FBM KLCI - sign of rebound

Stocks on Bursa Malaysia closed weaker yesterday on persistent profit taking in selected heavyweight counters amid the mixed performance on regional bourses. Regional markets were mixed due to weaker Chinese factory data, as well as growing concerns over the US’ economic growth. The benchmark FBM KLCI slipped 4.11 points or 0.24% to 1,743.41 after hovering between 1,732.27 and 1,752.08 throughout the day. Losers outpaced gainers by 436 to 378, while 2870 counters were unchanged. Total volume declined to 1.61 billion units, worth RM1.81 billion, from 2.23 billion units, worth RM3.69 billion, recorded on Friday.

The FBM KLCI rebounded to open 4.3 points higher at 1,751.82 and surged to hit the intra-day high of 1,752.08 briefly after opening. However, the upward move found no follow through and profit taking activity pressed the key index lower to hit the intra-day low of 1,732.27 at mid-morning, losing 15.25 points at its worst. The FBM KLCI rebounded from the low and climbed higher gradually till closing to recovered earlier losses. Chart-wise, the FBM KLCI formed a black hammer candlestick, a bottom reversal candlestick pattern which indicates the bears were in control initially but the bulls took control later. Hence, the FBM KLCI is likely to stage further rebound today if the buying momentum continues. A temporary bottom is seen at 1,732-point, but to confirm the reversal will require the index to at least close above yesterday’s high of 1,752. Immediate overhead resistance zone is at 1,752 to 1,759, while the downside support zone is at 1,732 to 1,725.

MACD continued to slide lower but its histogram contracted upward slightly, indicating the bearish downward momentum is reducing. RSI (14) was lower at 23.8 from 24.8, indicating the key index is still in a very bearish state. Stochastic, however, hooked upward to 7.6 from 5.6, indicating the index is closing off its low and a rebound is in sight. Readings from the indicators showed that the FBM KLCI is still in a bearish state but showed early signs that the bearish momentum is receding and a technical rebound is imminent.

The trend of the FBM KLCI still remained down and bearish. Nevertheless, the price action of the key index yesterday showed that the selling pressure is waning as buyers start to appear near the support of 1,732 and lifted the index off low. Hence, the FBM KLCI is likely to stage further rebound today. However, in order for the FBM KLCI to reverse its current downtrend, the key index must at least close above the 1,800-point level, the midrange of the range from the pivot high of 1,867.53 to the pivot low of 1,732.27. Current weakness of the FBM KLCI actually presented an opportunity for the longer term investors to accumulate quality shares at lower level.

Overnight, the Dow rose 29.69 points or 0.16% to close at 18,040.37. Today, the FBMKLCI is likely to trade within a range of 1,713 to 1,771.

This week's expected range: 1718 – 1801
Today’s expected range: 1713 – 1771

Resistance: 1752, 1762, 1771
Support: 1713, 1722, 1733

Stocks to watch: ABRIC, CAREPLS, DENKO, DIGISTA, FBMKLCI-HD, GLBHD, GMUTUAL, GUOCO, HUPSENG, MAHSING, MULPHAL, MYEG, PRTASCO, REXIT, SMTRACK

Stock pick highlight: ABRIC (7061)

Last Price: RM0.565 +0.03
Support Level: RM0.52, RM0.495
Resistance Level: RM0.585, RM0.605, RM0.62, RM0.635, RM0.665, RM0.685, RM0.705, RM0.74, RM0.76, RM0.79, RM0.81
Entry Level: RM0.56 – RM0.575

Technical Analysis

ABRIC (7061) rebounded from its intra-day low of 0.52 to close higher at the intra-day high of 0.565. Technically, the chart of ABRIC 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 Saucer pattern breakout. MACD rose further and is above 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 71.7 from 62.8, indicating the stock is turning very bullish from a bullish state. Stochastic hooked up to 81.2 from 69.2 and is above the slow stochastic line, indicating the stock is turning stronger and continuation of the up cycle. The medium and long term trend of ABRIC 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 RM0.585 will see an upside target of RM0.605, follow by RM0.62, RM0.635, RM0.665, RM0.685, RM0.705, RM0.74, RM0.76, RM0.79 and RM0.81.

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 (RM0.585). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.605, RM0.62, RM0.635 RM0.665, RM0.685), stop loss (RM0.515)
Mid Term – target price at (RM0.705, RM0.74, RM0.76, RM0.79, RM0.81), stop loss (RM0.49)

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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