Millionaire Trend Trader: FBM KLCI - mild technical rebound

Wednesday, May 2, 2012

FBM KLCI - mild technical rebound

Stocks on Bursa Malaysia ended mixed on Monday, in the absence of participation ahead of the Labour Day holiday on Tuesday. The market saw investors selling stocks following last week’s market weakness after the Eurozone sovereign debt troubles showed initial signs of respite. The FBM KLCI ended 2.81 points or 0.18% better at 1,570.61, after moving between 1,568.58 and 1,574.49 throughout the day. Losers led gainers by 388 to 297 while 318 counters were unchanged. Turnover stood at 945.418 million shares worth RM1.381 billion compared with last Friday’s 1.296 billion shares worth RM1.386 billion. Bursa Malaysia was closed yesterday for the Labour Day holiday.

Boosted by gains on Wall Street last Friday, the FBM KLCI opened 2.66 points higher at 1,570.46 and moved higher gradually to hit the intra-day high of 1,574.49 before late hour selling which pressed the key index to close off high. Chart-wise, the FBM KLCI formed a Doji candlestick which indicates uncertainties of market direction, and the key index is likely to stage either a follow through rebound or continue to consolidate. Immediate overhead resistance zone is at 1,574 to 1,580, whilst the immediate downside support zone is at 1,566 to 1,562.

MACD and its histogram continued to slide lower into the negative zone, indicating an increased in the bearish momentum. RSI (14) hooked up marginally to 38 from 35 previously, reflecting the mild rebound, but the short term relative strength indicates that the key index is still in a bearish state. Stochastic has hooked up to 7 from 4.3 previously, also reflecting the mild rebound on Monday, as the stochastic indicated a deeply oversold situation, the FBM KLCI is likely to stage a follow through rebound. Readings from the indicators showed that the FBM KLCI is still in a bearish condition and may continue to consolidate although some rebound is likely to happen.

The short term trend of the FBM KLCI is down as shown by the downtrend channel (in blue), and the medium term trend has also turned bearish as the key index is currently below the 50 and 60-day SMA. The long term trend, nevertheless, is still up. In order to reverse the current downtrend, the FBM KLCI must move above the upper resistance line of the downtrend channel as well as above the lower support line of the uptrend channel, and the intersection of these two lines is at 1,590, and happened to be the location of the 30-day SMA. On the other hand, if the FBM KLCI continues to break the current critical support of 1,566, it has a highly possible target of 1, 545 to 1,540.

Overnight, the Dow rose +65.69 points or +0.50% to close at 13,279.32. Today, the FBM KLCI is likely to trade within a range of 1,562 to 1,581.

This week's expected range: 1532 – 1618
Today’s expected range: 1562 – 1581

Resistance: 1574, 1578, 1581
Support: 1562, 1565, 1567

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Wednesday, May 2, 2012

FBM KLCI - mild technical rebound

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