Stocks on Bursa Malaysia rebounded yesterday to close higher on a technical correction after a five-day losing streak, alongside positive external sentiment. Asian stocks rose for the first time in three days after better-than-estimated U.S. data bolstered the outlook for the world's largest economy and China's central bank sought to ease cash crunch concerns. The FBM KLCI rose 12.12 points or 0.7% to close at 1,740.76 after moving between 1,724.82 and 1,744.64 throughout the day. Gainers outpaced losers by 577 to 195, with 255 counters unchanged. Total volume slipped to 1.439 billion shares worth RM2.422 billion from 1.599 billion shares worth RM2.851 on Tuesday.
Taking cue from the rebound on Wall Street overnight, the FBM KLCI opened 1.04 points higher at 1,729.68 but slipped to the intra-day low of 1,724.82 on profit-taking activity. The key index then rebounded and moved higher for the rest of the day to touch the intra-day high of 1,744.60 before pulling back on profit-taking to close off high. Chart-wise, the FBM KLCI formed a bullish white candlestick which indicates buyers were in control for the day, and it also confirmed the bottom reversal signal issued by the white inverted hammer formed on Tuesday. Hence, the FBM KLCI is likely to continue its upward momentum to move higher today. Immediate overhead resistance zone is at 1,744 to 1,752, while the downside support is at 1,724.
MACD continued to slide lower below the zero-line, however, its histogram contracted upward, indicating a reduction in the bearish momentum. RSI (14) hooked upward to 42.9 from 37.2, indicating the key index has returned to a mildly bearish state from a bearish state. Stochastic was marginally lower and tapering off to 11.6 from 13.2, indicating the market is still weak and continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI is still currently weak and bearish for the short term, and the gain in the index may well be just a technical correction in an oversold market.
The short and medium term trend of the FBM KLCI remained down as the key index continued to close below the short and medium term moving averages. Nevertheless, the long term uptrend still remained intact. With the strong upward move yesterday, the FBM KLCI is likely to continue to move higher today. However, in order to reverse the current downtrend, the FBM KLCI will have to move above the 30-day SMA currently at 1,768.88, and the 50 and 60-day SMA resistance are currently at 1,753 and 1,743.
Overnight, the Dow rose 149.83 points or +1.02% to close at 14,910.14. Today, the FBM KLCI is likely to trade within a range of 1,709 to 1,764.
This week's expected range: 1690 – 1827
Today’s expected range: 1709 – 1764
Resistance: 1748, 1756, 1764
Support: 1709, 1716, 1728
Stocks to watch: ALAM, MUHIBAH, PERDANA