FBM KLCI - losing momentum

Stocks on Bursa Malaysia ended on a mixed note yesterday with active profit-taking seen across the board. The benchmark FBM KLCI posted a marginal gain of 0.53 point or 0.03% to close at a new record high of 1,788.43 after hovering between 1,784.34 and 1,793.15 throughout the day. Losers led gainers by 504 to 398 with 271 counters unchanged. Volume decreased to 2.248 billion shares worth RM2.679 billion from Monday's 2.86 billion shares worth RM3.046 billion.

The FBM KLCI opened 1.75 points lower at 1,786.15 and rebounded to the intra-day high of 1,793.15 within the first hour of trading. Profit-taking activity set in and pushed the key index to the intra-day low of 1,784.34 at noon. The key index rebounded slightly and moved sideways in the afternoon before closing marginally higher. Chart-wise, the FBM KLCI formed a white inverted hammer candlestick, which indicates profit-taking activity was generally dominant for the day but the bulls fought back and managed to put the index into the positive territory with just a marginal gain. From the price movement yesterday, we can see that the key index is facing heavy resistance at level above 1,790-point, and the upward momentum is reducing as can be seen from the smaller daily trading range. Hence, the FBM KLCI is likely to pause for a breather at current level to consolidate its recent gains before moving higher to challenge the 1,800-point psychological resistance level.

MACD continued to climb higher, but its histogram was lower, indicating a reduction in the upward momentum. RSI (14) was marginally higher at 75.1 from 75, reflecting the marginal gain in the key index, and the key index is still in a very bullish state. Stochastic was higher at 69.3 from 63.9, indicating a continued improvement in the market strength and the short term up cycle. Readings from the indicators showed that the FBM KLCI is losing its upward momentum, and hence, is likely to consolidate.

The trend of the FBM KLCI remained up. However, the key index started to show sign of tiredness from the price action over the last two days as heavy profit-taking activity started to emerge. It is likely that the FBM KLCI will pause for a breather to consolidate itself before making further move to challenge the 1,800-point level. Immediate overhead resistance zone is at 1,793 to 1,800 while the downside support zone is at 1,784 to 1,775.

Overnight, the DJIA rose 123.57 points or +0.82% to close at 15,215.25. Today, the FBM KLCI is likely to trade within a range of 1,775 to 1,802.

This week's expected range: 1697 – 1818
Today’s expected range: 1775 – 1802

Resistance: 1793, 1798, 1802
Support: 1775, 1779, 1784