Stocks on Bursa Malaysia ended broadly lower in cautious trade yesterday against a backdrop of negative global economic conditions. External factors, including the weaker performance on Wall Street and renewed concerns over the Eurozone debt crisis, affected investor sentiment across the region. The benchmark FBM KLCI declined 15.08 points or 0.95% to close at 1,574.83 after opening 4.61 points lower at 1,585.30. Decliners led advancers by 476 to 283 while 314 counters were unchanged. Total volume rose to 1.742 billion valued at RM2.03 billion from 1.288 billion shares valued at RM1.792 billion on Tuesday.
Taking cue from the weak performance of Wall Street overnight, the FBM KLCI opened with a down gap of 4.61 points at 1,585.30 and slid lower to the intra-day low of 1,572.43 within the first half and hour after opening, losing 17.48 points at its worst. The key index rebounded but continued to stay in the negative territory. Chart-wise, the FBM KLCI formed a bearish black candlestick with a downside break away gap which indicates great fear in action, and this served to confirm the top reversal signals appeared two days ago. The key index is likely to further correct itself with an immediate downside support at 1,571 provided by the 10-day SMA.
MACD hooked downward, indicating a pulled back in the upward momentum. Nevertheless, as it is still above the signal-line, the currently weakness may just be part of a correction. RSI (14) plunged to 61.1 from 74.2 a day earlier, indicating the short term relative strength has reduced to bullish from the very bullish state two days ago. Stochastic hooked downward to 77.3 and has crossed below the slow stochastic line, indicating the possible beginning of a short term down cycle. Readings from the indicators showed that the FBM KLCI is experiencing a correction but the bullish undertone was unchanged.
The FBM KLCI has closed below the 5-day SMA, indicating a pullback is in action. However, it is still above the 10-day SMA which may provide support to the correction. Nevertheless, the general trend of the FBM KLCI still remained up. Immediate downside support zone is at 1,572 to 1,567 while the overhead resistance zone is at 1,585 to 1,595. The general market is likely to continue to consolidate. Nevertheless, this might present a buying opportunity for quality stocks as the FBM KLCI is likely to continue its uptrend after the correction.
Overnight, the Dow rose +78.18 points or +0.61% to close at 12,837.33. Today, the FBM KLCI is likely to trade within a range of 1,556 to 1,598.
This week's expected range: 1527 – 1622
Today’s expected range: 1556 – 1598
Resistance: 1583, 1591, 1598
Support: 1556, 1564, 1569
Stocks to watch: HWGB, NICORP, BRAHIMS
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