Stocks on Bursa Malaysia ended last Friday lower on continued selling in heavyweight stocks, led by CIMB; and Bank Negara Malaysia’s decision to raise interest rates by 25 basis points on Thursday, after pausing more than three years, further dampened stock prices. The benchmark FBMKLCI declined 9.47 points or 0.5% to close at an intra-day low of 1,883.15, after reaching a high of 1,894.86. On a weekly basis, the FBMKLCI declined 1.76 points from 1,884.91 previously. Market breadth was negative as decliners outpaced advancers by 534 to 289, with 337 counters unchanged. Total volume rose to 2.04 billion units worth RM2.45 billion from Thursday’s 1.62 billion shares worth RM1.98 billion. Weekly turnover declined slightly to 8.89 billion shares valued at RM10.88 billion from the 8.98 billion shares valued at RM9.97 billion recorded last week.
The FBMKLCI opened last Monday 0.49 of a point higher at 1,885.40 and rebounded strongly and rallied higher for the rest of the day to hit the fresh all-time intra-day high of 1,894.72 before pulling back to close 7.59 points or 0.4% to record a fresh all-time high of 1,892.5, breaking the previous all-time high of 1,892.33 recorded on June 24. Tuesday saw the benchmark index hit an all-time intra-day high of 1,896.23 before retreating to close 0.15 of a point higher to record another fresh all-time high of 1,892.65. The FBMKLCI fell on Wednesday on profit-taking activity to close 1.49 points lower at 1,891.16, after moving between 1,887.96 and 1,892.17. The key index rebounded on Thursday to closed 1.46 points higher at 1,892.62, but fell heavily on Friday to close at the intra-week low of 1,883.15.
On the weekly chart, the FBMKLCI formed a bearish black shooting-star candlestick, a bearish top reversal candlestick pattern which indicates heavy distribution and a top is seen at 1,896.23. Hence, the FBMKLCI is likely to slip into further correction in the coming week. On the daily chart, the FBMKLCI formed a bearish long black engulfing candlestick pattern which indicates heavy sell down of index-linked blue-chips on Friday after Bank Negara Malaysia’s announcement of interest rate hike, and hence, the FBMKLCI is likely to further correct downward today on continue selling pressure. Immediate downside support zone is at 1,876 to 1,870, while the overhead resistance zone is at 1,890 to 1,896.
Weekly MACD slipped lower and is staying just marginally above the signal-line, indicating further loss in weekly momentum and a bearish dead-cross is likely to happen soon. Daily MACD slid lower and made a dead-cross over the signal-line, issuing a sell signal on the daily chart and indicating the FBMKLCI is likely to correct deeper in the short term. Weekly RSI (14) hooked downward to 62.4 from 63.2, indicating a mild pullback on the weekly chart. However, daily RSI (14) fell sharply to 50.4 from 59.9, indicating a strong pullback correction which dragged the short term relative strength to a neutral state from a bullish state. Weekly Stochastic hooked downward to 81.8 from 89.3 and has crossed below the weekly slow stochastic line, issuing a sell signal and indicating the possible beginning of a down cycle on the weekly chart. Daily stochastic slipped lower to 63 from 80.5 and has crossed below the daily slow stochastic line, issuing a sell signal on the daily chart and the beginning of a daily down cycle. In short, weakness on both weekly and daily indicators showed that the FBMKLCI losing momentum and is likely to further correct downward.
With the sharp downward move on last Friday, the short term trend of the FBMKLCI has turned down as the key index has closed below the 5, 10 and 20-day simple moving average (SMA), and hence, the key index is likely to slip lower to find support at the 30-day SMA, which is currently at 1,880. A stronger support is expected at the 50 and 60-day SMA level at 1,876 and 1,874, and a longer term support by the 100 and 120-day SMA is at 1,858 and 1,850. Nevertheless, the medium and long term uptrend is still intact, and hence, current weakness actually posted an opportunity for the longer term investors to buy into weakness on quality stocks at key support level.
Last Friday, the Dow rose 28.74 points or 0.17% to close at 16,943.81. This week, the FBM KLCI is likely to trade within a range of 1,865 to 1,909, and today, the FBM KLCI is likely to trade within a range of 1,867 to 1,906.
This week's expected range: 1865 – 1909
Today’s expected range: 1867 – 1906
Resistance: 1890, 1898, 1906
Support: 1867, 1875, 1879
Stocks to watch: AFFIN, AFG, DAYANG, ENCORP, HARTA, JAKS, PRESBHD, PRESTAR, PUC, RCECAP, SUMATEC, WASEONG, YNHPROP
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