FBM KLCI - lower on profit-taking

FBM KLCI - lower on profit-taking

Stocks on Bursa Malaysia closed lower yesterday in line with regional markets following a weak economic data released in China. Most Asian stocks fell after the manufacturing purchasing managers’ index showed factory output in the world’s second-biggest economy contracted for the first time in 6 months. The FBMKLCI declined 2.1 points or 0.12% to close at 1,822.29, after hovering between 1,816.97 and 1,825.12 throughout the day. Market breadth was negative with losers outpacing gainers by 500 to 260 with 318 counters unchanged. Total volume decreased to 1.64 billion units worth RM1.62 billion from Wednesday’s 2.1 billion units worth RM1.92 billion.

The FBMKLCI opened 0.27 of a point higher at 1,824.66 and surged to the intra-day high of 1,825.12 briefly after opening. However, the upward move was hampered by profit-taking activity which dragged the key index lower for the rest of the day. It hit the intra-day low of 1,816.97 before a last minute bargain hunting activity which lifted the key index to close off low. Chart-wise, the FBMKLCI formed a bearish black hanging-man candlestick in dark-cloud-cover position, a top reversal candlestick pattern which indicates profit-taking activity, and it also marked a pause to the two days uptrend. Hence, the FBMKLCI is likely to stay in range-bound consolidation today. Immediate overhead resistance zone is at 1,825 to 1,827, while the immediate downside support zone is at 1,816 to 1,810.

MACD was marginally higher but is still below the signal-line, and its histogram further contracted upward, indicating a reduction in the bearish momentum and the key index is in a state of consolidation. RSI (14) hooked down slightly to 48.5 from 49.7, indicating a mild pullback correction, and the key index is mildly bearish. Stochastic, however, continued to climb higher to 31 from 20.4, indicating a continuation of the short term up cycle. Readings from the indicators showed that the FBMKLCI is in a state of consolidation, and is likely to further consolidate.

The general trend of the FBMKLCI is still down. However, the immediate near term trend of the FBMKLCI has turned up as the key index is now closing above the 5 and 10-day simple moving average (SMA). The correction yesterday indicated that the FBMKLCI is taking a breather after two days of strong rebound rally, and hence, the key index is likely to stay in range-bound consolidation today within a range of 1,816 to 1,827 until a breakout is seen on either side of the range, and the key index will move in the direction of the breakout. In order for the FBMKLCI to reverse its current downtrend the key index will have to break above the strong overhead resistance zone posted by a cluster of moving averages with the upper boundary at 1,855 posted by the 120-day SMA. On the other hand, a break of the immediate support at 1,805 will see the key index revisiting the 1,800-point psychological support level and below.

Overnight, the Dow rose 33.27 points or 0.19% to close at a fresh record high of 17,719.00. Today, the FBMKLCI is likely to trade within a range of 1,809 to 1,833.

This week's expected range: 1780 – 1856
Today’s expected range: 1809 – 1833

Resistance: 1825, 1829, 1833
Support: 1809, 1813, 1817

Stocks to watch: AWC, BPLANT, K1, KOMARK, MEGB, MATRIX, PENTA, SMRT, SOLID, SYSTECH, WPRTS

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