Stocks on Bursa Malaysia closed broadly lower yesterday in line with weak regional markets, as regional and international equity markets were discouraged by China's revised economic growth forecast to 7.5 percent against an earlier projection of eight percent. The FBM KLCI recouped earlier losses to close 0.69 of a point or 0.04% higher at 1,589.91 aided by selected buying of blue-chips. Decliners led advancers by 519 to 257 while 315 counters closed unchanged. Total volume reduced to 1.288 billion shares, valued at RM1.792 billion, from 1.448 billion shares, valued at RM1.760 billion, transacted on Monday.
The FBM KLCI opened 0.12 of a point lower at 1,589.10 and slipped to the intra-day low of 1,580.51 at mid day. The key index recovered its losses gradually in the afternoon session and a last minute buying of selected blue-chips helped to push the market barometer to close at the day’s high. Chart-wise, the FBM KLCI formed a white hanging-man candlestick, a top reversal candle pattern which indicates the bears were initially dominant in push the key index lower but the bulls later surfaced to lift up the index. With the appearance of two key reversal candlestick patterns, i.e. a shooting-star and a hangman at this high level, it indicated that selling pressure has emerged and hence the FBM KLCI is likely to pullback and correct itself after a four-day rally.
MACD continued to move higher, indicating the upward momentum is still intact. RSI (14) was higher at 74.2, but is tapering off, indicating a marginal increase in the short term relative strength, and the key index was at the overbought level for the short term. Stochastic was flat at 89.4, indicating the upward move was taking a pause. Readings from the indicators showed that the FBM KLCI is short term overbought and is making a pause, and might correct itself.
The trend of the FBM KLCI remained up and bullish. However, with the appearance of two key reversal candlestick patterns at this high level, the key index is likely to move lower to correct itself after the recent strong up move. Immediate overhead resistance zone is at 1,595 to 1,600 while the immediate downside support zone is at 1,580 to 1,567. The overall market is likely to go into a consolidation phase as can be seen from the shrinking volume. 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 fell -203.66 points or -1.57% to close at 12,759.15. Today, the FBM KLCI is likely to trade within a range of 1,574 to 1,600.
This week's expected range: 1527 – 1622
Today’s expected range: 1574 – 1600
Resistance: 1594, 1597, 1600
Support: 1574, 1577, 1583
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