Stocks on Bursa Malaysia closed on a mixed note last Friday on lack of buying momentum ahead of the weekend. However, the benchmark FBM KLCI closed 0.7 point or 0.04% higher at 1,721.07 after moving between 1,721.07 and 1,729.86 throughout the day. On a weekly basis, the FBM KLCI fell 67.17 points from previous Friday's 1,788.24. Losers led gainers by 391 to 386, with 283 counters unchanged. Turnover stood at 1.780 billion shares worth RM2.235 billion against 2.434 billion shares worth RM3.442 billion on Thursday. Weekly turnover rose to 11.571 billion shares valued at RM14.206 billion from previous week's 10.335 billion shares valued at RM8.972 billion.
The benchmark FBM KLCI experienced a sell down by foreign funds last week due to uncertainty over US Fed's easing of stimulus. The main triggers for the foreign selling were sell-offs in neighbouring countries due to reversal of fund flows back to the United States on speculations the Federal Reserve would reduce stimulus next month, and Bank Negara Malaysia's downgrade of the 2013 gross domestic product (GDP) growth forecast to 4.5 to five percent from five to six percent previously. The FBM KLCI opened last Monday lower with a downside gap of 13.74 points at 1,774.50 but rebounded to close 9.88 points lower at 1,778.36. The selling pressure continued into Tuesday which witnessed a 32.94 points or 1.85% decline to close at 1,745.42. Selling pressure eased slightly on Wednesday in cautious trading with the FBM KLCI closed down 0.57 point to 1,744.85 ahead of the release of Malaysia's second quarter economic data and the minutes of the US Federal Reserve's July policy meeting. Taking cue from the 105.44 points loss of the Dow overnight, Thursday saw the FBM KLCI opened with a big downside gap of 17.51 points lower at 1,727.34 and slid to the intra-week low of 1,710.17, losing 34.68 points at its worst, before rebounding to close off low with a loss of 24.48 points or 1.40% at 1,720.37. The key index rebounded marginally on Friday to end the week at 1,721.07.
On the weekly chart, the FBM KLCI formed a bearish long black candlestick which indicates heavy selling pressure on the benchmark index over the week, and the key index is likely to further consolidate in the coming week. On the daily chart, the FBM KLCI formed a black inverted hammer on Friday which indicates there was buying support initially which pushed the index to the intra-day high of 1,729.86, but jittery sellers continue to off load which sent the index to close at the low of the day. Hence, the FBM KLCI is likely to further consolidate today and in the coming week until the immediate downside gap at 1,729 to 1,740 is close.
Weekly MACD, which is still above the zero-line, and its histogram continued to slide southward with a big increment, indicating a strong pickup in the bearish momentum. Daily MACD, which is below the zero-line, and its histogram also slid downward, indicating a further increased in the daily bearish momentum. Weekly RSI (14) fell to 45.9 from 64.3, indicating a drastic change in the weekly relative strength of the FBM KLCI from a bullish state to a mildly bearish state. Daily RSI (14) hooked upward gently to 24.7 from 24.2, reflecting a very mild rebound on Friday, and the key index is still in the very bearish state and is short term oversold. Weekly Stochastic slipped lower to 44.8 from 65.6, indicating a continuation of the down cycle and weakness on the weekly chart. Daily Stochastic was almost flat at 11.54, indicating a very weak market, and is short term oversold. Readings from both the weekly and daily indicators showed that the FBM KLCI is currently weak and bearish, and hence, is likely to further consolidate. However, as both RSI and Stochastic indicators showed a state of short term oversold, a technical rebound might be expected, but could be short-live.
The trend of the FBM KLCI is down as the key index is currently closing below most of the short, medium and long term moving averages, including the 120-day SMA. Nevertheless, the longer term trend represented by the 200 and 240-day SMA is still up for the time being. A technical rebound on the FBM KLCI is expected this week after the heavy sell down last week which sent the key index into the short term oversold zone. However, please be cautioned that a technical rebound could be just a dead-cat-bounce on a downtrend, and is an opportunity for the short term players to get out before the downtrend continues. The sell down last week has seen the corrective C-wave extending its move to the 161.8% Fibonacci projection target of 1,727, and a further downward move may see the FBM KLCI moving lower to the 261.8% Fibonacci projection target of 1,680. On the other hand, in order to reverse the current downtrend, the FBM KLCI must at least close above 1,760, the mid range of the range measuring from the high of 1,811 to the low of 1,710.
Last Friday, the Dow rose 46.77 points or +0.31% to close at 15,010.51. This week, the FBM KLCI is likely to trade within a range of 1,661 to 1,818, and today, the FBM KLCI is likely to trade within a range of 1,709 to 1,739.
This week's expected range: 1661 – 1818
Today’s expected range: 1709 – 1739
Resistance: 1727, 1733, 1739
Support: 1709, 1715, 1718