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

Stocks on Bursa Malaysia ended last Friday, the mid-year closing day of 2012 on a steadier note in line with key regional bourses on renewed global optimism as European leaders unexpectedly agreed measures to ease the region’s debt crisis and bank problems which lifted market sentiment globally. The FBM KLCI settled just a whisker below the 1,600 points psychological level at 1,599.15 with a gain of 4.91 points or 0.31% after opening 0.20 of a point better at 1,594.53. Week-on-week, the benchmark index achieved an all-time high of 1,611.5 on June 25 before finishing the week 3.92 points lower at 1,599.15. Gainers led losers by 473 to 271, 320 counters were unchanged. Turnover declined to 1.301 billion shares worth RM1.885 billion from Thursday’s 1.563 billion shares valued at RM2.741 billion, while the weekly volume expanded to 6.163 billion shares, valued at RM8.988 billion, from 4.848 billion shares, worth RM6.437 billion, registered the previous week.

The FBM KLCI was basically in a range-bound consolidation mode the whole of last week, it opened last Monday 0.36 of a point easier at 1,602.71 and rallied to a record intra-day high of 1,611.50 but ended only 0.05 of a point higher at 1,603.12 on heavy profit-taking activity. In line with the weaker regional sentiment, weighed down by the Eurozone debt crisis that has struck global risk appetite, the FBM KLCI lost 9.02 points to 1,594.1 on Tuesday. The local bourse ended Wednesday on a mixed note with the benchmark index finished above the 1,600-point psychological level, taking cue from gains on regional markets, at 1,601.89, inching up 7.79 points. Thursday witnessed the listing of Felda Global Ventures Holdings Bhd (FGV), the world’s second largest initial public offering (IPO), but the FBM KLCI lost 7.65 points to close at 1,594.24 on persistent selling pressure, and the FBM KLCI ended Friday, the last trading day of June, with a gain of 4.91 points to close at 1,599.15.

On the weekly chart, the FBM KLCI formed a black spinning-top candlestick which indicates the benchmark index was facing uncertainties of direction after the previous week’s strong up move, and is likely to move range-bound or consolidate itself in the coming week. On the daily chart, the FBM KLCI formed a white candlestick with long upper shadow which indicates the key index was facing selling pressure above the 1,600-point psychological level, and the body of the candlestick was contained with the previous day’s black candlestick body, indicating range-bound consolidation, and the formation of a flag chart pattern further confirms the consolidation.

Weekly MACD continued to move higher and so is the histogram which turned shorter upward, indicating the weekly momentum is improving. Nevertheless, the weekly MACD is still below its signal-line. On the other side, daily MACD and its histogram was sliding lower, indicating losses in the daily momentum. However, as the MACD is still above its signal-line, the current weakness is viewed as a short term consolidation. Weekly RSI (14) has hooked downward slightly to 59.3 from 60.4, reflecting the mild pullback on the weekly chart, and the weekly relative strength is still in the upper end of the mildly bullish zone. Daily RSI (14) has hooked upward to 58.8 from 58.4, indicating a slight improvement in the daily relative strength, and is in the mildly bullish state. Weekly Stochastic continued to climb higher to 80.5, indicating the weekly up cycle is still intact and the weekly market strength is strengthening. Daily stochastic has hooked upward to 68.3 from 64.8 but is still below the slow stochastic line, reflecting the rebound and the short term down cycle is not over yet. Mixed readings from the weekly and daily indicators showed that the FBM KLCI is still generally bullish but is currently undergoing a consolidation, and when the consolidation is over, it might move higher to re-test the historical peak.

The broader trend of the FBM KLCI is up while for the immediate short term, it is in a sideways trend. Immediate overhead resistance zone is at 1,605 to 1,611 while the downside support is at 1,591, and a breakout above the upper resistance will likely see the FBM KLCI moving higher into the uncharted territory with an immediate target of 1,631 follow by 1,640. While a break below the immediate support of 1,591 will likely see the key index sliding lower to the immediate next lower support at 1,581.

Last Friday, the Dow rose +277.83 points or +2.20% to close at 12,880.09. This week, the FBM KLCI is likely to trade within a range of 1,570 to 1,631, and for today, it is likely to trade within a range of 1,582 to 1,616.

This week's expected range: 1570 – 1631
Today’s expected range: 1582 – 1616

Resistance: 1605, 1611, 1616
Support: 1582, 1588, 1593

Stocks to watch: MBFHLDG, TIMECOM, BIMB, BINTAI, PENERGY