Millionaire Trend Trader: FBM KLCI - likely to be range-bound with a downward bias

Monday, May 28, 2012

FBM KLCI - likely to be range-bound with a downward bias

Stocks on Bursa Malaysia ended higher last Friday despite weaker sentiments in the Asian stock markets, as local investors may be reacting to the generally positive quarter financial reports of companies recently as well as announcements of contracts secured. The FBM KLCI closed 2.87 points, or 0.2% higher, at 1,551.12, lifted up by gains in most heavyweight counters, and week-on-week, it gained 18.66 points from previous Friday’s close of 1,532.46. Gainers led losers by 432 to 266, while 307 counters were unchanged. Turnover was higher at 875.54 million shares valued at RM1.182 billion compared with 817.48 million shares worth RM1.311 billion on Thursday. Weekly turnover stood at 4.346 billion shares worth RM6.142bil versus 5.768 billion shares valued at RM8.262 billion a week ago.

The FBM KLCI bucked the regional trend last week as the benchmark index rebounded over the week. The FBM KLCI opened 0.71 of a point higher at 1,533.17 but slipped to the intra-week low of 1,531.95 before rebounding to close 6.45 points higher at 1,538.91 on last Monday. Sentiment was cautiously optimistic on Tuesday with the FBM KLCI closing 7.93 points higher at 1,546.44. The local market staged a pulled back on Wednesday after rising for two days with the FBM KLCI retreating 7.13 points to 1,539.71. The benchmark index rebounded on Thursday to closed at its intra-day high of 1,548.25 with a gain of 8.54 points, and the upward move continued into Friday to hit the intra-week high of 1,552.48 before closing the week slightly off high at 1,551.12.

On the weekly chart, the FBM KLCI formed a bullish white candlestick in Harami position which reflected the rebound over the week and indicates a possible bottom reversal. However, as the key index could not close above the mid range of the previous week’s candlestick of 1,555.61, the rebound is considered a weak technical rebound. Hence, the FBM KLCI may continue to remain sideways range-bound this coming week. On the daily chart, the FBM KLCI formed a small white candlestick which continued its rebound on Thursday. As the body of the candlestick is relatively small, it showed a lack of enthusiasm and the market may consolidate itself. Immediate overhead resistance zone is at 1,552 to 1566 while the immediate downside support zone is at 1,547 to 1,526.

Weekly MACD and its histogram continued to slip lower, indicating a continued loss in the weekly momentum. On the contrary, daily MACD and its histogram continued to rise, indicating an improvement in the daily momentum to the upside. Nonetheless, as the daily MACD line is still below the daily signal-line, the current rise in the daily MACD is viewed as just part of a technical rebound. Weekly RSI (14) hooked upward to 50.2 from 46.1 previously, indicating the weekly relative strength is neutral. Daily RSI (14) continued to rise to 42.6 from 40.9, indicating an improvement in the daily short term relative strength of the FBM KLCI, nevertheless, it is still mildly bearish. Weekly Stochastic continued to plunge lower to 31.1 from 51.9, indicating a rapid loss in the weekly strength and continuation of the weekly down cycle. On the flip side, the daily Stochastic showed a continued improvement in the stochastic value to 30.7 from 28.4. Readings from the weekly indicators shows a bearish outlook while the daily indicators showed signs of positive improvement, nevertheless, the daily improvement in the market momentum may just be a technical rebound in a bear market, and the FBM KLCI may continue to consolidate.

The overall trend of the FBM KLCI remained down as the key index is still below most of the short and medium term moving averages and remained within the downtrend channel. In order to reverse the current downtrend, the FBM KLCI must break above the upper channel line and the 50 and 60-day SMA which is currently at 1,580-poinr level, a confirm trend change requires the FBM KLCI to at least close above the 1,590-point level. On the flip side, the critical lower support zone lies at 1,526 to 1,510, if the key index closes below the 1,510-point level, then expect to see a downside target of 1,495 follow by 1,460.

Last Friday, the Dow fell -74.92 points or -0.60% to close at 12,454.83. This week, the FBM KLCI is likely to trade within a range of 1,517 to 1,573, and for today, it is likely to trade within a range of 1,543 to 1,558.

This week's expected range: 1517 – 1573
Today’s expected range: 1543 – 1558

Resistance: 1554, 1556, 1558
Support: 1543, 1545, 1548

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Monday, May 28, 2012

FBM KLCI - likely to be range-bound with a downward bias

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