FBM KLCI - turning bullish

FBM KLCI - turning bullish

Stocks on Bursa Malaysia closed mixed last Friday with the benchmark FBM KLCI ended the week on a firm note, boosted by persistent-buying momentum in selected blue chips, led by banking and oil and gas stocks. The benchmark index was traded in positive territory throughout the day, supported by foreign fund buying, ringgit appreciation and improved global sentiment. At close, the FBM KLCI rose 16.5 points, or 0.89%, to 1,862.58 after fluctuating between 1,849.71 and 1,862.58 throughout the day. On weekly basis, the benchmark index rose 16.72 points from 1,845.86 on previous Friday. Losers led gainers by 445 to 393, with 341 counters unchanged. Total volume rose to 2.1 billion shares worth RM2.0 billion from 1.98 billion shares worth RM1.68 billion on Thursday. Weekly turnover grew to 12.99 billion units worth RM10.42 billion from 12.11 billion units worth RM11.27 billion last week.

Taking cue from the heavy fall on Wall Street the previous Friday, the FBM KLCI opened 1.61 points lower at 1,844.25 and plunged lower to hit the intra-week low of 1,841.10 soon after opening. Nonetheless, the key index rebounded strongly from the low to close 2.80 points higher at 1,848.66, reversing its earlier losses on mild buying interest in selected finance and plantation counters. Tuesday saw the FBM KLCI breakouts from the sideways range to close 14.14 points higher at 1,862.80 on persistent fund buying of blue-chips as 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. Profit taking activity set in on Wednesday and Thursday which saw the FBM KLCI retreating 8.03 points and 8.69 points in two days to 1,846.08. Nonetheless, a strong rebound on Friday with a gain of 16.5 points revered the losses to end the week at 1,862.58.

On the weekly chart, the FBM KLCI formed a bullish white candlestick that breakouts from the recent consolidation range, and hence, the key index is likely to move higher in the coming week on follow through buying momentum towards the next target zone of 1,870 to 1,880. On the daily chart, the FBM KLCI also formed a bullish white candlestick, which together with the previous two candlesticks formed a morning-star bottom reversal pattern. Hence, the FBM KLCI is likely to continue its upward move from Friday to climb higher today. Immediate overhead resistance zone is at 1,865 to 1,880, while the immediate downside support zone is at 1,849 to 1,846.

Weekly MACD and its histogram continued to rise, indicating further increased in weekly momentum to the upside. Daily MACD hooked upward and made a golden-cross over the signal-line, issuing a buy signal. Weekly RSI (14) rose to 60.6 from 57.8, indicating the FBM KLCI’s weekly relative strength has turned bullish. Daily RSI (14) hooked upward to 64 from 56.7, indicating a strong rebound which lifted the daily relative strength of the key index back to the bullish zone from a mildly bullish zone. Weekly Stochastic was almost flat at 94, indicating a state of consolidation, while daily stochastic fell lower to 69 from 73, indicating the consolidation is not over yet. Readings from the weekly indicators pointed to a bullish outlook, while readings from the daily indicators showed a technical rebound with a bullish bias.

The trend of the FBM KLCI is up and bullish as the key index continues to stay above the short, medium and long term moving averages. On Friday, the 50-day simple moving average (SMA) had made a golden-cross over the 200-day SMA, issuing a bullish buy signal which will further elevate optimism and propel the FBM KLCI higher towards the all-time level of 1,896.23. With sign that the Ringgit and crude oil prices could strengthen in the near-term, added by strong performance of overseas market which saw the NASDAQ hitting a second straight record closing high a day after it topped a record that had stood for more than 15 years, it is likely that the FBM KLCI will move higher to test the all-time-record-high of 1896.23 on rising momentum and optimism in the short to medium term.

Last Friday, the Dow rose 21.45 points or 0.12% to close at 18,080.14. This week, the FBMKLCI is likely to trade within a range of 1,825 to 1,886, and today, the FBMKLCI is likely to trade within a range of 1,841 to 1,875.

This week's expected range: 1825 – 1886
Today’s expected range: 1841 – 1875

Resistance: 1866, 1871, 1875
Support: 1841, 1845, 1854

Stocks to watch: AIRASIA, BTECH, CAMRES, COASTAL, CONNECT, ECOFIRS, EKIB, FARLIM, GPHAROS, HEXZA, IDEAL, KENANGA, MRCB, MUHIBAH, NICORP, OWG, PERISAI, PRIVA, SKPETRO, SLP, TAFI, WZSATU

Stock pick highlight: WZSATU (7245)

Last Price: RM1.60 +0.08
Support Level: RM1.54, RM1.37
Resistance Level: RM1.63, RM1.68, RM1.75, RM1.84, RM1.92, RM1.97, RM2.06, RM2.26, RM2.64
Entry Level: RM1.60 – RM1.63

Technical Analysis

WZSATU (0119) rebounded from its intra-day low of 1.54 to close higher at 1.60 after hitting the intra-day high of 1.63. Technically, the chart of WZSATU formed a bullish white candlestick with increasing volume, indicating strong buying interest came into the stock on Friday. It breaks out from the consolidation range forming a Descending Triangle 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 62.5 from 56.5, indicating the stock is turning bullish. Stochastic rose to 66.7 from 45.3, and is above the slow stochastic line, indicated the stock is turning stronger after recent consolidation. The medium and long term trend of WZSATU is sideways to 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 RM1.63 will see an upside target of RM1.68, follow by RM1.75, RM1.84, RM1.92, RM1.97, RM2.06, RM2.26, and RM2.64.

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 (RM1.63). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM1.68, RM1.75, RM1.84, RM1.92), stop loss (RM1.53)
Mid Term – target price at (RM1.97, RM2.06, RM2.26, RM2.64), stop loss (RM1.36)

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