FBM KLCI - lower in line with regional weakness

Stocks on Bursa Malaysia closed lower yesterday in line with the downtrend in regional performance as investors continued to reduce their holdings as concerns over the weakening external economic environment continued to rise. The FBM KLCI declined 5.29 points or 0.34% to 1,570.94, which was also the intra-day low level. Losers led gainers by 381 to 267 while 325 counters were unchanged. Turnover eased to 670.945 million shares valued at RM1.127 billion from Wednesday’s close of 677.021 million units worth RM1.216 billion.

The FBM KLCI opened 0.31 of a point higher at 1,576.54 and hit the intra-day high of 1,577.60 within the first fifteen minutes of trading, and it moved within a tight range of 2 points until mid afternoon where selling pressure started to appear and pushed the key index to close at the lowest point of the day. Chart-wise, the FBM KLCI formed a bearish black candlestick which confirmed the top reversal signal issued by the black inverted hammer candlestick formed the day before, and the FBM KLCI is likely to further consolidate itself with an immediate support zone at 1,568 to 1,563, while the overhead resistance zone is at 1,577 to 1,582.

MACD has hooked downward and its histogram also turned shorter, indicating a reduction in the key index’s momentum. RSI (14) was lower at 51.1, indicating the short term relative strength of the key index is now back to the mildly bullish neutral zone. Stochastic has turned downward to 79.8 and crossed below its slow stochastic line, indicating a possible end to the recent short term up cycle and the beginning of a down cycle. Readings from the indicators showed that the upward momentum of the FBM KLCI is waning and is likely to further consolidate.

The immediate short term trend of the FBM KLCI has turned down as the key index has closed below the 5 and 10-day SMA. Nevertheless, it is still above the 20 and 30-day SMA, which might lend some support to the index at 1,565 to 1,561-point level. The medium term trend remained sideways while the longer term trend is still up. With the weekend approaching and the Greece’s second election to be held this coming Sunday, the FBM KLCI is likely to remain in a consolidation mode as can be seen from the shrinking total volume over the last few days.

Overnight, the Dow rose +155.53 points or +1.24% to close at 12,651.91. Today, the FBM KLCI is likely to trade within a range of 1,562 to 1,585.

This week's expected range: 1532 – 1603
Today’s expected range: 1562 – 1585

Resistance: 1576, 1580, 1585
Support: 1562, 1566, 1568

Stocks to watch: PENERGY, PERDANA, DIALOG