Millionaire Trend Trader: FBM KLCI - likely to be range-bound with an upward bias

Monday, May 7, 2012

FBM KLCI - likely to be range-bound with an upward bias

Stocks on Bursa Malaysia ended higher last Friday, with active buying interest across the board despite weak regional markets and Wall Street. Major US stock indices lost between 0.5% and 1.2% at the closing bell overnight on Wall Street following disappointing economic data. However, the local market remained buoyant and was not distracted by external market sentiment. The benchmark FBM KLCI was 7.87 points higher at 1,591.04 after moving between 1,585.06 and 1,591.04, it had opened 2.05 points higher at 1,585.22. On a Friday-to-Friday basis, the FBM KLCI jumped 23.24 points from previous Friday’s close of 1,567.80. Gainers led losers by 456 to 274 while 352 counters were unchanged. Turnover rose to 1.33 billion shares valued at RM1.59 billion from Thursday’s 1.295 billion shares worth RM1.214 billion. Total weekly volume decreased to 4.904 billion shares worth RM5.62 billion from previous week’s 7.309 billion shares valued at RM7.520 billion.

The FBM KLCI opened last Monday 2.66 points higher at 1,570.46 and moved higher gradually to hit the intra-day high of 1,574.49 before closing the last trading day of April at 1,570.61. Bursa Malaysia was closed for the Labour Day holiday on Tuesday. Trading resumed on Wednesday with the FBM KLCI opened with an up gap of 1.87 points at 1,572.47 and moved higher for the rest of the day to close at an intra-day high of 1,582.39 with a gain of 11.78 points. Thursday saw a mixed market due to the lack of direction, which kept the market quiet throughout the trading day, and the FBM KLCI was 0.78 of a point better at 1,583.17. The local bourse saw active buying interest on Friday which propels the FBM KLCI to close at the highest point of the week at 1,591.04.

On the weekly chart, the FBM KLCI formed a bullish white candlestick in Harami position which indicates the fight back of the bulls after being beaten down for two consecutive weeks, and the key index is likely to move higher in the coming week with a possibility of re-testing the historical high of 1,609.33. On the daily chart, the FBM KLCI formed a bullish white Marubozu candlestick which indicates the bulls were in full control for the day, and the key index was up for four consecutive days. With the bullish up move last Friday, the FBM KLCI has broken out of the downtrend channel and is likely to continue its upward momentum to move higher. Immediate overhead resistance zone is at 1,594 to 1,600.

Weekly MACD was marginally lower and is tapering off, and its histogram also turned shorter marginally, indicating a waning of the weekly downward momentum. Daily MACD continued to climb higher, while its histogram was shorter upward, indicating a reduction in the daily bearish momentum. However, as the MACD is still below the zero-line, this improvement may turn out to be just a technical rebound. Weekly RSI (14) hooked up strongly to 60.8 from 55.9 previously, indicating the weekly relative strength has moved back to the bullish zone. Daily RSI (14) climbed higher to 54.5 from 48.8, indicating the daily relative strength of the FBM KLCI had turned mildly bullish from mildly bearish previously. Weekly Stochastic, however, continued to slide lower to 74.2 from 78.3 previously, indicating the weekly down cycle is still intact. Daily Stochastic, on the contrary, climbed higher to 50.8, indicating an improvement in the short term strength of the key index and continuation of the daily up cycle. Readings from the indicators showed that from the weekly perspective the FBM KLCI is still in a consolidation mode, while from the daily perspective, the short term correction of the FBM KLCI is probably nearing over; however, more data is required to confirm this.

The short term trend of the FBM KLCI has reversed up as the key index has moved above the upper resistance trend line of the downtrend channel. However, it is still below the lower support trend line of the longer term uptrend channel, the key index will have to close at least above the 1,595-point level in order to get back into the uptrend channel. The medium term trend is sideways while the longer term uptrend is still intact. For the coming week, the FBM KLCI is likely to move range-bound but with an upward bias. Overhead resistance zone is at 1,594 to 1,609 with 1,600 being the strong psychological resistance level. While the downside support zone is pegged at 1,585 to 1,566.

Last Friday, the Dow fell -168.32 points or -1.27% to close at 13,038.27. This week, the FBM KLCI is likely to trade within a range of 1,553 to 1,614, and for today, it is likely to trade within a range of 1,581 to 1,597.

This week's expected range: 1553 – 1614
Today’s expected range: 1581 – 1597

Resistance: 1593, 1595, 1597
Support: 1581, 1583, 1587

Stocks to watch: MAYBULK, MUDAJYA, BENALEC, COASTAL, MULPHA

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Monday, May 7, 2012

FBM KLCI - likely to be range-bound with an upward bias

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