Stocks on Bursa Malaysia closed firmer yesterday supported by gains in blue-chips despite the weaker performance on regional bourses, as overnight Wall Street ended on a weaker note with the Dow Jones Industrial Average slipping between 0.8% and 1.1% after bearish economic data halted the market’s upward momentum. The FBM KLCI went through see-saw trading yesterday, but the key index managed to hold, ending 3.06 points or 0.18% higher at 1,688.46, after opening 4.43 points lower at 1,680.97. The FBM KLCI moved between 1,678.18 and 1,700.55 throughout the day. Gainers led losers by 534 to 226 with 264 counters unchanged. Turnover declined to 996.007 million shares worth RM1.751 billion from Wednesday's 1.345 billion shares worth RM2.893 billion.
Taking cue from the weak performance of Wall Street overnight, the FBM KLCI opened lower with a downside gap of 4.43 points at 1,680.97 and slipped lower to the intra-day low of 1,678.18 within the first three minutes of trading. The key index rebounded strongly and surged to hit a new all-time intra-day high of 1,700.55 within the next five minutes, and heavy profit-taking set in which saw the key index slipping lower from the intra-day high and move sideways for the rest of the day. Chart-wise, the FBM KLCI formed a white inverted hammer candlestick which indicates heavy profit taking activity and distribution at the immediate overhead resistance zone of 1,690 to 1,700. The breaking of the historical high of 1,699.68 to a new all-time intra-day high of 1,700.55 but pulled back to close way below the new high is a false breakout and should forewarn of a possible top, and a white inverted hammer candlestick appearing at this high level also indicated toppishness and is a sign of possible top reversal. Hence, the FBM KLCI is likely to stay range-bound with immediate overhead resistance zone at 1,690 to 1,700, while the downside support zone is at 1,678 to 1,660.
MACD continued to climb higher, but its histogram expanded just marginally higher to 4.8313 from 4.8288, indicating a very mild increase in the upward momentum. RSI (14) was higher at 70.8, entering the very bullish or overbought zone for the first time after breaking below the 70-level on 2nd January 2013, indicating a very bullish or overbought state of the FBM KLCI, and a correction is imminent. Stochastic continued to climb higher to 91.7 from 90.4, indicating a very strong market strength and continuation of the short term up cycle. Readings from the indicators showed that the FBM KLCI is currently in a very bullish or overbought state, and a pullback correction is expected to happen soon.
The trend of the FBM KLCI is up and bullish as the key index is closing above all the moving averages. However, the long upper shadow of the white inverted hammer coupled with a false breakout is forewarning of heavy distribution at current level, and a pullback correction is imminent. Nevertheless, the pullback is expected to be shallow, and the FBM KLCI is likely to re-challenge the all-time high level after the correction is over.
Overnight, the Dow rebounded 55.76 points or +0.38% to close at 14,606.11. Today, the FBM KLCI is likely to trade within a range of 1,666 to 1,711.
This week's expected range: 1607 – 1712
Today’s expected range: 1666 – 1711
Resistance: 1693, 1699, 1711
Support: 1666, 1677, 1680
Stocks to watch: MAYBULK, MUHIBAH, NAIM, PERDANA, SENDAI, ZELAN