Stocks on Bursa Malaysia closed sharply lower yesterday on panic selling after Standard and Poor’s said it may cut Malaysia’s sovereign credit rating if the government did not deliver promised reforms to cut spending to reduce its fiscal deficits. Malaysia’s ranking slippage in the latest World Economic Forum’s Competitiveness Index 2012-2013 also gave investors the excuse to close bets and take profits ahead of the potential budget and local election. The FBM KLCI lost 23.02 points or 1.40% to close at 1,617.99 after opening 7.42 point lower at 1,633.59, and hovered between 1,613.16 and 1,635.95 throughout the day. Losers beat gainers by 739 to 157, while 241 counters were unchanged. Total turnover declined to 1.30 billion shares worth RM1.99 billion from Wednesday's 1.35 billion shares worth RM1.7 billion.
The FBM KLCI opened with a gap down of 7.42 points at 1,633.59 and rebounded to the intra-day high of 1,635.95 within the first thirty minutes of trading, but slipped lower on heavy selling pressure due to panic selling and hit the intra-day low of 1,613.16 at mid-afternoon, losing 27.85 points at its worst. The benchmark index rebounded on bargain hunting activity in the last hour to close off low. Chart-wise, the FBM KLCI formed a bearish long black candlestick with a runaway gap to the downside, indicating players or investors are selling out in a panic or irrational situation, and the key index may continue to slide lower on further selling pressure from those who missed the selling yesterday. Immediate downside support is at 1,613, and if this support level cannot hold, the FBM KLCI may slip lower to the all important psychological support level of 1,600.
MACD and its histogram slipped further southward, indicating a huge increased in the bearish downward momentum. RSI (14) plunged to 32.8 from 48.6 the day before, indicating a huge loss in the short term relative strength, and the key index has entered the bearish zone. Stochastic slipped to 22.5 from 59.2 previously, indicating a serious weakening of the market strength and continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI has turned bearish for the short term and is likely to further correct or consolidate itself.
The FBM KLCI has turned bearish for the short and medium term as it is now closing below the short and medium term moving averages, namely the 30 and 60-day SMA. The long term trend, nevertheless, is still up for the time being. Immediate downside support zone is at 1,613 to 1,600 while the overhead resistance zone is at the gap area of 1,635 to 1,641. The 1,600-point psychological support level is extremely crucial now as it coincided with the 120-day SMA, and a break below this critical support level would spell a death knell for the FBM KLCI. Any rebound from now onwards should be viewed as an opportunity to cash out.
Overnight, the Dow rose +244.52 points or +1.87% to close at 13,292.00. Today, the FBM KLCI is likely to trade within a range of 1,585 to 1,658.
This week's expected range: 1632 – 1661
Today’s expected range: 1585 – 1658
Resistance: 1631, 1645, 1658
Support: 1585, 1600, 1608
Stocks to watch: KNM, SCOMI, THHEAVY