Millionaire Trend Trader: FBM KLCI - likely to remain range-bound with a bearish bias

Monday, May 14, 2012

FBM KLCI - likely to remain range-bound with a bearish bias

Stocks on Bursa Malaysia ended broadly lower last Friday in line with bearish regional markets as investors shied away from riskier markets due to external woes as global markets remained volatile amid ongoing uncertainties in Europe and a mild recovery in the US. Bursa Malaysia is likely to experience more range-bound consolidation within 1,550-1,610 in the short term, ahead of the run-up to the 13th general election. The FBM KLCI was 3.74 points or 0.24% lower at 1,584.32, pressured mainly by losses in selected key heavyweights. On a Friday-to-Friday basis, the benchmark declined 6.72 points from previous Friday’s 1,591.04. Losers led gainers by 476 to 234, while 332 counters were unchanged. Turnover was lower at 1.114 billion shares valued at RM1.206 billion compared with 1.4 billion shares worth RM1.399 on Thursday. Total weekly volume rose to 6.033 billion shares worth RM6.45 billion from 4.904 billion shares worth RM5.62 billion.

The FBM KLCI was basically in a range-bound consolidation mode the whole of last week where it opened with a down gap of 5.87 points on Monday and slipped to the intra-day low of 1,579.74 before rebounding to close at 1,584.87. Tuesday saw a continuation in rebound with the FBM KLCI closing 5.73 points higher at 1,590.60. On Wednesday, the key index staged a pulled back to close 5.7 points lower at 1,584.90 while on Thursday, it rebounded 3.16 points to 1,588.06. The benchmark index came under mild selling pressure on Friday where it fell to the intra-week low of 1,572.95, losing 15.11 points at its worst due to a possible mistake done in KLK, but the FBM KLCI recovered quickly to close just 3.74 points lower.

On the weekly chart, the FBM KLCI formed a Doji candlestick in Harami position which indicates indecision of market direction and uncertainties ahead. The FBM KLCI has also closed below the 5 and 10-week SMA, and hence, the key index is likely to remain range-bound with a downward bias in the coming week. Immediate critical support is pegged at the 1,566-point level, the pivot low formed two weeks ago, and a breach of this support level is likely to see the FBM KLCI sliding lower to the 1,550-point psychological support level. On the daily chart, the FBM KLCI formed a bearish black hammer candlestick which indicates selling pressure on the key index but with buying support, and it is likely to stay range-bound today.

Weekly MACD continued to slide lower and had just made a dead-cross over the weekly signal-line, flashing a bearish sell signal on the FBM KLCI weekly chart. Daily MACD was marginally lower and continued to stay below the daily signal-line as well as the zero-line, indicating a bearish condition for the FBM KLCI. Weekly RSI (14) hooked downward to 58.7 from 60.8 previously, indicating the weekly relative strength of the FBM KLCI has turned mildly bullish from bullish. Daily RSI (14) was lower at 49.1 from 51.8 the previous day, indicating the daily relative strength has turned mildly bearish. Weekly Stochastic continued to slide lower to 68.2, indicating a continuation of the weekly down cycle and continued loss in the index’s momentum, and the daily stochastic also hooked slightly downward but is still above its slow stochastic line, reflecting the mild pullback. Generally bearish readings from both the weekly and daily indicators showed that the FBM KLCI is likely to continue to consolidate in the coming week.

The short term trend of the FBM KLCI has turned sideways with a downward bias and the medium term trend is also sideways. Hence, a choppy market is expected ahead. The longer term trend, even though is still up at the moment maybe challenge if the key index continue to come under selling pressure. Immediate overhead resistance zone is envisaged at 1,591 to 1,600 while the immediate downside support zone is at 1,579 to 1,566.

Last Friday, the Dow fell -34.44 points or -0.27% to close at 12,820.60. This week, the FBM KLCI is likely to trade within a range of 1,556 to 1,610, and for today, it is likely to trade within a range of 1,558 to 1,606.

This week's expected range: 1556 – 1610
Today’s expected range: 1558 – 1606

Resistance: 1592, 1599, 1606
Support: 1558, 1565, 1575

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Monday, May 14, 2012

FBM KLCI - likely to remain range-bound with a bearish bias

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