FBM KLCI - hitting another new record high

Stocks on Bursa Malaysia closed higher yesterday in line with the rally in regional bourses with the FBM KLCI touching an all-time intra-day high of 1,625.04. The local bourse’s uptrend was mainly prompted by gains in plantation counters, and investor sentiment was also lifted by new progress on the Eurozone after their finance ministers agreed to grant Spain an extra year, until 2014, to reach its deficit reduction targets. The benchmark FBM KLCI rose 3.98 points or 0.25% to close at a new high of 1,624.29, after the index opened 0.7 of a point better at 1,621.01. Gainers led losers by 436 to 338 while 355 counters were unchanged. Turnover increased to 1.132 billion shares worth RM1.536 billion from 1.266 billion shares worth RM1.293 billion on Monday.

The FBM KLCI opened 0.7 point higher at 1,621.01 and climb higher to hit an all-time intra-day high of 1,625.04 within the first hour of trading. Profit-taking activity which emerged pressed the key index lower and traded in a sideways band for most part of the day, but some last minute buying of selected blue-chips helped to push the FBM KLCI to close at another record high. Chart-wise, the FBM KLCI formed a bullish white candlestick which continues the uptrend, and buyers were still in control. The upward momentum is likely to carry the index to a higher level with 1,625 to 1,631 being the immediate resistance zone.

MACD continued to move higher and its histogram also grew longer, indicating a continuation of the upward momentum after a day of slow down. RSI (14) was higher at 70.03 from 68.3, entering the short term overbought zone for the first time since April 3^rd, indicating a very bullish state of the FBM KLCI but is now overbought. Stochastic has hooked downward slightly to 99.02 from 99.4, indicating very strong market strength but is extremely overbought for the short term. Readings from the indicators showed that the FBM KLCI is currently in a very bullish state but is overbought, and a correction is expected ahead.

The bullish uptrend of the FBM KLCI continues, however, as it is in a record making state for the past few days, the bears might have quietly creep in as can be seen from the intra-day sell-off and a last minute push up during the past few trading sessions. The best strategy now is to trade short term and lock-in profit along the way as the key index rises. Overall volume remained low, but the total value traded was higher, indicating the first and second liners stocks are dominant, and the FBM KLCI may hit the peak when the buying euphoria comes in.

Overnight, the Dow fell -83.17points or -0.65% for the fourth consecutive days to close at 12,653.12. Today, the FBM KLCI is likely to trade within a range of 1,617 to 1,630.

This week's expected range: 1585 – 1641
Today’s expected range: 1617 – 1630

Resistance: 1626, 1628, 1630
Support: 1617, 1619, 1621

Stocks to watch: MHB, MBSB, RSAWIT, YINSON, WEIDA, PRLEXUS