Stocks on Bursa Malaysia closed lower last Friday on profit-taking as investors trim their positions ahead of the weekend. Profit-taking and the prolonged overbought momentum restricted the index from breaking the 1,650 level. The benchmark FBM KLCI fell 1.6 points or 0.1% to close at 1,643 after moving between 1,641.58 and 1,647.41 throughout the day. Week-on-week, the benchmark index advanced 16.62 points or 1.02% higher from previous Friday’s closing of 1,626.38 after hitting a historic high of 1,645 points on Wednesday. Decliners led advancers by 410 to 376 while 352 counters closed unchanged. Total volume rose to 1.22 billion shares valued at RM1.718 billion from 1.109 billion shares valued at RM1.591 billion on Thursday, while weekly volume decreased to 5.916 billion shares, worth RM8.29 billion, from 6.309 billion shares, worth RM8.618 billion, registered the previous week.
Last week was a record making week for the FBM KLCI as it continuously charts new high and extended its rally into record territory for a third straight week. The FBM KLCI opened last Monday with an up gap of 1.89 points at the intra-week low of 1,628.37 and rallied to close at the highest point of the day at 1,635.96. The key index continued its up move on Tuesday to end 3.19 points higher at 1,639.15 after touching an intra-day high of 1,646.97. Continuous buying momentum on Wednesday pushed the FBM KLCI 5.85 points higher to close at the all-time high of 1,645. Thursday witnessed the benchmark index hitting an all-time intra-day high of 1,647.94 before succumbing to profit-taking pressure to close 0.4 of a point lower at 1,644.60, and the key index continued to slip on Friday to close 1.6 point lower at 1,643.
On the weekly chart, the FBM KLCI formed a bullish white candlestick and has risen for the third consecutive weeks. It is approaching the psychological resistance level of 1,650 and may test it before a meaningful pullback occurs. However, a break of the 1,650-point level may see the benchmark index rally towards the next target of 1,661. On the daily chart, the FBM KLCI attempted to challenge the all-time intra-day high level of 1,647.94 on Friday but failed and closed lower to form a second black inverted hammer candlestick which confirmed the top reversal signal issued by the first inverted hammer candlestick formed on Thursday, and the key index is likely to further correct itself with immediate downside support zone envisaged at 1,641 to 1,632, with the 10-day SMA at 1,633 and the 20-day SMA at 1,619 giving strong support.
Weekly MACD and its histogram continued to rise, indicating continued improvement in the weekly momentum. Daily MACD has turned flat, but the histogram has turned shorter, indicating a reduction in the upward momentum. Weekly RSI (14) was higher at 66.9, indicating a very bullish state of the FBM KLCI and is approaching the overbought zone. Daily RSI (14) continued to slip lower to 73.7, reflecting the pullback of the key index, but the short term relative strength is still in the very bullish zone. Weekly Stochastic was higher at 96.4 while the daily stochastic was at 93, indicating an overbought situation. Readings from the indicators showed that the FBM KLCI is in a very bullish state; however, signs are there that it is overbought and further pullback is likely to happen.
The trend of the FBM KLCI remained up and bullish. Nevertheless, top reversal candlestick patterns was formed on the daily chart, and further pullback correction is expected but is likely to be a shallow one ahead of the listing of IHH Holdings on Wednesday, which offer opportunities to buy into quality shares at lower price. Turnover remained lukewarm for last week, and with the Ramadan month started on last Saturday, the market may see a dwindling volume and the FBM KLCI is likely to go into a consolidation mode; however, rotational plays on the second and third liners is likely to keep the market alive.
Last Friday, the Dow fell -120.79 points or -0.93% to close at 12,822.57. This week, the FBM KLCI is likely to trade within a range of 1,612 to 1,668, and for today, it is likely to trade within a range of 1,634 to 1,654.
This week's expected range: 1612 – 1668
Today’s expected range: 1634 – 1654
Resistance: 1647, 1650, 1654
Support: 1634, 1638, 1640
Stocks to watch: DRBHCOM, MNRB, IJMPLNT, WEIDA, MYEG, SCOPE