Stocks on Bursa Malaysia ended last Friday's trading on a high note, with gains mostly seen in finance, oil and gas and blue-chip stocks. The positive sentiment was bolstered by overnight gains on Wall Street which recovered further, coupled with easing geopolitical tension in Syria as well as improving US economic data. The FBM KLCI climbed 23.8 points, or 1.4%, to close at 1,727.58 after opening 4.53 points firmer at 1,708.31, and moved between 1,708.31 and 1,727.58. Week-on-week, the key index gained 6.51 points or 0.4% from previous Friday's 1,721.07. Gainers trounced losers by 492 to 299, with 282 counters unchanged. Turnover stood at 1.60 billion shares worth RM2.48 billion against Thursday's 1.852 billion shares worth RM2.260 billion. Weekly turnover amounted to 9.495 billion shares worth RM12.551 billion, versus previous week's 10.336 billion shares valued at RM8.973.
The FBM KLCI opened last Monday 1.07 points higher at 1,722.14 and climbed higher gradually to touch the intra-week high of 1,732.25 before profit-taking activity erased most of the earlier gains to close just 1.42 points higher at 1,722.49. The key index saw heavy selling pressure on Tuesday plunging 21.25 points to 1,701 points amid weak global sentiment. Wednesday saw the FBM KLCI falling another 40.85 points to hit the intra-week low of 1660.39 before recovering some lost ground to close 15.07 points lower at 1,686.17. The rebound continued into Thursday and Friday which saw the key index closing at the highest point of the day on Friday at 1,727.58
On the weekly chart, the FBM KLCI formed a white hammer candlestick, a bottom reversal candlestick pattern which indicates strong buying support and price reversal, and the key index may have seen a temporary bottom at 1,660.39. Hence, the FBM KLCI may continue to bounce higher this week with key resistance level at 1,749, being the mid range of previous week. On the daily chart, the FBM KLCI formed a bullish white Marubozu candlestick with an upside runaway gap which indicates strong buying appetite for key index-linked stocks. Hence, the FBM KLCI may continues its upward momentum to move higher today. Immediate overhead resistance zone is at the gap area of 1,732 to 1,740, while the immediate downside support is at 1,718, the mid-range of Friday's white Marubozu candlestick, which coincided with the pivot high formed before May 6.
Weekly MACD and its histogram continued to slide lower, indicating an increased in the weekly bearish momentum. Daily MACD hooked upward, and its histogram also contracted upward for the second bar, indicating a rebound in a bearish market as the MACD is still below the zero-line. Weekly RSI (14) hooked upward slightly to 47.5 from 45.9, indicating a mild rebound and the weekly relative strength of the key index is in a mildly bearish state. Daily RSI (14) was higher at 40.9 from 29.3, indicating a strong move on the daily chart which brought the key index into the mildly bearish zone from a previously very bearish state. Weekly Stochastic slipped lower to 41.8 from 44.9, indicating a weak market and the weekly cycle is still down. On the contrary, daily Stochastic continued to climb higher to 32.3 from 18.6, indicating a further improvement on the daily market strength, and continuation of the short term up cycle. In short, readings from the weekly indicators showed that the FBM KLCI is still weak and bearish and the weekly down cycle has not completed, whereas from the daily indicators' readings, it showed a technical rebound is taking place as all three indicators are showing an upward swing. Nevertheless, a technical rebound can be short-live in a bear market, and hence, more data are needed to confirm a market reversal.
With the strong rebound on last Friday, the immediate short term trend has shown the first sign of reversing up as the key index has closed above the 5 and 10-day SMA, but is still below the rest of the 15, 20 and 30-day SMA. In order to reverse the bigger downtrend, the FBM KLCI will have to move above 1,770, which is where the 30 and 60-day SMA, the two highest moving averages are located right now. Nevertheless, the up move will meet lots of resistance along the way as the confidence of the general market is still weak. From the external front, the question of whether the US Federal Reserve will taper the QE3 program, and the Syria tension will still be major factors influencing the direction of the market. A pullback on profit-taking is likely to happen, but as long as the key index does not fall below the psychological support of 1,700, it is still considered alright.
Last Friday, the Dow fell 30.64 points or -0.21% to close at 14,810.31. This week, the FBM KLCI is likely to trade within a range of 1,634 to 1,778, and today, the FBM KLCI is likely to trade within a range of 1,695 to 1,746.
This week's expected range: 1634 – 1778
Today’s expected range: 1695 – 1746
Resistance: 1734, 1740, 1746
Support: 1695, 1701, 1714