FBM KLCI - lower on continued profit taking

FBM KLCI - lower on continued profit taking

Stocks on Bursa Malaysia closed lower yesterday with the benchmark FBM KLCI ended lower, reversing earlier gains on lack of buying momentum in the afternoon session. At close, the FBM KLCI settled at 1,839.61, down 2.47 points or 0.13% after fluctuating between 1,846.31 and 1,837.25 throughout the day. Losers outpaced gainers by 459 to 359 with 339 counters unchanged. Total volume shrank to 2.02 billion shares worth RM2.08 billion from 2.12 billion shares worth RM1.87 billion on Monday.

The FBM KLCI opened 3.43 points higher at 1,845.51 and climbed to hit the intra-day high of 1,846.31 thirty minutes after opening. However, the rise could not sustain and the key index slipped lower gradually on persistent profit taking for the rest of the day. The FBM KLCI hit the intra-day low of 1,837.25 before a last minute buying which lifted the key index to close off low. Chart-wise, the FBM KLCI formed a bearish engulfing candlestick pattern which indicates the bears or selling pressure still dominates the market. Hence, the FBM KLCI is likely to further correct downward today. Immediate downside support zone is at 1,837 to 1,831, while the overhead resistance zone is at 1,846 to 1,856.

MACD continued to slide lower but is still above the signal-line, and its histogram also further contracted, indicating further increased in the bearish momentum. RSI (14) was lower at 59.3 from 61.1, indicating further loss in the key index’s relative strength to the mildly bearish zone from a bullish state. Stochastic slipped lower to 70.1 from 79.3, indicating further weakening of the FBM KLCI and continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI is in a correction mode and is likely to further correct downward.

The near term trend of the FBM KLCI has turned bearish or down as the key index has closed below the 5 and 10-day simple moving average (SMA) yesterday, indicating a deeper correction is expected ahead. Nonetheless, the short, medium and long term trend is still up. Immediate short term moving average support zone is at 1,834 to 1,827 provided by the 15 and 20-day SMA, and the key index is likely to find good support at the 1,830-point level where a few of the long term moving averages converge. On the broader market, while the big-caps consolidate, rotational play on small caps and ACE market counters is still active, which provide good short term trading opportunities.

Overnight, the Dow rose 59.66 points or 0.33% to close at 18,036.70. Today, the FBMKLCI is likely to trade within a range of 1,832 to 1,854.

This week's expected range: 1816 – 1875
Today’s expected range: 1832 – 1854

Resistance: 1846, 1850, 1854
Support: 1832, 1836, 1839

Stocks to watch: ALAM, BOILERM, BONIA, EDUSPEC, ELSOFT, EURO, EFORCE, GBGAQRS, GESHEN, ICON, IFCAMSC, L&G, MALTON, MATRIX, NOTION, OWG, PANPAGE, PRTASCO, SALCON, SUNSURIA, SYSTECH, TASCO, TMCLIFE, UNISEM, VIS, WILLOW

Stock pick highlight: EFORCE (0065)

Last Price: RM0.665 +0.02
Support Level: RM0.645, RM0.63, RM0.595
Resistance Level: RM0.67, RM0.685, RM0.705, RM0.74, RM0.77, RM0.80, RM0.835, RM0.855, RM0.88
Entry Level: RM0.665 – RM0.67

Technical Analysis

EFORCE (0065) rebounded from its intra-day low of 0.645 to close higher the intra-day high of 0.665. Technically, the chart of EFORCE formed a bullish white Marubozu candlestick with increasing volume, indicating strong buying interest came into the stock yesterday. It breaks out from the consolidation range forming a Rectangle pattern breakout. MACD surged upward and is above the signal-line, and its histogram also further extended upward, indicating an increased in momentum to the upside and a buy signal. RSI (14) rose to 67.8 from 62, indicating the stock is turning more bullish. Stochastic rose to 91.2 from 83.3, indicating the stock is turning stronger after recent consolidation. The medium and long term trend of EFORCE is up, and the short term trend is turning up with the 5-day SMA closing above the 10-day SMA and is also above the 30-day SMA, and a confirmed breakout above RM0.67 will see an upside target of RM0.685, follow by RM0.705, RM0.74, RM0.77, RM0.80, RM0.835, RM0.855 and RM0.88.

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 (RM0.67). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.685, RM0.705, RM0.74, RM0.77), stop loss (RM0.64)
Mid Term – target price at (RM0.80, RM0.835, RM0.855, RM0.88), stop loss (RM0.625)

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