Stocks on Bursa Malaysia closed lower yesterday amid profit taking and weaker sentiment in the regional markets. The weaker sentiment in the Asian market was brought on by a weak Spanish bond auction that inflamed concerns about the European debt crisis as well as concerns on the US economy. The benchmark FBM KLCI declined 5.83 points or 0.36% to 1,583.75, after opening 3.61 points lower at 1,595.66. Decliners beat advancers by 352 to 342 while 317 counters were unchanged. Turnover was lower at 1.14 billion shares worth RM1.22 billion from the 1.195 billion shares worth RM1.1 billion on Wednesday.
Taking cue from the weak performance of Wall Street overnight, the FBM KLCI opened with a down gap of 3.61 points at 1,595.66 and slid lower to the intra-day low of 1,591.85 on continued profit-taking activity. The key index then rebounded in the afternoon session to hit the intra-day high of 1,596.46 before some last minute sell down which brought the key index deeper into the negative territory. Chart-wise, the FBM KLCI formed a small black spinning-top like candlestick which represents consolidation with a downward bias, and the key index is likely to continue to consolidate today. The FBM KLCI is in a critical position now as it has hit the lower support trend line and rebounded from it, and a break below the support trend line is likely to see the key index sliding lower to the 1,580-point level.
MACD has hooked downward, and so is the histogram, indicating a weakening of the momentum. Nevertheless, as the MACD is still above the signal-line, the current weakness is viewed as just a correction. RSI (14) was lower at 58.7 from 63.7 previously, indicating a continued weakening of the short term relative strength and the FBM KLCI is now in the mildly bullish state. Stochastic continued to plunge lower to 75.2, indicating a continuation of the short term down cycle and weakening of the market strength. Readings from the indicators showed that the FBM KLCI is undergoing a correction, and is likely to further consolidate.
The FBM KLCI has just closed below the 5-day SMA, reflecting the short term correction. The key index is now sitting on the 10-day SMA which provided the immediate support yesterday, and a break below this 10-day SMA support which is now at 1,592 is likely to see the key index sliding lower to the 20 and 30-day SMA support zone at 1,582 to 1,580. Nevertheless, the overall trend of the FBM KLCI still remained up. As the total volume continued to dwindle, the overall market is likely to remain in a consolidation mode with some penny stocks in rotational play.
Overnight, the Dow fell -14.61 points or -0.11% to close at 13,060.14. Today, the FBM KLCI is likely to trade within a range of 1,586 to 1,601.
This week's expected range: 1571 – 1611
Today’s expected range: 1586 – 1601
Resistance: 1596, 1599, 1601
Support: 1586, 1589, 1591
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