FBM KLCI - remained in consolidation mode

Stocks on Bursa Malaysia closed marginally higher yesterday with the FBM KLCI settling at 1,579.69 with a marginal gain of 0.34 point or 0.02% in cautious trading and taking cue from gains on regional markets. Despite the gains on regional markets and strong US corporate results alongside reassurances from the Federal Reserve to support growth, the local bourse lacked traction due to the absence of fresh market moving factors. Decliners led advancers by 453 to 253 while 321 counters remained unchanged. Total volume rose to 1.454 billion valued at RM1.461 billion from the 1.47 billion shares worth RM1.53 billion transacted Wednesday.

Taking cue from the strong performance of the Dow overnight, the FBM KLCI opened 0.98 of a point higher at 1,580.33 and surged to the intra-day high of 1,583.08 within the first fifteen minutes of trading, and profit-taking activity which appeared pressed the key index lower to the intra-day low of 1,577.71 before rebounding to close marginally higher. Chart-wise, the FBM KLCI formed a black spinning-top candlestick which indicates uncertainty or indecision of market direction with a downward bias. Hence, the key index is likely to continue to consolidate at current level. Immediate critical support is the 1,577-point horizontal support level, and a close below this support level is likely to see the FBM KLCI sliding further southward.

MACD and its histogram continued to slide lower, indicating a further loss in the index’s momentum. MACD is currently at a critical position as it is just marginally above the zero-line, and a break below the zero-line would indicate that the FBM KLCI has turned bearish. RSI (14) made a gentle hook up to 42.9 from 42.5 previously, reflecting the mild gain on the index. Nevertheless, it indicates that the short term relative strength of the FBM KLCI is in the moderately bearish zone. Stochastic was lower at 7.08, and is deep into the short term oversold zone, indicating very weak short term strength of the key index. However, the stochastic has shown sign of tapering off indicating a reduction in the downward momentum and a rebound might be expected ahead. Readings from the indicators showed that the FBM KLCI is currently weak and bearish bias, and likely to extend its consolidation phase.

The short term trend of the FBM KLCI still remained down while the medium term trend is being challenged at the moment, as the key index is hovering around the 50-day SMA and is very close to the 60-day SMA which is currently at 1,575.64-point. A close below the 60-day SMA would mean the medium term trend also turn bearish. Nevertheless, the long term trend is still up. Immediate downside support zone is at 1,577 to 1,566 while the overhead resistance zone is at 1,583 to 1,586.

Overnight, the Dow rose +113.90 points or +0.87% to close at 13,204.62. Today, the FBM KLCI is likely to trade within a range of 1,571 to 1,589.

This week's expected range: 1577 – 1613
Today’s expected range: 1571 – 1589

Resistance: 1583, 1586, 1589
Support: 1571, 1574, 1577