FBM KLCI - higher in line with regional rebound

Stocks on Bursa Malaysia staged a rebound on bargain hunting yesterday after recent losses and in tandem with other regional markets, as investors are on short-covering ahead of the Group of Seven (G7) talks on the Eurozone debt crisis, although investor sentiment remained weak, on persistent worries over the global economic health. The FBM KLCI closed 5.18 points or 0.33% higher at 1,560.36 after hovering between 1,554.51 and 1,563.33. Market breadth was positive with advancers leading decliners by 411 to 275 while 309 counters were unchanged. Turnover fell to 637.97 million shares worth RM923.14 million from the 677.63 billion shares worth RM1.144 billion on Monday.

The FBM KLCI opened 0.07 of a point higher at 1,555.25 but slipped to the intra-day low of 1,554.51 within the first five minutes after opening. The key index then rebounded and staged a rally to hit the intra-day high of 1,563.33 before pulling back on profit-taking to close off high at 1,560.36. Chart-wise, the FBM KLCI formed a bullish white piercing-line candlestick pattern which indicates fight back by the bulls after being beaten down a day earlier. As the key index was able to close at the mid point of the previous day’s candlestick, it is likely that the rebound might see a follow through today, and the immediate overhead resistance zone is at 1,563 to 1,566.

MACD hooked upward gently, but its histogram continued to get shorter, indicating a weak rebound. RSI (14) hooked up to 47.4 from 44.8, indicating the short term relative strength has improved slightly but still in the mildly bearish state. Stochastic, however, continued to slide lower to 65.7, indicating a continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI was undergoing a technical rebound, and whether the rebound is able to reverse the downtrend will require more data to confirm.

The short and medium term trend of the FBM KLCI is currently down as the key index continues to stay below the short and medium term moving averages. Nevertheless, the longer term trend is still up. Readings from the various technical indicators shows that the FBM KLCI is likely to stay sideways range-bound until clear sign of breakout, either up or down, is observed. In order to reverse the current downtrend, the FBM KLCI must move out of the downtrend channel and close above the immediate strong overhead resistance zone of 1,566 to 1,582, the downside support zone is at 1,554 to 1,544.

Overnight, the Dow rebounded with a gain of +26.49 points or +0.22% to close at 12,127.95. Today, the FBM KLCI is likely to trade within a range of 1,546 to 1,573.

This week's expected range: 1514 – 1620
Today’s expected range: 1546 – 1573

Resistance: 1565, 1569, 1573
Support: 1546, 1550, 1555

Stocks to watch: DIALOG, PERMAJU, IJACOBS, SCOMIMR, MPHB, ASAS