Stocks on Bursa Malaysia pared its week loss last Friday sparked by optimism over Bank Negara Malaysia’s decision to keep interest rates unchanged and overnight strength on United States stocks to record highs on Fed’s commitment to sustain low interest rates for a longer period. The benchmark FBMKLCI closed 4.17 points or 0.23% better at 1,849.49 after moving between 1,843.35 and 1,853.68. Week-on-week, the key index lost 6.15 points from previous Friday’s 1,855.64. Gainers outpaced losers by 578 to 251 with 320 counters unchanged. Total volume rose to 2.60 billion shares worth RM2.26 billion from 2.06 billion shares worth RM2.30 billion on Thursday. Weekly turnover, for the holiday-shortened week, fell to 8.84 billion shares valued at RM8.16 billion from 11.85 billion shares valued at RM10.11 billion recorded the previous week.
Taking cue from the weak performance of Wall Street the previous Friday, the FBMKLCI opened last Monday 2.5 points lower at 1,853.14 but rebounded to hit the intra-week high of 1,856.16 briefly after opening. However, the rebound could not last and the key index plunged on heavy selling pressure to hit the intra-week low of 1,836.50, losing 19.14 points at its worst before rebounding to gradually recover some lost ground to close Monday 8.34 points easier at 1,847.30. Bursa Malaysia was closed on Tuesday for Malaysia Day holiday. Wednesday saw cautious trading with the FBMKLCI opened 5.97 points lower at 1,841.33 but rebounded to close 3.52 points lower at 1,843.78 after fluctuating between 1,841.05 and 1,845.74 throughout the day, ahead of Bank Negara Malaysia's Monetary Policy Committee meeting on Thursday and that of the US Federal Open Market Committee meeting. Thursday saw volatile movement of the FBMKLCI where it opened 1.08 points higher at 1,844.86 but slipped lower on profit-taking throughout the morning session to hit an intra-day low of 1,836.90 before recovering to close 1.54 points higher at 1,845.32, and Friday saw follow through rebound which pushed the key index to gain 4.17 points to 1,849.49.
On the weekly chart, the FBMKLCI formed a black hammer candlestick, a bottom reversal candlestick pattern which indicates the bears were initially in control in pushing the key index lower but the bulls later took over to lift the index from its low. Hence, the FBMKLCI is likely to see further rebound in the coming week especially towards the month-end as window dressing activity for core blue-chips take place for the third quarter closing, and strong resistance is expected at 1,876-point level. On the daily chart, the FBMKLCI formed a bullish white candlestick which confirmed the candlestick bottom reversal signal appeared on Thursday, and hence, the FBMKLCI is likely to climb higher today on follow through buying momentum. Immediate overhead resistance zone is at 1,853 to 1, 860 while the downside support zone is at 1,843 to 1,836.
Weekly MACD and its histogram continued to slide lower, indicating further loss in the weekly momentum. However, as weekly MACD is still above the zero-line, current weakness should be viewed as just a correction in a bull market. Daily MACD continued to slide lower below the zero-line, but its histogram contracted upward for the first time after expanding southward for four consecutive sessions, indicating a reduction in the bearish momentum or technical rebound is in sight. Weekly RSI (14) slipped lower to 46.8 from 49, indicating further loss of the index’s relative strength to the weaker mildly bearish zone. Daily RSI (14) was higher at 39.5 from 35.3, indicating an improvement in the index’s daily relative strength towards a mildly state from a bearish state. Weekly Stochastic continued to slide lower to 35.2 from 44.3, indicating further weakening of the key index on the weekly perspective. Daily Stochastic rose to 22.5 from 20.8 after hitting the oversold zone on Wednesday, indicating follow through rebound. In short, readings from weekly indicators showed that the FBMKLCI is still weak and mildly bearish on the weekly perspective. However, daily indicators showed signs of technical rebound, and hence, the FBMKLCI may see further upside.
The short and medium term trend of the FBMKLCI is still down as the key index continues to stay below the short and medium term moving averages. However, last Friday’s rebound has seen the FBMKLCI closing above the 5-day simple moving average (SMA) and hence, may see further rebound of the key index to test the higher overhead resistance zone. Immediate strong overhead resistance zone is posted by the cluster of short and medium term moving averages at 1,859, by the 10-day SMA, to 1,871 by the 60-day SMA. In order to reverse the current downtrend, the FBMKLCI must at least be able to close above the 1,871-point level. Otherwise, the FBMKLCI is likely to stay in sideways range-bound. Nevertheless, the longer term uptrend is still intact. For the coming week, the FBMKLCI is likely to gradually move higher, building up momentum towards the month-end third quarter closing on core blue-chips window dressing activity, follow by a mini pre-budget rally as the Budget 2015 announcement is scheduled on October 10.
Last Friday, the Dow rose 13.75 points or 0.08% to close at 17,279.74. This week, the FBM KLCI is likely to trade within a range of 1,818 to 1,875, and today, the FBM KLCI is likely to trade within a range of 1,833 to 1,864.
This week's expected range: 1818 – 1875
Today’s expected range: 1833 – 1864
Resistance: 1854, 1859, 1864
Support: 1833, 1838, 1844
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