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Wednesday, November 3, 2010

FBM KLCI - a healthy profit-taking correction

Stocks on Bursa Malaysia ended lower yesterday, with the key index falling 0.20%, dragged down by losses in heavyweight counters. The benchmark FBM KLCI which has been hovering above the 1,500 psychological level, slipped 3.09 points to close at 1506.57 after opening 0.15 point lower at 1509.51. Decliners outnumbered advancers by 463 to 279 while 320 counters were unchanged. Turnover dropped to 1.200 billion shares worth RM1.609 billion from Monday’s 1.271 billion shares worth RM1.512 billion.

The FBM KLCI opened 0.15 point lower at 1509.51 and continued to slip lower throughout the day. Last minute bargain-hunting of selected key heavyweights helped lift the key index off its intra-day low of 1504.72 to close the day at 1506.57. Chart-wise the key index formed a bearish black candlestick which covered the gap formed on Monday. The price action of the FBM KLCI yesterday also confirmed the reversal signal issued by the spinning-top candlestick formed on Monday. The key index, however, still manage to close above the 5 and 10-day moving average lines.

MACD has hooked downward and continue to remain below its signal line, indicating a resumed of the downward momentum. RSI (14) has retraced from the reading of 73.8 the day before to 70, reflecting the current correction, nevertheless is still in the very bullish zone. Stochastic at 93.8 continued to climb higher but is tapering off. Mixed signals from the indicators indicate that the FBM KLCI might goes into a short term consolidation.

The overall uptrend remained intact as the FBM KLCI continued to stay above all its short, medium and long term moving averages. Immediate overhead resistance zone is at 1511 to 1524 while the downside support zone is at 1500 to 1490.

Overnight, the Dow rose +64.10 points or +0.58% higher to close at 11,188.72. Today, the FBM KLCI is likely to trade within a range of 1499 to 1515.

This week's expected range: 1481 – 1524
Today’s expected range: 1499 – 1515

Resistance: 1509, 1512, 1515
Support: 1499, 1502, 1504

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