBM KLCI opened last Monday 2.87 points higher at 1,586.65 and rallied to hit the intra-week high of 1,594.72 before profit-taking set in which pressed the key index to close 5.44 points higher 1,589.22. Stocks on Bursa Malaysia closed broadly lower on Tuesday in line with weak regional markets while the FBM KLCI recouped earlier losses to close 0.69 of a point higher at 1,589.91 aided by selected buying of blue-chips. Wednesday saw the FBM KLCI declined 15.08 points to 1,574.83 against a backdrop of negative global economic conditions. On Thursday, the benchmark FBM KLCI rebounded to finish 3.53 points higher at 1,578.36 supported by foreign institutional buying amid improved global economic sentiment, and the benchmark market barometer inched up another marginal 0.64 of a point to end last week at 1,579.00.

On the weekly chart, the FBM KLCI formed a black spinning-top candlestick in a dark-cloud-cover position which indicates indecision of market direction amid active profit-taking activity. As the last candlestick did not close below the mid-point of the previous candle, the profit-taking activity is considered mild, and when the profit-taking activity is over, the key index is likely to continue its uptrend to move higher to re-test the historical high level of 1,597.08 follow by the target of 1,600-point.

On the daily chart, the FBM KLCI formed a Doji candlestick which indicates indecision of market direction as the broad market was in a consolidation mode ahead of the weekend. The key index is currently still trapped within the range of 1,585 to 1,572 of the long black candlestick formed last Wednesday, a breakout on either one the top or bottom level will see the FBM KLCI continue moving in the breakout direction.

Weekly MACD continued to move higher but its histogram was marginally lower, indicating a mild reduction in the upward momentum. On the contrary, daily MACD had made a dead-cross over the daily signal-line, flashing out a short term sell signal. Nevertheless, as the daily MACD is still above the zero-line, the current weakness is being viewed as just a short term correction. Weekly RSI (14) has made a mild pulled back to 64.3 from 65.6 the previous week, reflecting the mild profit-taking activity last week. Daily RSI (14) was marginally higher at 63 from 62.7 previously, reflecting a weak rebound. The readings of both weekly and daily RSI showed that the relative strength of the FBM KLCI is still bullish. Weekly Stochastic has slid lower to 93.8 from 95.2 and is below the weekly slow stochastic line, indicating weakness is surfacing. Daily stochastic has continued to slide lower to 58.8, indicating a continuation of the down cycle and continued weakening of the market strength. Readings from both the weekly and daily indicators showed that the FBM KLCI is in a short term consolidation mode with a still bullish undertone, and the key index is likely to continue its uptrend after the correction phase is over.

The FBM KLCI is currently undergoing a short term correction and consolidation phase. Nevertheless, the general trend is still up as the key index is still staying above majority of the short, medium and long term moving averages. Immediate overhead resistance zone is at 1,582 to 1,585 while the immediate downside support zone is at 1,577 to 1,572. With the volume continuously shrinking, the FBM KLCI may continue to move range-bound until a firm breakout of 1,585-point level is seen.

Last Friday, the Dow rose +14.08 points or +0.11% to close at 12,922.02. This week, the FBM KLCI is likely to trade within a range of 1,547 to 1,617, and for today, it is likely to trade within a range of 1,572 to 1,587.

This week's expected range: 1547 – 1617
Today’s expected range: 1572 – 1587

Resistance: 1582, 1585, 1587
Support: 1572, 1574, 1576