Millionaire Trend Trader: FBM KLCI - likely to be range-bound with an upward bias

Monday, June 18, 2012

FBM KLCI - likely to be range-bound with an upward bias

Stocks on Bursa Malaysia closed firmer last Friday ahead of the weekend, prompted by the possibility of additional economic stimulus being introduced by the United States and European policymakers to spur economic activities. Regional bourses were steadier with Japan’s Nikkei 225 up 0.43 of a point at 8,569.32, Hong Kong’s Hang Seng surged 425.54 points to 19,233.94 and Singapore’s Straits Times Index improved 40.19 points to 2,814.00. The FBM KLCI closed 8.29 points or 0.53% higher at 1,579.23 after fluctuated between 1,574.15 and 1,580.9 throughout the day, and week-on-week, the benchmark index gained 8.61 points from previous Friday's closing of 1,570.62. Gainers thumped losers by 440 to 273 while 312 counters were unchanged. Turnover surged to 979.94 million units, worth RM2.418 billion, from Thursday’s 670.945 million shares valued at RM1.127 billion, and weekly volume rose to 3.768 billion shares worth RM7.207 billion from previous week's 3.372 billion shares valued at RM5.642 billion.

Last week was a week of uncertainty with the market alternating between optimism and pessimism throughout the week. Taking cue from the strong performance of the Dow the previous Friday and the Spain bailout news over the previous weekend, the FBM KLCI opened last Monday with an up gap of 5.33 points at 1,575.95 and surged to the intra-day high of 1,582.29 before ending the day 7.79 points higher at 1,578.41. The FBM KLCI closed lower on Tuesday on profit-taking to end 2.34 points lower at 1,576.07. On Wednesday, the benchmark index ended at its intra-day low level of 1,576.23 with a marginal gain of 0.16 of a point as concerns over weak market fundamentals globally heightened, and made most investors stay on the sidelines. The FBM KLCI declined 5.29 points to end at the intra-day low level of 1,570.94 on Thursday as investors continued to reduce their holdings as concerns over the weakening external economic environment continued to rise. Nevertheless, the local bourse rebounded on Friday in tandem with regional market to end Friday 8.29 points higher at 1,579.23.

On the weekly chart, the FBM KLCI formed a white spinning-top candlestick which indicates uncertainty of the market direction but with an upward bias. Immediate overhead resistance zone is at 1,582 to 1,591 while the downside support zone is at 1,574 to 1,554. A breakthrough of the upper resistance zone is likely to see the FBM KLCI rallying to retest the historical high level of 1,609.33. On the daily chart, the FBM KLCI formed a bullish white candlestick which reversed the bearish black candlestick formed on Thursday indicating optimism has set in. However, the market was still cautious when it approached the immediate resistance zone of 1,580 to 1,582 and receded after testing the 1,580-point level.

Weekly MACD was lower but tapering off, and its histogram was shorter upward, indicating a reduction in the weekly downward momentum. Daily MACD and its histogram were slightly higher, indicating a mild pickup in the daily momentum. Weekly RSI (14) hooked up to 55.8, and daily RSI (14) was also higher at 55.4 from 51.1 previously, indicating both the weekly and daily relative strength has further improved to a mildly bullish state. Weekly Stochastic rose further to 57.9 from 46.5 after crossing the slow stochastic line last week, indicating continuation of the weekly up cycle and improvement of weekly market strength. Daily Stochastic, however, just hooked up marginally to 80.5 from 79.8, reflecting the rebound and indicating the daily market strength is still strong; however, it is still below the daily slow stochastic line. Readings from both the weekly and daily indicators showed that the FBM KLCI is gradually gaining its upward momentum, and is likely to move range-bound with an upward bias in this week.

The short term trend of the FBM KLCI has turned sideways range-bound after a week of see-saw movements, and it has formed a rectangle chart pattern which indicates short term consolidation, nevertheless, it was closing above all the short term as well as the medium and long term moving averages, indicating a bullish condition. If the FBM KLCI is able to breakout above the 1,582-point level, it is likely that it will move higher to test the next resistance level at 1,591, follow by the psychological resistance level of 1,600. With Greece’s election result favoring the pro-bailout New Democracy Party, the market is likely to move higher today.

Last Friday, the Dow rose +115.26 points or +0.91% to close at 12,767.17. This week, the FBM KLCI is likely to trade within a range of 1,561 to 1,594, and for today, it is likely to trade within a range of 1,568 to 1,588.

This week's expected range: 1561 – 1594
Today’s expected range: 1568 – 1588

Resistance: 1582, 1585, 1588
Support: 1568, 1571, 1575

Stocks to watch: SUPERMX, TOPGLOV, LATEXX, OLDTOWN, PERDANA

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Monday, June 18, 2012

FBM KLCI - likely to be range-bound with an upward bias

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