FBM KLCI - in consolidation

Stocks on Bursa Malaysia closed mixed yesterday as last-minute selling in selected heavyweights limited gains. Market sentiment firmed up for the first time in recent days with interest seen in smaller capitalised stocks but CIMB came under some selling pressure and dragged the benchmark FBM KLCI into the negative territory. At close, the FBM KLCI slipped 2.04 points or 0.12% to 1,741.37 after hovering between 1,736.57 and 1,746.49 throughout the day. Gainers outpaced losers by 571 to 262 while 280 counters were unchanged. Total volume rose to 1.73 billion units worth RM2.15 billion, from 1.61 billion units worth RM1.81 billion recorded on Monday.

The FBM KLCI opened 0.07 of a point higher at 1,743.48 and slipped lower on continued selling pressure to hit the intra-day low of 1,736.57 fifty minutes after opening. The key index rebounded from the low and climbed higher gradually for the rest of the day to hit the intra-day high of 1,746.49 just before closing. However, a last minute sell down of selected heavyweight pulled the FBM KLCI back into the negative territory. Chart-wise, the FBM KLCI formed a black spinning-top candlestick which indicates uncertainty of market direction amid consolidation as the key index was moving within the previous day’s range. Hence, the FBM KLCI is likely to further consolidate today. Immediate overhead resistance zone is at 1,746 to 1,752, while the downside support zone is at 1,736 to 1,732.

MACD continued to slide southward but its histogram contracted upward for the second bar, indicating reduction of the bearish downward momentum and consolidation. RSI (14) was lower at 23.3 from 23.8, indicating mild drop in the relative strength and consolidation. Stochastic was marginally higher at 8.3 from 7.6, and has made a mild golden-cross over the slow stochastic line, issuing a stochastic buy signal. Readings from the indicators showed that the FBM KLCI is in a state of consolidation and is oversold, and hence a technical rebound is imminent.

The trend of the FBM KLCI still remained down. However, the price action of the FBM KLCI yesterday showed that the key index is trying to settle down at current level as the selling pressure is gradually waning, and hence, an oversold or technical rebound is likely to happen. Nevertheless, to reverse the current downtrend, the FBM KLCI will have to at least move above the 1,800-point level which is looking a bit far away at the moment. On the broader market, sentiment improved slightly which saw buying interest in small caps and ACE market counters with a positive market breadth of two gainers to one losers. For the longer term investors, current weakness actually presented an excellent opportunity to accumulate quality shares for medium to long term gains.

Overnight, the Dow fell 28.43 points or -0.16% to close at 18,011.94. Today, the FBMKLCI is likely to trade within a range of 1,726 to 1,756.

This week's expected range: 1718 – 1801
Today’s expected range: 1713 – 1771

Resistance: 1746, 1751, 1756
Support: 1726, 1731, 1736

Stocks to watch: ACOSTEC, AHB, APPASIA, BARAKAH, CIHLDG, CANONE, EATECH, ENGTEX, EVERGRN, GHLSYS, HARBOUR, HHGROUP, HOVID, INSTACO, IRCB, KIANJOO, KKB, LCTH, LEONFB, MYEG, PADINI, PENTA, REDTONE, SKPETRO, SCGM, SIGN, SMPC, WASEONG, XINQUAN, YOCB

Stock pick highlight: HHGROUP (0175)

Last Price: RM0.665 +0.045
Support Level: RM0.62, RM0.60
Resistance Level: RM0.675, RM0.695, RM0.715, RM0.74, RM0.765, RM0.785, RM0.80, RM0.825, RM0.85, RM0.875, RM0.90
Entry Level: RM0.66 – RM0.67

Technical Analysis

HHGROUP (7061) rebounded from its intra-day low of 0.62 to close higher at the intra-day high of 0.665. Technically, the chart of HHGROUP 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 turned upward but is below the signal-line, and its histogram also contracted upward strongly, indicating a change in momentum to the upside and a buy signal. RSI (14) rose to 57.1 from 47.6, indicating the stock is turning mildly bullish from a bearish state. Stochastic hooked up to 19.2 from 8.1 and made a golden-cross over the slow stochastic line, issuing a stochastic buy signal and indicated the stock is turning stronger after recent consolidation. The medium and long term trend of HHGROUP is up, and the short term trend is sideways with the 5-day SMA below the 10 and 30-day SMA while the 10-day SMA is above the 30-day SMA, and a confirmed breakout above RM0.675 will see an upside target of RM0.695, follow by RM0.715, RM0.74, RM0.765, RM0.785, RM0.80, RM0.825, RM0.85, RM0.875 and RM0.90.

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 (RM0.675). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.695, RM0.715, RM0.74 RM0.765, RM0.785), stop loss (RM0.615)
Mid Term – target price at (RM0.80, RM0.825, RM0.85, RM0.875, RM0.90), stop loss (RM0.595)

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