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Monday, November 8, 2010

FBM KLCI - inching closer to all time high level

Stocks on Bursa Malaysia ended last week broadly higher. Bursa Malaysia was closed for Deepavali celebration on Friday. The market barometer, FBM KLCI ended last week at 1511.74, or 6.08 points higher from 1505.66 the previous week. It is getting closer to its all time high close of 1516, recorded on Jan 11, 2008. The total weekly turnover decreased to 5.075 billion shares valued at RM6.168 billion from 6.275 billion shares valued at RM8.958 billion the previous week.
The FBM KLCI ended firmer on last Monday with a gain of 4 points to close at 1509.66, led by oil & gas stocks after the strong listing the previous Friday of Petronas subsidiary MHB, and in line with regional markets on the back of China's strong manufacturing growth. The market ended lower on Tuesday on profit-taking amid regional weakness after Australia unexpectedly raised interest rates, with the FBM KLCI down 3.09 points to close at 1506.57. On Wednesday, The FBM KLCI inched up by 1.03 points to close at 1507.6 after trading in a tight range, with most investors switching trading positions to fast moving lower liners and plantation stocks. Stocks extended gains on last Thursday, on Deepavali eve, after news of UEM Land's merger plan with Sunrise, which boosted buying interest in lower liner property stocks.

On the weekly chart, the FBM KLCI formed a spinning-top candlestick which indicates a balanced in the bull’s and bear’s fight with the bull having a slight edge as the key index closed above its weekly opening price, this candle formation also indicates indecision in the market to move forward. Nevertheless, this is the sixth straight week of gain in the benchmark index. On the daily chart, The FBM KLCI too formed a Doji candlestick after opening with an up gap of 4.46 points higher last Thursday; the formation of a Doji indicates the benchmark index was indecisive to move further ahead of a long weekend. Nevertheless, it still made a gain of 4.14 points on a day-on-day basis.

Weekly MACD continued to move higher, however, its weekly histogram is getting shorter, indicating a slow down in the weekly or medium term upward momentum. Daily MACD was turning flat but is still below its signal line, and its daily histogram has turned shorter upward, indicating a state of consolidation. Just a slight gain in the key index will lead to a golden-cross.

Weekly RSI (14) continued to move higher, and is at 80.7, a level which is strongly overbought, and a correction is imminent. Daily RSI (14) at 72.7 continued to climb higher and is still in a bullish state.

Weekly Stochastic is at 97.1 and continued to move higher, indicating a very strong medium term underlying strength of the FBM KLCI. Daily Stochastic at 90.6 has, however, turned flat and has stick to its slow stochastic, reflecting the consolidation.

Technical signals on the weekly chart are indicating a still very strong underlying strength, with the appearance of a spinning-top candlestick and weekly RSI moving into extremely overbought zone, a correction is imminent. Signals from the daily chart are indicating a strong underlying strength with a slow down in the upward momentum, hence, the key index might continue to move sideways with an upward bias.

Having said so, the bullish trend indicators should offset the overbought situation on momentum oscillators for the FBM KLCI which could persist for a while, especially given the firm external market tone as global stocks and commodities rally on optimism the second round of quantitative easing by the US further weakens the dollar and boost growth.
The Dow rose a marginal +9.24 points or +0.08% higher to close at 11,444.08 last Friday. This week, the FBM KLCI may trade within a range of 1492 to 1527, and for today it is likely to trade within a range of 1504 to 1518.

This week's expected range: 1492 – 1527
Today’s expected range: 1504 – 1518

Resistance: 1514, 1516, 1518
Support: 1504, 1506, 1509

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