FBM KLCI - lower on extended profit taking

FBM KLCI - lower on extended profit taking

Stocks on Bursa Malaysia extended Wednesday’s losses to close lower yesterday as profit taking continued amid less optimistic economic data from China, Japan and Europe. Selling was mostly recorded in selected blue chips, mostly finance and banking as well as plantation stocks. The FBM KLCI fell 8.69 points or 0.47% to 1,846.08 after fluctuating between 1,846.08 and 1,855.7 throughout the day. Decliners outpaced advancers 480 to 310, with 365 counters unchanged. Total volume decreased to 1.98 billion shares worth RM1.68 billion from 3.04 billion shares worth RM2.74 billion on Wednesday.

Continuing the fall on Wednesday, the FBM KLCI opened 6.48 points lower at 1,848.29 but rebounded to hit the intra-day high of 1,855.70 fifty minutes after opening. However, the rebound could not last, and the key index slipped lower on continued selling pressure for the rest of the day to close at the lowest point of the day. Chart-wise, the FBM KLCI formed a bearish black inverted hammer candlestick, a bottom reversal candlestick pattern but with a downward bias, which indicates buyers were initially strong in pushing up the key index, however, sellers later surface to press down the key index. Hence, the FBM KLCI is likely to further correct downward or consolidate today. Immediate downside support zone is at 1,841 to 1,836, while the overhead resistance zone is at 1,856 to 1,863.

MACD slipped lower and made a dead-cross over the signal-line, issuing a sell signal and indicated an increased in momentum to the downside. RSI (14) was lower at 56.7 from 62.9, indicating the FBM KLCI is losing its relative strength to a mildly bullish state from a bullish state. Stochastic hooked downward sharply to 73 from 83.8 and made a dead-cross over the slow stochastic line, indicating an end to the short term up cycle and the beginning of a down cycle. Readings from the indicators showed that the FBM KLCI is turning weak for the short term, and hence, is likely to further correct downward or consolidate in the short term.

The medium to long term trend of the FBM KLCI is up. However, with the downward move yesterday, the short term trend of the FBM KLCI has turned down as the key index has closed below the 5, 10 and 15-day simple moving average (SMA). The FBM KLCI is expected to further consolidate today with immediate downside support zone at 1,841 to 1,836. The 20-day SMA is currently at 1,841-point and a break of this critical short term support line will likely see the FBM KLCI sliding lower to the lower moving average support zone of 1,830 to 1,828, provided by the 30-day SMA and a cluster of the long term SMA. On the broader market, trading volume has reduced drastically to below two billion shares from above three billion shares a few sessions ago, indicating the market in turning cautious.

Overnight, the Dow rose 20.42 points or 0.11% to close at 18,058.69. Today, the FBMKLCI is likely to trade within a range of 1,833 to 1,865.

This week's expected range: 1820 – 1869
Today’s expected range: 1833 – 1865

Resistance: 1852, 1858, 1865
Support: 1833, 1839, 1842

Stocks to watch: AEM, APFT, APPASIA, IREKA, JCY, KBES, KINSTEL, LCTH, MIKROMB, OCB, PICORP, SCIB, SCH, SEEHUP, SERSOL, WPRTS, YGL, YTLPOWR

Stock pick highlight: APPASIA (0119)

Last Price: RM0.25 +0.035
Support Level: RM0.22, RM0.20
Resistance Level: RM0.255, RM0.27, RM0.28, RM0.29, RM0.30, RM0.325, RM0.35, RM0.375, RM0.40
Entry Level: RM0.25 – RM0.26

Technical Analysis

APPASIA (0119) rebounded from its intra-day low of 0.22 to close higher at 0.25 after hitting the intra-day high of 0.255. Technically, the chart of APPASIA formed a bullish long white candlestick with increasing volume, indicating strong buying interest came into the stock yesterday. It breaks out from the consolidation range forming a Saucer pattern breakout. MACD swung upward and made a golden-cross over the signal-line, and its histogram also extended upward strongly, indicating an increased in momentum to the upside and a buy signal. RSI (14) rose to 65.7 from 46.9, indicating the stock is turning bullish. Stochastic swung upward to 64.3 from 22.2, and made a golden-cross over the slow stochastic line, issuing a stochastic buy signal and indicated the stock is turning strong after recent consolidation. The medium and long term trend of APPASIA is up, and the short term trend is up with the 5-day SMA crossing above the 10-day SMA and both are above the 30-day SMA, and a confirmed breakout above RM0.255 will see an upside target of RM0.27, follow by RM0.28, RM0.29, RM0.30, RM0.325, RM0.35, RM0.375, and RM0.40.

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 (RM0.255). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.27, RM0.28, RM0.29, RM0.30), stop loss (RM0.215)
Mid Term – target price at (RM0.325, RM0.35, RM0.375, RM0.40), stop loss (RM0.195)

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