Stocks on Bursa Malaysia closed at a seven-week low yesterday as increasing worries over external developments curbed investors' appetite, influenced by concerns about a credit crunch in China, reflecting the prospect of slower economic growth for the world's second largest economy. The FBM KLCI fell 9.55 points or 0.55% to close at 1,728.64, after moving between 1,723.74 and 1,743.16 throughout the trading session. Losers trounced advancers by 531 to 258, with 289 counters unchanged. Total volume slipped to 1.599 billion shares worth RM2.851 billion from 1.67 billion shares valued at RM2.18 billion on Monday.
Taking cue from the weak performance of Wall Street overnight, the FBM KLCI opened lower with a big downside gap of 10.46 points at 1,727.73 and slipped to the intra-day low of 1,723.74 within the first seven minutes of trading. The key index rebounded from there and climbed to the intra-day high of 1,743.16 at mid morning, but the bulls could not sustained, and the bears surfaced to continue to beat down the key index to close near the opening level. Chart-wise, the FBM KLCI formed a white inverted hammer candlestick, a bottom reversal candlestick pattern, which indicates the key index might have hit a temporary bottom at 1,723, and seen the surfacing of the bulls which chased the key index 20 points up to the immediate resistance level of 1,743. However, there are still remnant sellers who took the opportunity to sell down. Hence, the FBM KLCI is likely to continue to consolidate today or may stage a technical rebound as the key index has retreated 68 points from the top resistance level of 1,795, or 98 points from the historical high level of 1,826.
MACD continued to slide lower and has crossed below the zero-line, indicating the FBM KLCI has officially turned bearish for the medium term. RSI (14) was lower at 37.2 from 40.1, indicating the key index has turned bearish for the short term. Stochastic slipped lower to 13.2 from 23.9, entering the short term oversold zone, indicating a very weak market and continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI has turned bearish for the short term. Nonetheless, an oversold reading on the stochastic may trigger a technical rebound.
The FBM KLCI has turned bearish for the short and medium term as the key index has closed below the short and medium term moving averages. Nevertheless, the long term trend of the FBM KLCI is still up as can be seen from the trend channel on the chart, and the long term moving averages are still pointing northeast. Immediate downside support is pegged at 1,723, follow by 1,718, the pivot high formed on April 30, and a breach of this support zone might see the FBM KLCI re-visiting the 1,700 psychological support level. The local market is likely to trade cautiously today with an immediate overhead resistance at 1,743 follow by 1,752.
Overnight, the Dow rose 100.75 points or +0.69% to close at 14,760.31. Today, the FBM KLCI is likely to trade within a range of 1,701 to 1,762.
This week's expected range: 1690 – 1827
Today’s expected range: 1701 – 1762
Resistance: 1739, 1751, 1762
Support: 1701, 1712, 1720