INDEXFTSE:FBMKLCI : FBM KLCI - rebounded strongly to close higher

FBM KLCI - rebounded strongly to close higher

Stocks on Bursa Malaysia closed higher yesterday on buying interest in blue-chips and heavyweights, in line with regional bourses as China’s decision to cut the lending rate had boosted the country’s economy and strengthened optimism in the global economy. The FBMKLCI rose by 24.64 points or 1.36% to close at 1,833.77, after hovering between 1,809.63 and 1,833.77 throughout the day. Market breadth was positive with gainers outpacing losers by 510 to 297 with 290 counters unchanged. Total volume increased to 2.24 billion units worth RM1.91 billion from 1.77 billion units worth RM1.66 billion on last Friday.

Taking cue from the record close on Wall Street last Friday, the FBMKLCI opened 2.32 points higher at 1,811.45 and pulled back on profit-taking to hit the intra-day low of 1,809.63 briefly after opening. The key index rebounded from the low and rallied higher for the rest of the day with intermittent mild profit-taking to end the day at the highest point. Chart-wise, the FBMKLCI formed a bullish long white candlestick which indicates the bulls were in control for the day, and the candlestick which breaks above the pivot high of 1,824.39 on 19 November also issued a strong bottom reversal signal, indicating the end of the recent downtrend and the beginning of a short term uptrend. Hence, the FBMKLCI is likely to move higher today on follow through buying momentum. Immediate overhead resistance zone is at 1,841 to 1,858, while the immediate downside support zone is at 1,824 to 1,809.

MACD turned upward and made a golden-cross over the signal-line, issuing a bullish buy signal. RSI (14) also hooked up strongly to 54.4 from 41.9, indicating a strong rebound which turned the short term relative strength of the key index from a mildly bearish state to a mildly bullish state. Stochastic hooked upward to 35.3 from 26.1, indicating a swing in the key index from down to up and also continuation of the short term up cycle. Readings from the indicators showed that the momentum of the FBMKLCI has a drastic changed from a bearish state to a mildly bullish state, and hence, is likely to move higher.

The general trend of the FBMKLCI is still down. However, yesterday’s bullish strong move has lifted the key index to close above the short and medium term moving averages, i.e. the 5, 10 20, 30 and 50-day simple moving average (SMA), indicating strong bullish reversal which could mark the beginning of the year-end window-dressing rally. Nevertheless, in order for the FBMKLCI to fully reverse its current downtrend, the key index must break above the overhead resistance zone at 1,847 to 1,855 posted by a cluster of medium to long term moving averages, with the 120-day SMA posting the upper barrier at 1,855, and the pivot high of 1,858.09. Otherwise, the FBMKLCI may move sideways range-bound.

Overnight, the Dow rose 7.84 points or 0.04% to close at a fresh record high of 17,817.90. Today, the FBMKLCI is likely to trade within a range of 1,793 to 1,857.

This week's expected range: 1778 – 1849
Today’s expected range: 1793 – 1857

Resistance: 1841, 1849, 1857
Support: 1793, 1801, 1817

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