Stocks on Bursa Malaysia rebounded from recent losses to close on a firm note last Friday, as sharp gains in regional equity markets on positive economic data from US sparked buying interest on the local bourse. The FBM KLCI rose 19.32 points or 1.11% to close at 1,762.19 after opening 6.54 points higher at 1,749.41. Week-on-week, the key index lost 13.4 points from previous Friday's 1,775.59. Market breadth was positive as gainers thumped losers 526 to 221, with 319 counters unchanged. Volume declined to 1.869 billion units worth RM2.119 billion from 2.134 billion units valued at RM2.794 billion on Thursday. Weekly turnover rose to 10.38 billion shares worth RM12.234 billion from 10.11 billion shares valued at RM11.12 billion last week.
The FBM KLCI was basically in a correction mode last week. It opened last Monday higher with an upside gap of 4.58 points at 1,780.17 and climbed higher to the intra-week high of 1,792.67 before pulling back to close off high on mild profit-taking at 1,787.8 with a gain of 12.21 points. Tuesday saw the key index retreated 8.23 points to 1,779.57 on weaker regional sentiment as the sharp decline in Japan's Nikkei 225, attributed to the still unclear situation about the US quantitative easing programme. The FBM KLCI continued to slide lower on Wednesday to end 4.45 points lower at 1,775.12, and Thursday saw the key index plunging 32.25 points or 1.81% to 1,742.87, a five-week low due to growing concerns over the outlook for the United States monetary policies that have put global equity markets under pressure. Nonetheless, Friday saw a rebound on the FBM KLCI.
On the weekly chart, the FBM KLCI formed a bearish black spinning-top candlestick with a slightly longer lower shadow which indicates the key index was facing uncertainties with a bearish bias. Hence, the FBM KLCI is likely to continue to consolidate in the coming week. On the daily chart, the FBM KLCI staged a rebound last Friday to form a white Marubozu candlestick in bullish Harami position, indicating strong bargain-hunting activity emerging on Friday, and the key index may continue its strong rebound to move higher. However, strong overhead resistance is expected at 1,765-point level.
Weekly MACD has hooked downward slightly while its histogram continued to slide lower, indicating a further loss in the weekly momentum. Daily MACD continued to slide lower, but its histogram contracted upward slightly, indicating a technical rebound. Weekly RSI (14) slipped lower to 66.5 from 71.1, indicating the weekly relative strength of the FBM KLCI has retreated from the very bullish or overbought zone. Daily RSI (14) hooked upward to 49.6 from 41.6, reflecting the strong rebound on Friday, but the reading showed that the key index is still short term bearish. Weekly Stochastic continued to slide lower to 73 from 75.3, indicating the weekly down cycle is still intact. Daily stochastic, nevertheless, hooked upward slightly to 23.1 from 22.9, reflecting the rebound on Friday, and the short term daily cycle is still down. Readings from the weekly indicators showed that the FBM KLCI has just started its correction, while the readings from the daily indicators showed that the correction is picking up strength, and a deeper correction is expected ahead.
The short term trend of the FBM KLCI has turned down as the key index is now closing below the short term 5, 10, 20, and 30-day SMA. Nevertheless, the longer term uptrend is still very much intact. The current correction is actually needed to neutralize the overbought situation, and hence, the FBM KLCI is expected to further correct downward to cover the gap formed on May 6. However, as the long term uptrend is still very much intact, current weakness should be viewed as an opportunity to bought into quality stocks at lower price level for longer term gain.
Last Friday, the Dow fell -105.90 points or -0.70% to close at 15,070.18 . This week, the FBM KLCI is likely to trade within a range of 1,716 to 1,815, and today, the FBM KLCI is likely to trade within a range of 1,740 to 1,775.
This week's expected range: 1716 – 1815
Today’s expected range: 1740 – 1775
Resistance: 1766, 1771, 1775
Support: 1740, 1744, 1753