FBM KLCI - downtrend continued

Stocks on Bursa Malaysia extended their downtrend for the third consecutive day yesterday in line with weaker performances in key regional markets, and the better local and regional sentiments were eroded by the overnight fall on Wall Street on Monday. The FBM KLCI was 14.01 points or 0.9% lower at 1,561.07, after opening 4.33 points lower at 1,570.75. Losers led gainers by 658 to 176 while 250 counters were unchanged. Turnover rose to 1.12 billion shares worth RM1.64 billion from 977.743 million shares valued at RM1.12 billion on Monday.

Taking cue from the weak performance of Wall Street overnight, the FBM KLCI opened with a down gap of 4.33 points at 1,570.75 and slid lower to the intra-day low of 1,559.01 within the first hour of trading. The key index then staged a weak rebound and hovers in a narrow range near the low. Chart-wise, the FBM KLCI formed a bearish black candlestick which indicates sellers were in control for the day, and the key index is likely to continue its downtrend until a bottom reversal signal is seen. Immediate downside target is the 1,550-point psychological support level with a possible lower target of 1,538-point, the 23.6% Fibonacci retracement level.

MACD continued to slide lower and so is the histogram, indicating an increase in the bearish momentum. RSI (14) slid lower to 35.6 from 42.9 previously, indicating the short term relative strength of the FBM KLCI has turned bearish. Stochastic was lower at 34.4 from 59.2, indicating an acceleration of the bearish momentum and a continuation of the down cycle. Readings from the indicators showed that the FBM KLCI is currently in a bearish state, and the bearishness is likely to remain until there is strong reversal seen.

The short term trend of the FBM KLCI remained down as the key index is now closing below the lower supporting trend line of the downtrend channel, as well as below the short and medium term moving averages. With bearishness looming in the global market, the FBM KLCI is likely to follow suit, and a critical support level is the 1,538-point level where the 120-day SMA is located now and a close of the key index below this level will also mean the beginning of the long term bear trend. The best strategy to adopt now is to sell on rebound.

Overnight, the Dow fell -63.35 points or -0.50% to close at 12,632.00. Today, the FBM KLCI is likely to trade within a range of 1,544 to 1,584

 
This week's expected range: 1556 – 1610
Today’s expected range: 1544 – 1584

Resistance: 1569, 1576, 1584
Support: 1544, 1551, 1556