News Column

Index likely to stage re-test of its immediate downside support

January 26, 2014

S.N. Lock

MAJOR weaknesses on the Wall Street and regional stock markets continued to dampen market sentiment on Bursa Malaysia . The local benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) closed lower yesterday at 1,802.57 points. Bursa Malaysia's continuing consolidations saw the FBM KLCI hitting an intra-week high of 1,816.94 on Tuesday before staging a technical pullback to an intra-week low of 1,798.57 yesterday, giving the index an intra-week trading range of 18.37 points. Share prices on Bursa Malaysia continued to consolidate for the week under review. However, the key index rebound on Tuesday failed in its bid to arrest the faltering momentum over the next three trading days. In New York , the Dow Jones Industrial Index continued to consolidate its recent gains. It stayed above its major psychological resistance of 16,000 points last week and closed at 16,197.35 points on Thursday with a week-to-date loss of 1.59 per cent. The tech stock-heavy Nasdaq Composite Index moved in counter-trend with the market sentiment on the broader market. It closed at 4,218.88 points on Thursday with a week-to-date gain of 0.51 per cent. Back at home, share prices on Bursa Malaysia continued to consolidate further last week. On the scoereboard, the FBM KLCI ended lower at 1,802.57 points yesterday, with a week-on-week loss of 0.58 per cent. The FBM Small Cap Index lost 238.70 points, or 1.49 per cent, to close lower at 15,834.71 points, while the FBM ACE Index closed lower at 5,938.51 points, giving it a week-on-week loss of 1.55 per cent yesterday. Followings are the readings of some of the FBM KLCI's technical indicators:- Moving Averages: The FBM KLCI stayed above its 100- and 200-day moving averages yesterday. It stayed below the support of its 10-, 20-, 30- and 50-day moving averages. Momentum Index: Its short-term momentum index had since stayed below the support of its neutral reference line yesterday. On Balance Volume (OBV): Its short-term OBV trend continued to stay below the support of its 10-day exponential moving averages. Relative Strength Index: Its 14-day RSI stood at 37.10 per cent. Outlook The FBM KLCI hit its intra-week high of 1,816.94 on Tuesday, failing to re-challenge this column's envisaged resistance zone of between 1,817 and 1,851 points. The ensuing consolidations sent the FBM KLCI to an intra-week low of 1,798.57 yesterday, moving into the confines of this column's envisaged support zone of between 1,774 and 1,808 points. There were 17 losers and 10 gainers. UEM Sunrise Bhd , SapuraKencana Petroleum Bhd , CIMB Group Holdings Bhd and UMW Holdings Bhd all registered week-on-week losses of 4.15 per cent, 3.43 per cent, 2.95 per cent and 2.38 per cent respectively. Genting Malaysia Bhd replaced Tenaga Nasional as the week's top performer with a year-to-date gain of 10 sen , or 0.97 per cent. The local bourse saw its weekly price chart continue to stay above the support of its intermediate-downtrend (See FBM KLCI's weekly chart - A3:A4) yesterday. It also continued to stay above its intermediate-term uptrend support (A1:A2). Chartwise, the FBM KLCI failed to re-challenge its immediate overhead resistance (See FBM KLCI's daily chart - B5:B6) on Wednesday. It stayed below its intermediate-term uptrend support (B1:B2) yesterday. The FBM KLCI's monthly fast MACD stayed above its monthly slow MACDs and its daily and weekly fast MACDs stayed below their respective slow MACDs yesterday. The FBM KLCI's 14-day RSI stayed at 37.10 per cent while its 14-week and 14-month RSI stayed at 51.34 and 62.94 per cent, respectively, yesterday. As the FBM KLCI has yet to shake off the negative impact of the recent consolidations, the index is likely to stage another re-test of its immediate downside support zone of between 1,770 and 1,800 points. With that, the benchmark index is likely to consolidate further in its bid to dilute the recent overbought momentum. Chartwise, its next downside support is likely to be at 1,780 points. Next week, the FBM KLCI's envisaged resistance zone is likely to be between 1,806 and 1,840 points while its immediate downside support is expected to be between 1,764 and 1,798 points. The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.

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Source: Business Times (Malaysia)

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