Millionaire Trend Trader: FBM KLCI - Down on bearish market sentiment

Tuesday, June 5, 2012

FBM KLCI - Down on bearish market sentiment

Stocks on Bursa Malaysia ended in negative territory yesterday, influenced by weaker investor sentiment in regional markets after data from the US and China added to evidence of a global economic slowdown. The FBM KLCI fell 18.41 points or 1.17% lower to close at 1,555.18 after hovering between 1,554.65 and 1,566.19. Losers led gainers by 674 to 114 while 194 counters were unchanged. Turnover rose to 677.63 million shares worth RM1.144 billion from 654.35 billion shares worth RM1 billion on last Friday.

Taking cue from the hefty fall of 275 points on the Dow last Friday, the FBM KLCI opened with a down gap of 7.4 points at 1,566.19 and continued sliding lower on selling pressure for the rest of the day with weak intermittent rebound. It hit the intra-day low of 1,554.65 before rebounding slightly to close off low. Chart-wise, the FBM KLCI formed a bearish long black candlestick which indicates sellers were selling down stocks on great fear, and the bearish sentiment is likely to send the benchmark index lower until a bottom reversal signal is seen. This bearish candlestick formation also served to confirm the bearish reversal signal generated by the Doji in Harami position formed last Friday.

MACD has hooked downward and its histogram also turned shorter, indicating a reversal of the momentum direction from up to down, indicating an end of the technical rebound rally which started on the 21^st May 2012. RSI (14) plunged lower to 44.8 from 53.5, indicating a return of the short term relative strength from mildly bullish to the mildly bearish state. Stochastic has also hooked downward to 76.8 from previous reading of 84.8, indicating a possible end of the recent short term up cycle. Readings from the indicators showed that the FBM KLCI is experiencing a strong pullback after the recent rally, and the strong downward momentum may send the benchmark index lower.

With the bearish down move yesterday, the FBM KLCI has fallen back to the downtrend channel as well as closing below the short term moving averages, indicating a short term trend reversal from up to down. The medium term trend remained sideways while the long term trend is still up and maybe subjected to challenge soon. Immediate downside support zone is at 1,550 to 1,538 with 1,550 being the psychological support level. A further break of this support zone will likely see the FBM KLCI sliding lower to re-test the pivot low of 1,526.60 formed on 18^th May 2012.

Overnight, the Dow fell a marginal -17.11 points or -0.14% to close at 12,101.46. Today, the FBM KLCI is likely to trade within a range of 1,539 to 1,578.

This week's expected range: 1514 – 1620
Today’s expected range: 1539 – 1578

Resistance: 1563, 1571, 1578
Support: 1539, 1547, 1551

Stocks to watch: KLCCP, IJACOBS, SCOMIMR

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Tuesday, June 5, 2012

FBM KLCI - Down on bearish market sentiment

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