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Wednesday, October 6, 2010

FBM KLCI - ready to re-test recent resistance at 1479

Stocks on Bursa Malaysia ended yesterday higher with the benchmark index closing above the 1470 level. The FBM KLCI rebounded to close 9.92 points or 0.68% at 1472.19 after opening 5.75 points higher at 1468.02. Losers led gainers by 411 to 319 today while 290 counters were unchanged. Turnover was lower at 985 million shares valued at RM1.51 billion, compared with Monday’s 1.37 billion shares worth RM1.71 billion.

The FBM KLCI opened 5.75 points higher at 1468.02 and continued to trade in the positive territory throughout the day within a six points range. Continued buying of selected blue-chips helped pushed the key index to close near the high of the day. Chart-wise, the key index formed a bullish outside bar, which indicates the bull was in control of the day. After consolidating below the 1470 level for more than a week, the key index has finally stood above the 1470 level again, and is ready to re-test the recent high of 1479.59. If the key index is able to break through this tough resistance level, it is expected to challenge the next target level of 1491.

MACD continued to move lower, but is tapering off, as shown by the shorter histogram, indicating a slow down in the downward momentum. RSI (14) at 66.9 has hooked up, nonetheless, is still in the mildly bullish zone. Stochastic at 65 has rebounded and crossed above its slow stochastic, but still trapped in a sideways range as it has been see-sawing in the current level. Signals from the indicators are indicating a sideways or range-bound market with an upward bias.

With the rebound yesterday, the FBM KLCI has again stood above the short term 5 and 10-day moving averages (MA), and is expected to continue moving higher. The underlying medium to longer term uptrend remained intact. Immediate overhead resistance zone is at 1480 to 1500 while the downside support zone is at 1445 to 1456.

The overall market is expected to remain buoyant leading to the announcement of the Budget 2011 on 15 October. Rotational play on second and third liners will remain active. Overnight, the Dow rose +193.45 points or +1.80% higher to close at 10,944.72. Today, the FBM KLCI is likely to trade within a range of 1463 to 1481.

This week's expected range: 1445 – 1491
Today’s expected range: 1463 – 1481

Resistance: 1474, 1476, 1481
Support: 1463, 1465, 1468

Stock to watch: Handal, Homeriz, SDRED, IJMLand

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