Millionaire Trend Trader: FBM KLCI - higher on follow through buying

Wednesday, May 23, 2012

FBM KLCI - higher on follow through buying

Stocks on Bursa Malaysia ended firmer yesterday in tandem with the overnight technical rebound on Wall Street. The local market was also benefiting from bargain-hunting activities but sentiments remained cautiously optimistic. The FBM KLCI closed 7.93 points or 0.515% higher at 1,546.44 after hovering between 1,539.74 and 1,546.84 throughout the day. Gainers led losers by 479 to 245 while 310 counters were unchanged. Turnover appreciated to 911.80 million shares worth RM1.280 billion from 780.02 million shares valued at RM1.07 billion transacted on Monday.

Taking cue from the rebound on Wall Street overnight, the FBM KLCI opened 0.83 point higher at 1,539.74 and surged to the morning session high of 1,546.37 before going into an intra-day consolidation. Bargain-hunting activities in the last hour helped pushed the key index to close at the highest point of the day. Chart-wise, the FBM KLCI formed a bullish white Marubozu candlestick which served to confirm the bottom reversal signal issued by the bullish Harami candlestick pattern formed on Monday. Continuing from the steady upward momentum yesterday, the FBM KLCI is likely to climb higher today but is likely to face heavy resistance or profit-taking at the 1,552 to 1,559 zone.

MACD was marginally lower but is tapering off, while its histogram was shorter upward, indicating a reduction in the bearish downward momentum. RSI (14) was higher at 38.4 from 33.4 previously, indicating an improvement of the short term relative strength. Nevertheless, it is still bearish but is approaching the mildly bearish zone. Stochastic continued to climb higher to 19.9 after crossing over the slow stochastic line on Monday, indicating an improvement in the market strength and a possible short term up cycle is beginning. Readings from the indicators showed that the FBM KLCI is undergoing a technical rebound after a round of sell down, and overall the key index is still bearish at the moment.

The FBM KLCI has just made a crossover above the very short term 5-day SMA and was also back above the long term 120-day SMA. Nonetheless, the overall trend of the FBM KLCI still remained down as it is still below the middle trend line of the downtrend channel. In order for the FBM KLCI to reverse the current downtrend, it must at least move above the 1,590-point level. With the overall volume staying below the one billion shares mark, the broad market is likely to remain quiet with some rotational play on the second and third liners.

Overnight, the Dow fell a marginal -1.67 points or -0.01% to close at 12,502.81. Today, the FBM KLCI is likely to trade within a range of 1,535 to 1,554.

This week's expected range: 1489 – 1606
Today’s expected range: 1535 – 1554

Resistance: 1550, 1552, 1554
Support: 1535, 1537, 1542

Stocks to watch: SKPETRO, WINGTM, PERMAJU, MBL

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Wednesday, May 23, 2012

FBM KLCI - higher on follow through buying

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