Stocks on Bursa Malaysia ended yesterday lower on persistent selling, led by index-linked counters, as foreign funds reduced their holdings in the Asian market in anticipation of the monetary stimulus tapering by the US Federal Reserve next month. The FBM KLCI fell 32.94 points or 1.85% to close at 1,745.42 after fluctuating between 1,737.58 and 1,774.47 throughout the trading session. Market breadth was negative with 964 losers and 75 gainers, while 160 counters were unchanged. Turnover stood at 2.616 billion shares worth RM3.748 billion against the 3.158 billion shares worth RM2.441 billion on Monday.
Taking cue from the weak performance on Wall Street overnight, the FBM KLCI opened lower with a downside gap of 4.51 points at 1,773.85 and slipped lower throughout the day on persistent selling pressure on blue-chip stocks. The key index hit the intra-day low of 1,737.58 at mid-afternoon, losing 40.78 points at its worst before recovering slightly to close off low. Chart-wise, the FBM KLCI formed a bearish long black candlestick which indicates heavy selling pressure for the day, and the key index is likely to slide lower if the selling continues. Immediate downside support zone is at 1,737 to 1,723, while the overhead resistance zone is at 1,766 to 1,776.
MACD and its histogram continued to slide southward, and MACD has crossed below the zero line, giving out a sell signal, indicating the FBM KLCI has turned bearish. RSI (14) was lower at 30.9 from 45, indicating the FBM KLCI has turned bearish for the short term. Stochastic was lower at 27.3 from 45, indicating a weak market strength and continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI is currently bearish and is likely to further consolidate.
The short and medium term trend of the FBM KLCI is bearish or down as the key index is now closing below all the short and medium term moving averages. Looking from the angle of Elliott wave, the FBM KLCI is currently running the C-impulse wave with a downside target of 1,729, being the 161.8% extension of the current C-wave and a further break of the critical support of 1,723, the pivot low formed on June 25, will likely see the FBM KLCI extending its downward move to the 261.8% target level of 1,685, which coincides with the support zone provided by the 240 and 300-day SMA. Nevertheless, the long term trend is still up at the moment. Hence, from a much longer term view, current weakness may present an opportunity to buy into weakness on quality stocks at respective key support level for longer term gain.
Overnight, the Dow fell 7.75 points or -0.05% to close at 15,002.99, while the S&P500 rebounded 6.29 points or +0.38% to close at 1,652.35. Today, the FBM KLCI is likely to trade within a range of 1,693 to 1,811.
This week's expected range: 1753 – 1824
Today’s expected range: 1693 – 1811
Resistance: 1767, 1789, 1811
Support: 1693, 1715, 1730