FBM KLCI - breakouts from sideways range

FBM KLCI - breakouts from sideways range

Stocks on Bursa Malaysia closed higher yesterday as persistent fund buying in most of the heavyweights throughout the day helped propel the benchmark FBM KLCI to close 14.14 points or 0.76% higher at 1,862.80, after it went as low as 1,850.35 during the day. Investors regained confidence in the local market after Bank Negara Malaysia’s governor Zeti Akhtar Aziz defended Malaysia’s fiscal direction in her latest interview. Gainers overwhelmed losers by 536 to 359, with 311 counters unchanged. Total volume stood at 3.04 billion shares worth RM2.47 billion, down from Monday’s 3.13 billion shares worth RM2.14 billion.

Taking cue from the strong performance on Wall Street overnight, the FBM KLCI opened 2.05 points higher with an upside breakaway gap at 1,850.71 but pulled back to hit the intra-day low of 1,850.35 briefly after opening. The key index rebounded from the low to climb higher for the rest of the day with intermittent pullback on mild profit taking and persistent buying of blue-chips pushed the FBM KLCI to close at the highest point of the day. Chart-wise, the FBM KLCI formed a bullish Marubozu candlestick which indicates the bulls were in full control yesterday in pushing the key index higher. Hence, the FBM KLCI is likely to move higher today on follow through buying momentum. Immediate overhead resistance zone is at 1,867 to 1,880, while the immediate downside support zone is at 1,856 to 1,850.

MACD hooked upward and made a golden-cross over the signal-line, issuing a buy signal and indicated the momentum of the FBM KLCI has turned bullish. RSI (14) rose to 69.4 from 63.2, indicating the short term relative strength of the key index is turning very bullish. Stochastic rose to 81.9 from 74.7, indicating strong index strength and continuation of the up cycle. Readings from the indicators showed that the FBM KLCI is turning bullish from a state of sideways consolidation before, and hence, is likely to climb higher on follow through bullish momentum.

With the bullish move yesterday, the FBM KLCI has breakout from its near term sideways range-bound consolidation, and the trend of the key index is up and bullish as the index is staying above the short, medium and long term moving averages. Hence, the FBM KLCI is likely to move higher to test the next overhead resistance zone of 1,867 to 1,880, and a successful breakthrough of this resistance zone will see the FBM KLCI moving higher to test the all-time high of 1,896.23 in the medium term. On the broader market, rotational play on the small caps and ACE market counters is picking up steam as can be seen from the high trading volume of above three billion shares.

Overnight, the Dow fell 85.34 points or -0.47% to close at 17,949.59. Today, the FBMKLCI is likely to trade within a range of 1,842 to 1,875.

This week's expected range: 1820 – 1869
Today’s expected range: 1842 – 1875

Resistance: 1867, 1871, 1875
Support: 1842, 1846, 1854

Stocks to watch: AIRASIA, ASIAPLY, ASTINO, ASUPREM, BTM, EAH, EWEIN, EFORCE, GHLSYS, GPHAROS, ITRONIC, KHEESAN, KPSCB, JETSON, LEESK, LEWEKO, MAGNA, MPAY, MICROLN, PANSAR, PWORTH, PRIVA, SALCON, SYMPHNY, SYSTECH, TANCO, TFP, UCHITEC, WINTONI

Stock pick highlight: PRIVA (0123)

Last Price: RM0.41 +0.045
Support Level: RM0.365, RM0.345
Resistance Level: RM0.415, RM0.44, RM0.45, RM0.485, RM0.50, RM0.52, RM0.56, RM0.605, RM0.66, RM0.70
Entry Level: RM0.41 – RM0.415

Technical Analysis

PRIVA (0123) rebounded from its intra-day low of 0.365 to close higher at the intra-day high of 0.41. Technically, the chart of PRIVA formed a bullish Marubozu candlestick with increasing volume, indicating strong buying interest came into the stock yesterday. It breaks out from the consolidation range forming a Flag pattern breakout. MACD hooked upward but is still below the signal-line, and its histogram also contracted upward strongly, indicating an increased in momentum to the upside and a buy signal. RSI (14) rose to 68.4 from 57.2, indicating the stock is turning bullish. Stochastic swung upward to 54.8 from 38.1, and made a golden-cross over the slow stochastic line, issuing a stochastic buy signal and indicated the stock is turning stronger after recent consolidation. The medium and long term trend of PRIVA is up, and the short term trend is up with the 5-day SMA closing above the 10-day SMA and both are above the 30-day SMA, and a confirmed breakout above RM0.415 will see an upside target of RM0.44, follow by RM0.45, RM0.485, RM0.50, RM0.52, RM0.56, RM0.605, RM0.66 and RM0.70.

Since the short term trend is bullish, day traders with shorter time frame perspective may ride on the short term bullishness and buy on breakout level (RM0.415). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.44, RM0.45, RM0.485, RM0.50), stop loss (RM0.36)
Mid Term – target price at (RM0.52, RM0.56, RM0.605, RM0.66, RM0.70), stop loss (RM0.34)

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