FBM KLCI - lower on continued selling pressure

Stocks on Bursa Malaysia ended lower yesterday in another cautious trading day in tandem with most regional peers amid speculation that the Federal Reserve (Fed) will raise interest rates as early as September. Most Asian stock markets sank in a sea of red as recent upbeat US jobs data bolstered expectations of an interest rate increase by the Fed before year-end. The benchmark FBM KLCI eased 10.40 points or 0.6% to close at 1,729.05 after hovering between 1,729.05 and 1,738.76. Losers thumped gainers 605 to 221, while 278 counters were unchanged. Total volume rose to 1.33 billion units worth RM1.46 billion from 1.24 billion units worth RM1.38 billion on Monday.

The FBM KLCI opened 1.92 points lower at 1,737.53 and rebounded to touch the intra-day high of 1,738.76 briefly after opening, but heavy selling pressure dragged the key index lower to the morning session low of 1,729.92, and the key index rebounded to move sideways range-bound for the rest of the day. However, a last minute selling on selected blue-chips sent the FBM KLCI to close at the lowest point of the day. Chart-wise, the FBM KLCI formed a bearish black candlestick which indicates sellers were dominant for the day, and hence, the FBM KLCI is likely to continue its downtrend to slip lower today. Immediate downside support zone is at 1,727 to 1,718, while the overhead resistance zone is at 1,732 to 1,741.

MACD hooked downward after staying flat, and its histogram also extended southward marginally, indicating an increased in the bearish momentum after recent consolidation. RSI (14) was lower at 25.2 from 28.1, indicating the key index is turning more bearish. Stochastic was lower at 10.7 from 13.1, and made a dead-cross over the slow stochastic line, issuing a bearish sell signal and indicated the key index is very weak. Readings from the indicators showed that the FBM KLCI is weak and bearish, and hence is likely to further consolidate. Nonetheless, as the oscillators are in the oversold zone, some relief rebound may be expected.

The trend of the FBM KLCI remained down and bearish, and the price action of the key index yesterday showed that a fresh round of selling might have started after recent consolidation in the 1,732 to 1,741 points range. Hence, the FBM KLCI is likely to slide lower towards the next lower support zone of 1,718 to 1,700 as the key index still shows no sign of bottoming at the moment. On the broader market, second and third liners also consolidated in tandem with the blue-chips.

Overnight, the Dow fell 2.51 points or -0.01% to close at 17,764.04. Today, the FBMKLCI is likely to trade within a range of 1,716 to 1,748.

This week's expected range: 1714 – 1771
Today’s expected range: 1716 – 1748

Resistance: 1735, 1742, 1748
Support: 1716, 1722, 1725

Stocks to watch: BARAKAH, BTM, GMUTUAL, HARBOUR, KAWAN, MYEG, NCB, SENDAI, SOLUTN, TAKAFUL, 3A

Stock pick highlight: MYEG (0138)

Last Price: RM2.76 +0.04
Support Level: RM2.59, RM2.32
Resistance Level: RM2.78, RM2.82, RM2.88, RM2.92, RM2.94, RM3.03, RM3.07, RM3.15, RM3.29, RM3.38, RM3.58
Entry Level: RM1.73 – RM1.76

Technical Analysis

MYEG (0138) rebounded from its intra-day low of 2.68 to close higher at 2.76 after hitting the intra-day high of 2.78. Technically, the chart of MYEG 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 climbed higher 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 64.8 from 62.6, indicating the stock is getting more bullish. Stochastic was higher at 92.4 from 85.3 and is above the slow stochastic line, indicating the stock is turning stronger after recent consolidation. The medium and long term trend of MYEG 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 RM2.78 will see an upside target of RM2.82, follow by RM2.88, RM2.92, RM2.94, RM3.03, RM3.07, RM3.15, RM3.29, RM3.38 and RM3.58.

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 (RM2.78). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM2.82, RM2.88, RM2.92 RM2.94, RM3.03), stop loss (RM2.58)
Mid Term – target price at (RM3.07, RM3.15, RM3.29, RM3.38, RM3.58), stop loss (RM2.31)

Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. The Stocks to watch is not a recommendation to buy or sell the particular stock, as it is only meant for graduates of the "Share Trading the Pro Way" course as case study. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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