Millionaire Trend Trader: FBM KLCI - likely to be sideways range-bound

Monday, March 19, 2012

FBM KLCI - likely to be sideways range-bound

Stocks on Bursa Malaysia closed mixed last Friday, ending the week in cautious trading in line with major regional markets as foreign investors liquidated regional stocks to benefit from the recovery in the US on the backdrop of improved sentiment in global market as well as concern on China's growth. The benchmark FBM KLCI was down 7.98 points or 0.51% to close at 1,571.40, after opening 1.1 point higher at 1,580.48, and week-on-week, it fell 7.6 points from 1,579 previously. Gainers outnumbered losers by 437 to 330, while 343 counters were unchanged. Turnover surged higher to 2.414 billion shares worth RM1.926 billion from 1.359 billion shares valued at RM1.731 billion on Thursday. Total weekly volume decreased to 7.479 billion units worth RM8.609 billion from 7.556 billion units worth RM8.631 billion the previous week.

The FBM KLCI started last week on a bearish tone by falling 14.25 points to close Monday at 1,564.75 on cautious sentiment. The key index continued to consolidate on Tuesday to closed 0.73 of a point lower at 1,564.02 after hitting the intra-week low of 1,562.97. Buoyed by external developments in the United States and the Euro zone, a stronger-than-expected retail sales in the US and comments from the Federal Reserve that financial market strain was easing, as well as, news that most US banks passed their annual stress test lifted global equity markets, the FBM KLCI ended 11.69 points higher at 1,575.71 on Wednesday. The FBM KLCI rose another 3.67 points on Thursday to close at 1,579.38, and on Friday the key index experienced heavy profit-taking to close 7.98 points at 1,571.40.

On the weekly chart, the FBM KLCI formed a black spinning-top candlestick which indicates indecision of market direction with a downward bias. As this is a second black spinning-top candlestick formed in two weeks, it indicated that the market was in a correction and consolidation mode after hitting a high of 1,594.72, and the FBM KLCI is likely to continue its consolidation mode this week. Nevertheless, as the key index is still closing above the 5 and 10-week SMA, the underlying uptrend is still intact.

On the daily chart, the FBM KLCI formed a bearish engulfing candlestick pattern after hitting the intra-day high of 1,583.55, indicating heavy profit-taking activity. With this bearish down move, the key index is likely to further consolidate itself today. Immediate downside support zone is at 1,570 to 1,562 while the overhead resistance zone is at 1,583 to 1,594.

Weekly MACD continued to move higher but is tapering off, while its histogram continued to turn shorter, indicating a loss in the upward momentum. On the contrary, the daily MACD continued to slide lower, indicating a further consolidation of the key index. Weekly RSI (14) was lower at 62.1, reflecting the pullback correction, and daily RSI (14) has slid lower to 54.8, indicating a loss in the short term relative strength to a mildly bullish state. Weekly Stochastic was lower at 90.4, indicating a loss in the weekly market strength, while the daily stochastic was higher at 54.3. Mixed signals from the weekly and daily indicators showed that the FBM KLCI is in a consolidation phase which is likely to extend.

With the bearish close on last Friday, the rebound was probably over as the FBM KLCI is again closing below the short term 5 and 10-day SMA, indicating a short term correction; however, as it is still above the 20 and 30-day SMA, the short term trend is still up. A critical level to watch is the 1,565-point support level provided by the 30-day SMA, a break below this level would indicate the short term is turning bearish. Nevertheless, the medium and longer term uptrend is still intact. For this week, the FBM KLCI is likely to stay sideways range-bound with a downward bias.

Last Friday, the Dow fell -20.14 points or -0.15% to close at 13,232.62. This week, the FBM KLCI is likely to trade within a range of 1,541 to 1,605, and for today, it is likely to trade within a range of 1,554 to 1,596.

This week's expected range: 1541 – 1605
Today’s expected range: 1554 – 1596

Resistance: 1580, 1588, 1596
Support: 1554, 1562, 1567

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Monday, March 19, 2012

FBM KLCI - likely to be sideways range-bound

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