FBM KLCI - higher but overbought

FBM KLCI - higher but overbought

Stocks on Bursa Malaysia closed higher yesterday and persistent buying in selected index-linked heavyweights by funds pushed the benchmark FBM KLCI to close at a seven-month high, in line with regional markets. Most Asian markets rose yesterday following the positive lead from Wall Street overnight, while investors remained cautious as to how the US market would react over the weak job data. The FBM KLCI closed at an intra-day high of 1,856.51, up 13.57 points or 0.74%, after opening at the intra-day low of 1,843.18. Gainers outpaced losers by 502 to 354, while 327 counters were unchanged. Total volume was lower at 1.95 billion units worth RM2.10 billion from Monday’s 1.99 billion units worth RM1.67 billion.

Taking cue from the strong performance on Wall Street overnight, the FBM KLCI opened 0.24 of a point higher at 1,843.18, the intra-day low level, and rallied higher to hit the morning session high of 1,856.46 at mid-morning. The FBM KLCI pulled back on profit-taking to move sideways range-bound for the rest of the day, but a last minute buying on selected heavyweights helped pushed the key index to close at the highest point of the day. Chart-wise, the FBM KLCI formed a bullish white Marubozu candlestick which indicates the bulls were in full control for the day, and hence, the FBM KLCI is likely to continue its upward momentum to move higher today. Immediate overhead resistance zone is at 1,858 to 1,870, while the immediate downside support zone is at 1,843 to 1,831.

MACD continued to rise, and its histogram also extended upward strongly, indicating a strong increased in momentum to the upside. RSI (14) was higher at 71.3 from 66.9, indicating the FBM KLCI is turning very bullish and is slightly overbought for the short term. Stochastic was marginally higher at 97.6 from 97.1, indicating very strong index strength but has entered the overbought zone. Readings from the indicators showed that the FBM KLCI is turning very bullish but is overbought for the short term, and a pullback correction is expected ahead to neutralize the overbought situation.

The trend of the FBM KLCI has turned up and bullish as predicted in previous analysis that if the key index is able to break through the 1,831 resistance, it will rally towards the 1,845 to 1,858 resistance zone, and it did in just two sessions. Hence, the FBM KLCI is likely to continue its uptrend to move higher in the short term to challenge the higher resistances of 1,858, follow by 1,860, 1,870, 1880, 1,886 and ultimately the all-time high level of 1,896.23. On the broader market, buying sentiment has improved as the market breadth is turning more positive and rotational play on ACE market and small caps will continue to stay alive.

Overnight, the Dow fell a marginal 5.43 points or -0.03% to close at 17,875.42. Today, the FBMKLCI is likely to trade within a range of 1,834 to 1,869.

This week's expected range: 1798 – 1858
Today’s expected range: 1834 – 1869

Resistance: 1860, 1865, 1869
Support: 1834, 1838, 1847

Stocks to watch: ANCOM, CARIMIN, CAP, CYL, DUFU, EDUSPEC, EFFICEN, ENGTEX, EVERGRN, FABER, GASMSIA, GHLSYS, GMUTUAL, HANDAL, IRETEX, JAKS, JCY, LUXCHEM, MAGNA, MATRIX, MMSV, MNC, MULPHAL, PENTA, RUBEREX, SALCON, SYSCORP, TAKASO, YFG

Stock pick highlight: EFFICEN (0064)

Last Price: RM0.32 +0.02
Support Level: RM0.30, RM0.28
Resistance Level: RM0.32, RM0.335, RM0.35, RM0.375, RM0.39, RM0.40, RM0.41, RM0.425, RM0.45
Entry Level: RM0.315 – RM0.325

Technical Analysis

EFFICEN (0064) rebounded from its intra-day low of 0.30 to close higher at the intra-day high of 0.32. Technically, the chart of EFFICEN formed a bullish white Marubozu candlestick with increasing volume, indicating strong buying interest came into the stock yesterday. It breaks out from the consolidation range forming a Pennant pattern breakout. MACD climbed upward and made a golden-cross over the zero-line, issuing a medium term buy signal, and its histogram also extended upward, indicating an increased in momentum to the upside. RSI (14) rose to 61.9 from 53.4, indicating the stock is turning bullish. Stochastic rose higher to 75 from 61 and is above the slow stochastic line, indicating the stock is turning stronger after recent consolidation. The long term trend of EFFICEN is up while the medium term trend is sideways, and the short term trend is up with the 5-day SMA above the 10-day SMA and is also above the 30-day SMA, and a confirmed breakout above RM0.32 will see an upside target of RM0.335, follow by RM0.35, RM0.375, RM0.39, RM0.40, RM0.41, RM0.425 and RM0.45.

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 (RM0.32). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.335, RM0.35, RM0.375, RM0.39), stop loss (RM0.295)
Mid Term – target price at (RM0.40, RM0.41, RM0.425, RM0.45), stop loss (RM0.275)

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