FBM KLCI - higher on technical rebound

FBM KLCI - higher on technical rebound

Stocks on Bursa Malaysia closed mixed yesterday with the benchmark FBM KLCI closed higher, lifted by gains in selected heavyweights led by Petronas Chemicals and Genting. Key Asian markets were cautious after the Shanghai Composite Index fell more than 4%, fuelled by media reports of tougher margin requirements by some brokerages. At close, the FBM KLCI rose 9.15 points or 0.5% to 1,827.42 after fluctuating between 1,818.16 and 1,830.9 throughout the day. Losers led gainers by 434 to 362 with 321 counters unchanged. Total volume rose to 1.82 billion shares worth RM1.93 billion from last Thursday’s 1.52 billion shares worth RM2.17 billion.

Taking cue from the rebound on Wall Street, the FBM KLCI opened 12.05 points higher at 1,830.32 and surged to the intra-day high of 1,830.90 briefly after opening. However, profit taking activity dragged key index lower from the high to hit the intra-day low of 1,818.16 at mid-afternoon, and some last hour bargain hunting lifted the FBM KLCI to close higher. Chart-wise, the FBM KLCI formed a black hammer candlestick, a bottom reversal candlestick pattern which indicates support and possible reversal. Nonetheless, the FBM KLCI will have to close higher above 1,830.9 to confirm a reversal; otherwise, the key index may continue to consolidate at current level with immediate support at 1,818, while the immediate overhead resistance zone is at 1,830 to 1,841.

MACD and its histogram continued to slide lower, indicating an increased in the bearish momentum. RSI (14) hooked upward to 45.3 from 40.6, indicating a technical rebound and the key index is in a mildly bearish state. Stochastic slipped lower to 12.19 from 22.6, indicating a very weak state of the FBM KLCI but is short term oversold. Readings from the indicators showed that the FBM KLCI is short term weak and bearish but is oversold, and the gain yesterday was just an oversold technical rebound and hence the key index is likely to further consolidate.

The short term trend of the FBM KLCI is down as the key index has closed below the short term 5, 10, 15, 20 and 30-day simple moving average (SMA). However, the FBM KLCI found support at the medium term 60-day SMA when the key index rebound from it, and hence, the medium term trend is still up. The long term trend is turning sideways as the FBM KLCI is closing below the 240, 300 and 360-day SMA but is above the 100, 120, 150 and 200-day SMA. With a mixed outlook on the trend, the FBM KLCI is likely to go into a sideways range-bound consolidation. On the broader market, the FBMSCAP and FBMACE indices are in a correction mode. Thus, rotational play on small caps and ACE market counters is also taking a breather with different set of counters in play.

Overnight, the Dow fell 142.20 points or -0.79% to close at 17,928.20. Today, the FBMKLCI is likely to trade within a range of 1,807 to 1,843.

This week's expected range: 1785 – 1883
Today’s expected range: 1807 – 1843

Resistance: 1832, 1838, 1843
Support: 1807, 1812, 1820

Stocks to watch: APPASIA, ARMADA, BOILERM, BTM, CAB, CSL, EATECH, GESHEN, GRANFLO, HHGROUP, KAREX, LIONDIV, LONBISC, MAHSING, MPAY, OWG, SMTRACK

Stock pick highlight: MPAY (0156)

Last Price: RM0.34 +0.02
Support Level: RM0.32, RM0.305
Resistance Level: RM0.345, RM0.35, RM0.365, RM0.375, RM0.385, RM0.40, RM0.425, RM0.45, RM0.475, RM0.50
Entry Level: RM0.335 – RM0.345

Technical Analysis

MPAY (0156) rebounded from its intra-day low of 0.32 to close higher at 0.34 after hitting the intra-day high of 0.345. Technically, the chart of MPAY formed a bullish white candlestick with increasing volume indicating buying demand came into the stock yesterday. It reversed up from the consolidation forming a V-pattern reversal. MACD hooked upward but is still below the signal-line, and its histogram also contracted upward, indicating a change in momentum to the upside and a buy signal. RSI (14) rose to 63.8 from 57.9, indicating the stock is turning bullish. Stochastic hooked upward to 65.8 from 51.2, and made a golden-cross over the slow stochastic line, issuing a stochastic buy signal and indicating the stock is turning stronger after recent consolidation. The medium and long term trend of MPAY is up, and the short term trend is also 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 RM0.345 will see an upside target of RM0.35, follow by RM0.365, RM0.375, RM0.385, RM0.40, RM0.425, RM0.45, RM0.475, and RM0.50.

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 (RM0.345). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.35, RM0.365, RM0.375, RM0.385, RM0.40), stop loss (RM0.315)
Mid Term – target price at (RM0.425, RM0.45, RM0.475, RM0.50), stop loss (RM0.30)

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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