Stocks on Bursa Malaysia closed lower across the board at a five-week low yesterday due to growing concerns over the outlook for the United States monetary policies that have put global equity markets under pressure. Jitters on the US Federal Reserve, which could taper down bond purchases, put more pressure into global equity markets which have already been affected after the Bank of Japan declined to take additional stimulus measures on Tuesday. The FBM KLCI, influenced by regional sell-off, ended the day at 1,742.87, down 32.25 points or 1.81%, after hitting an intra-day high at 1,774.52 but ended at intra-day low of 1,742.87. Losers beat gainers by 803 to 142, with 186 counters unchanged. Volume expanded to 2.134 billion units valued at RM2.794 billion from 1.725 billion units worth RM2.231 billion on Wednesday.
Taking cue from the weak close of the Dow overnight, the FBM KLCI opened 1.44 points lower at 1,773.68 and rebounded briefly to the intra-day high of 1,774.52. However, heavy selling pressure sent the key index lower for the rest of the day to end at the intra-day low of 1,742.87. Chart-wise, the FBM KLCI formed a bearish long black candlestick which indicates heavy selling pressure and the bears were in control. With such a bearish down move on increased volume, it indicates a heavy sell down, and the bearish momentum is likely to drag the FBM KLCI lower to cover the gap formed on May 6. Immediate downside support is at 1,718.44, the pivot high formed on April 30.
MACD and its histogram plunged lower, indicating an increased in the bearish momentum. RSI (14) fell below the 50-level to 41.6 from 55.3, issuing a sell signal, and indicated the FBM KLCI has turned bearish for the short term. Stochastic plunged to 22.9 from 53.5, making a dead-cross over the slow stochastic line, indicating the key index is very weak and continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI had turned bearish and the downward momentum is increasing, and hence, the correction is likely to extend.
The short term trend of the FBM KLCI has turned bearish and down for the first time in 5-weeks after the GE13, as the key index has now closed below the 30-day SMA and headed toward the 50-day SMA which is now at 1,740-point level, and a further break of the 50-day SMA will see the index plunging lower to the 60-day SMA currently at 1,725. The FBM KLCI is likely to slide lower to cover the gap formed on May 6 with 1,718 being the critical support level. Nevertheless, from the longer term perspective, the long term uptrend of the FBM KLCI is still very much intact, and hence, the current correction should be viewed as an opportunity to buy into quality stocks at lower level for longer term gain.
Overnight, the Dow rebounded 180.85 points or +1.21% to close at 15,176.08. Today, the FBM KLCI is likely to trade within a range of 1,700 to 1,785.
This week's expected range: 1756 – 1791
Today’s expected range: 1700 – 1785
Resistance: 1752, 1763, 1785
Support: 1700, 1721, 1732