Millionaire Trend Trader: FBM KLCI - likely to be range-bound with an upward bias

Monday, June 11, 2012

FBM KLCI - likely to be range-bound with an upward bias

Stocks on Bursa Malaysia ended lower in narrow trading last Friday with investors taking some profits after recent strong gains. The bourse's weak performance was in line with other Asian stock markets on renewed concerns over the economic situation in the Eurozone and US, and investors were also reluctant to hold positions ahead of the weekend amid lack of market leads as China's unexpected interest rate cut has contributed to the uncertainty over the strength of the world's second largest economy. The FBM KLCI lost 4.69 points or 0.30% to 1,570.62 after hovering between 1,568.89 and 1,576.52, and week-on-week it lost 2.97 points from previous Friday’s 1,573.59. Market breadth was negative with decliners leading advancers by 376 to 288 while 327 counters were flat. Turnover fell to 576.86 million shares worth RM988.39 million from the 779.75 million shares worth RM1.45 billion on Thursday, and weekly volume fell to 3.37 billion shares valued at RM5.64 billion from 4.3 billion shares worth RM7.03 billion registered the previous week.

Taking cue from the hefty fall of 275 points on the Dow the previous Friday, the FBM KLCI opened last Monday with a down gap of 7.4 points at 1,566.19 and continued sliding lower on heavy selling pressure to hit the intra-week low of 1,554.65 before ending 18.41 points lower at 1,555.18. The benchmark index rebounded on Tuesday in tandem with regional markets to closed 5.18 points higher at 1,560.36 after hovering between 1,554.51 and 1,563.33. Continued buying interest on Wednesday pushed the FBM KLCI 9.07 points higher to close at 1,569.43. Buoyed by positive economic developments in Europe and the United States, the FBM KLCI rose 5.88 points to 1,575.31 on Thursday after hitting the intra-week high of 1,578.76, while Friday’s saw profit-taking activity sets in and the FBM KLCI 4.69 points to end the week at 1,570.62.

On the weekly chart, the FBM KLCI formed a white spinning-top candlestick in Harami position which indicates indecision of the market direction but with an upward bias. It was closing below the 10-week SMA but was above the 5-week SMA, indicating a range-bound situation with immediate overhead resistance zone at 1,578 to 1,582 and the downside support zone at 1,554 to 1,544. On the daily chart, the FBM KLCI formed a bearish black candlestick which actually confirmed the top reversal signal issued by the spinning-top candlestick formed on Thursday, and the key index also closed the gap which indicates exhaustion of the three days up move last week. Hence, the FBM KLCI is likely to continue to consolidate or remained range-bound.

Weekly MACD was marginally lower but its histogram was shorter upward, indicating a slow down in the weekly downward momentum. On the contrary, daily MACD continued to climb higher, but its histogram was slightly shorter, indicating a state of consolidation. Weekly RSI (14) hooked down marginally to 54.1 from 58.4, reflecting the mild pullback in the key index, and the weekly relative strength is still in the mildly bullish zone. Daily RSI (14) also made a pullback to 51.9 from 54.3, indicating the daily relative strength of the FBM KLCI is in a neutral state with a slight bullish bias. Weekly Stochastic has hooked upward to 46.5 and crossed over the weekly slow stochastic line, issuing a buy signal and indicating a possible end of the recent down cycle. The daily Stochastic was higher at 79.8, indicating a continuation of the short term up cycle and strengthening of the benchmark index. Mixed signals from the indicators showed that the FBM KLCI is in a consolidation state but with an upward bias.

The broad trend of the FBM KLCI remained down as the key index is still trapped within the downtrend channel. However, despite the pullback on last Friday, the short term trend is up as the key index is now closing above the short term 5, 10, 20 and 30-day SMAs. The medium term trend remained sideways as the FBM KLCI is still below the medium term 50 and 60-day SMAs but above the longer term moving averages. In order to re-gain its bullish uptrend and breakout from the current sideways range-bound situation, the FBM KLCI will have to break through the immediate resistance zone of 1,578 to 1,582 follow by the next resistance level at 1,591. On the flip side, if the FBM KLCI breaks below its immediate critical support of 1,554, the bearish downtrend will continue.

Last Friday, the Dow rose +93.24 points or +0.75% to close at 12,554.20. This week, the FBM KLCI is likely to trade within a range of 1,532 to 1,603, and for today, it is likely to trade within a range of 1,559 to 1,585.

This week's expected range: 1532 – 1603
Today’s expected range: 1559 – 1585

Resistance: 1576, 1580, 1585
Support: 1559, 1564, 1567

Stocks to watch: GASMSIA, DIALOG, MPHB

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Monday, June 11, 2012

FBM KLCI - likely to be range-bound with an upward bias

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