FBM KLCI - sign of bottoming

Stocks on Bursa Malaysia closed higher yesterday, propped up by buying sentiment as traders took the opportunity of the market’s weakness amid expectation of a further monetary stimulus in China. Asian shares advanced as investors focused on hopes of a further stimulus from Beijing to prevent a sharper slowdown in the world’s second-largest economy. At close, the benchmark FBM KLCI rose 4.41 points or 0.25% to 1,803.02, after hovering between 1,795.16 and 1,803.68 throughout the day. Gainers led losers 420 to 355, with 323 counters unchanged. Total volume was slightly higher at 1.68 billion units worth RM2 billion from 1.62 billion units worth RM1.7 billion on Tuesday.

The FBM KLCI opened 2.47 points higher at 1,801.08 and climbed to hit the intra-day high of 1,803.68 twenty minutes after opening. However, the upward move was met with heavy profit taking which dragged the key index to the intra-day low of 1,795.16 at mid-morning, and the key index rebounded from there to move gradually higher for the rest of the day. Chart-wise, the FBM KLCI formed a bullish white hammer candlestick, a bottom reversal candlestick pattern which indicates the emergence of buyers after the key index was beaten down earlier of the day. Hence, the FBM KLCI is likely to stage further rebound if the buying interest continues into today. Immediate overhead resistance zone is at 1,805 to 1,814, while the downside support zone is at 1,795 to 1,790.

MACD continued to slide lower but its histogram contracted upward, indicating a first change in momentum from down to up, and hence, the FBM KLCI is likely to stage further rebound. RSI (14) hooked upward to 38.1 from 35.4, indicating a mild rebound and the relative strength is still in the bearish zone. Stochastic turned up to 5.5 from 3.1 and made a golden-cross over the slow stochastic line, issuing a stochastic buy signal and indicating the possible end of the short term down cycle and the beginning of an up cycle. Nonetheless, more data is required to confirm the reversal.

The technical picture of the FBM KLCI is still very much unchanged in that the short and medium term trend is still down while the long term trend is sideways. Nonetheless, the price action of the FBM KLCI yesterday showed that a technical rebound or reversal is in sight, and hence, the key index is likely to stage a rebound today. However, a trend reversal will require more confirmation signals. On the broader market, small caps and ACE market counters has also stage a technical rebound and hence is likely to see more active trading today.

Overnight, the Dow fell 7.74 points or -0.04% to close at 18,060.49. Today, the FBMKLCI is likely to trade within a range of 1,789 to 1,812.

This week's expected range: 1772 – 1856
Today’s expected range: 1789 – 1812

Resistance: 1806, 1809, 1812
Support: 1789, 1792, 1797

Stocks to watch: ABRIC, APPASIA, ARMADA, EATECH, GHLSYS, HOMERIZ, HUMEIND, IFCAMSC, KHEESAN, KKB, LBS, MUHIBAH, OMEDIA, OSK, PRKCORP, PJDEV, SERSOL, SKPRES, SMTRACK, TECNIC, TOMYPAK, UNISEM, ZELAN

Stock pick highlight: SMTRACK (0169)

Last Price: RM0.14 +0.015
Support Level: RM0.12, RM0.10
Resistance Level: RM0.145, RM0.155, RM0.17, RM0.185, RM0.205, RM0.225, RM0. 245, RM0.26, RM0.275, RM0.29
Entry Level: RM0.135 – RM0.145

Technical Analysis

SMTRACK (0169) rebounded from its intra-day low of 0.12 to close higher at 0.14 after hitting the intra-day high of 0.145. Technically, the chart of SMTRACK formed a bullish white candlestick with increasing volume indicating strong buying interest came into the stock yesterday. It reversed up from the pullback correction forming a Flag pattern breakout. MACD climbed upward and is above the signal-line, and its histogram also extended upward, indicating an increased in momentum to the upside and a buy signal. RSI (14) rose to 73.5 from 68.9, indicating the stock is turning bullish. Stochastic, however, fell to 90 from 92.5, indicating consolidation. The medium and long term trend of SMTRACK is up, and the short term trend is also up with the 5-day SMA staying above the 10-day SMA and both are above the 30-day SMA, and a confirmed breakout above RM0.145 will see an upside target of RM0.155, follow by RM0.17, RM0.185, RM0.205, RM0.225, RM0.245, RM0.26, RM0.275, and RM0.29.

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 (RM0.145). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.155, RM0.17, RM0.185, RM0.205), stop loss (RM0.125)
Mid Term – target price at (RM0.225, RM0.245, RM0.26, RM0.275, RM0.29), stop loss (RM0.095)

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 Millionaire Trend Trader