FBM KLCI - slightly lower on profit taking

Stocks on Bursa Malaysia closed mixed yesterday with the benchmark FBM KLCI ended lower dragged down by selected blue-chips as investors remained pessimistic about Malaysian shares. Bucking the trend of Asian markets that were generally on an uptrend, the FBM KLCI continued its downtrend, as it shed another 3.31 points or 0.19% to close at 1,767.38 points yesterday on the back of rising political undercurrents in the market. While global investors were net purchasers of Asian equity last week, they continued to be net sellers of Malaysian equity. However, market breadth was slightly positive with gainers outpacing losers by 485 to 318, while 331 counters were unchanged. Total volume slipped to 1.56 billion units worth RM1.91 billion from 1.85 billion units worth RM1.9 billion on Monday.

Taking cue from the mild losses in overseas market overnight, the FBM KLCI opened 0.34 of a point lower at 1,767.04 and plunged lower to hit the intra-day low of 1,755.09 fifteen minutes after opening. The FBM KLCI rebounded strongly from the low and rally to the intra-day high of 1,776.07 at mid-morning. However, the buying momentum could not sustain and the key index slipped lower to move sideways range-bound in the positive territory for a major part of the day, and a last hour profit taking dragged the FBM KLCI back into the negative zone. Chart-wise, the FBM KLCI formed a high wave black spinning-top candlestick which indicates high volatility and uncertainty of market direction with a bearish bias. Hence, the FBM KLCI is likely to further consolidate today with a downward bias. Immediate downside support zone is at 1,755 to 1,746, while the overhead resistance zone is at 1,776 to 1,787.

MACD and its histogram continued to slide southward, indicating an increased in the bearish momentum. RSI (14) was lower at 28.6 from 29.4, indicating further loss of relative strength in the very bearish or oversold zone. Stochastic, however, hooked upward to 10.7 from 7.5 but is still below the slow stochastic line, reflecting a weak technical rebound. Readings from the indicators showed that the FBM KLCI is very weak and bearish, and hence, is likely to further consolidate.

The trend of the FBM KLCI still remained down and bearish as the key index continued to stay below the short, medium and long term moving averages. However, the formation of the high wave spinning-top candlestick yesterday showed that a temporary bottom was seen at the 1,755-point level but is still too early to call for a reversal. A reversal of the current downtrend will require the FBM KLCI to at least move above the 1,800-point level or the upper downtrend line of the downtrend channel measuring from the high of 1,867.53. On the other hand, a further break of the immediate support of 1,755-point will see the FBM KLCI sliding lower to test the 61.8% and 76.4% Fibonacci Retracement support zone at 1,746 to 1,718.

Overnight, the Dow fell 190.48 points or -1.04% to close at 18,041.54. Today, the FBMKLCI is likely to trade within a range of 1,733 to 1,797.

This week's expected range: 1727 – 1866
Today’s expected range: 1733 – 1797

Resistance: 1775, 1786, 1797
Support: 1733, 1744, 1754

Stocks to watch: ABRIC, DESTINI, ECONBHD, EMICO, EWEIN, FBMKLCI-HD, FBMKLCI-HE, FBMKLCI-HI, HOMERIZ, MAA, OWG, PARAMON, PRLEXUS, PUNCAK, REXIT, SASBADI, UCHITEC

Stock pick highlight: REXIT (0106)

Last Price: RM0.455 +0.045
Support Level: RM0.415, RM0.39
Resistance Level: RM0.485, RM0.495, RM0.52, RM0.545, RM0.575, RM0.60, RM0.635, RM0.66, RM0.70, RM0.75, RM0.835
Entry Level: RM0.45 – RM0.46

Technical Analysis

REXIT (0106) rebounded from its intra-day low of 0.415 to close higher at 0.455 after hitting the intra-day high of 0.485. Technically, the chart of REXIT formed a bullish white 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 swung 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 77.8 from 67.2, indicating the stock is turning very bullish. Stochastic fell to 81.5 from 85.2 and is below the slow stochastic line, indicating consolidation. The medium and long term trend of REXIT 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 RM0.485 will see an upside target of RM0.495, follow by RM0.52, RM0.545, RM0.575, RM0.60, RM0.635, RM0.66, RM0.70, RM0.75 and RM0.835.

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 (RM0.485). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.495, RM0.52, RM0.545, RM0.575, RM0.60), stop loss (RM0.41)
Mid Term – target price at (RM0.635, RM0.66, RM0.70, RM0.75, RM0.835), stop loss (RM0.385)

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