FBM KLCI - lower on extended selling

FBM KLCI - lower on extended selling

Stocks on Bursa Malaysia closed lower yesterday in line with Asian bourses as traders turned cautious ahead of the US Federal Reserve’s (Fed) policy meeting which will indicate the interest rate’s direction, and late selling pressure on Petronas Dagangan and Petronas Chemicals and other heavyweights sent the FBM KLCI down more by 12.13 points or 0.65% to 1,842.93, after fluctuating between 1,842.84 and 1,855.46 throughout the day while trading volume declined. Gainers led losers marginally 410 to 407, while 324 counters were unchanged. Total volume decreased to 1.59 billion shares worth RM1.9 billion from Tuesday’s 2.17 billion shares worth RM2.15 billion.

The FBM KLCI opened 0.04 of a point higher at 1,855.10 and surged slightly higher to 1,855.46 briefly after opening, and profit taking pressure which emerged sent the key index lower throughout the day with selling pressure increased in last hour to end the FBM KLCI almost at the lowest point of the day. Chart-wise, the FBM KLCI formed a bearish long black candlestick which indicates heavy selling pressure for the day, and hence, the FBM KLCI is likely to further consolidate today ahead of the long holiday weekend. Immediate downside support zone is at 1,836 to 1,831, while the overhead resistance zone is at 1,855 to 1,867.

MACD continued to slide lower and its histogram also extended lower, indicating an increased in the bearish downward momentum. RSI (14) slipped lower to 51.6 from 58.9, indicating the FBM KLC is turning neutral from a bullish state before. Stochastic swung downward to 51.8 from 76 and made a dead-cross over the slow stochastic line, indicating increased weakness and the short term cycle has turned down. Readings from the indicators showed that the FBM KLCI is turning weak and bearish, and hence, is likely to further correct downward.

The short term trend of the FBM KLCI has turned down as the key index has now closed below the short term, 5, 10, 15 and 20-day simple moving average (SMA). Thus, the FBM KLCI is likely to slip lower to find support from the 30-day SMA which is currently at 1,837, and the next lower moving average support zone is at 1,831 to 1,818 provided by a cluster of medium and long term moving averages. Nevertheless, the medium and long term trend is still up at the moment. On the broader market, volume declined substantially, indicating traders were sidelines ahead of the long holiday. Bursa Malaysia will be closed on Friday, May 1st and Monday, May 4th, for Labour Day holiday and replacement for Wesak Day which falls on Sunday.

Overnight, the Dow fell 74.61 points or -0.41% to close at 18,035.53. Today, the FBMKLCI is likely to trade within a range of 1,826 to 1,868.

This week's expected range: 1825 – 1886
Today’s expected range: 1826 – 1868

Resistance: 1851, 1859, 1868
Support: 1826, 1834, 1838

Stocks to watch: ASIAPLY, ASUPREM, EKIB, EWEIN, FRONTKN, IDEALUBB, KENANGA, LIENHOE, LUXCHEM, MPAY, PERWAJA, PRTASCO, SUNZEN, YTLPOWR

Stock pick highlight: PRTASCO (5070)

Last Price: RM1.80 +0.07
Support Level: RM1.73, RM1.65
Resistance Level: RM1.83, RM1.87, RM1.90, RM1.95, RM2.02, RM2.06, RM2.08, RM2.13, RM2.25, RM2.41
Entry Level: RM1.80 – RM1.82

Technical Analysis

PRTASCO (5070) rebounded from its intra-day low of 1.73 to close higher at the intra-day high of 1.80. Technically, the chart of PRTASCO 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 Saucer pattern breakout. MACD swung upward and is above the signal-line, and its histogram also surged upward, indicating an increased in momentum to the upside and a buy signal. RSI (14) rose to 69.3 from 63, indicating the stock is getting more bullish. Stochastic rose to 72.7 from 62.9, and is above the slow stochastic line, indicating the stock is turning stronger after recent consolidation. The medium and long term trend of PRTASCO is up, and the short term trend is up with the 5-day SMA crossing above the 10-day SMA and both are above the 30-day SMA, and a confirmed breakout above RM1.83 will see an upside target of RM1.87, follow by RM1.90, RM1.95, RM2.02, RM2.06, RM2.08, RM2.13, RM2.25 and RM2.41.

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 (RM1.83). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM1.87, RM1.90, RM1.95, RM2.02, RM2.06), stop loss (RM1.72)
Mid Term – target price at (RM2.08, RM2.13, RM2.25, RM2.41), stop loss (RM1.64)

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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