KLCI reverses course to stay above key 1,050 support level

RENEWED buying support in key heavyweight index-linked counters helped to reverse the falling trend on Bursa Malaysia. The Kuala Lumpur Composite Index (KLCI) continued to stay above its critical support of 1,050 when it closed at 1,075.77 points yesterday.

The KLCI opened marginally higher at 1,061.88 points before drifting lower to its intra-day low of 1,040.40 on Monday. The KLCI closed at 1,045.97 points, giving a day-on-day loss of 13.53 points, or 1.28 per cent. It continued to fall further on the weak performances on Wall Street and regional stock markets on Tuesday. The KLCI staged a late-day rebound to close at 1,044.48 points, giving a day-on-day loss of 1.49 points, or 0.14 per cent.Renewed buying support in key heavyweight index-linked counters sent the KLCI higher on Wednesday. The KLCI closed at 1,057.85 points, giving a day-on-day gain of 13.37 points, or 1.28 per cent.

Continuing buying support on key heavyweight index-linked counters' sent the KLCI above its 1,070 level on Thursday. The KLCI closed grossly higher at 1,074.11 points, recording a day-on-day gain of 16.26 points, or 1.54 per cent. The KLCI consolidated at around the overnight level yesterday. It closed at 1,075.77 points, giving a day-on-day gain of 1.66 points, or 0.15 per cent.

On the foreign front, the Dow Jones Industrial Average (DJIA) continued to consolidate its recent gains over the last four trading days.

The DJIA closed at 8,472.40 points on Thursday, giving a four-day loss of 67.33 points, or 0.79 per cent. The tech stock heavy Nasdaq Composite Index continued to maintain its technical composure above its support of 1,800. It closed at 1,829.54 points on Thursday, recording a four-day gain of 51.08 points, or 2.75 per cent. Dow closed Friday at 8438.39 down -34.01 or 0.4%

The Tokyo stock market trended within tight trading range. The Nikkei 225 Index closed at 9,877.39 points yesterday, giving a week-on-week gain of 91.13 points, or 0.93 per cent.

The Hong Kong stock market maintained its technical composure above its critical support of 18,000 points. The Hang Seng Index closed at 18,600.26 points, posting a week-on-week gain of 679.33 points, or 3.79 per cent.

The KLCI rebounded towards the later part of the week to close at 1,075.77 points yesterday, giving a week-on-week gain of 16.27 points, or 1.54 per cent.

The FTSE Bursa Malaysia Second Board Index eased 15.35 points, or 0.32 per cent to 4,798.80 level while the FTSE Bursa Malaysia Mesdaq Index lost 22.54 points, or 0.54 per cent, to 4,116.97 level.

Following are the readings of some of the KLCI's technical indicators: Moving Averages: The KLCI had since stayed above its 10-, 20-, 30-, 50- 100- and 200-day moving averages.

Momentum Index: Its short-term momentum index stayed below the support of its neutral reference line.

On Balance Volume: Its short-term OBV trend stayed above the support of its 10-day exponential moving averages.

Relative Strength Index: Its 14-day RSI stood at the 60.03 per cent level yesterday.

Outlook

The KLCI's brief and short technical pullback hit its intra-week low of 1,028.14 on Tuesday, staging a successful re-test of the envisaged support zone (1,022 to 1,056 levels). Subsequent technical rebounds sent the KLCI to its intra-week high of 1,081.83 yesterday, moving into the confines of the envisaged resistance zone (1,062 to 1,096 levels).

Despite a sharp technical pullback last week and the rebounds during the week, the KLCI continued to stay comfortably above its immediate downside support (See KLCI's weekly chart - A3:A4). It continued to stay above its resistance-turned-support trendline (A7:A8).

Chartwise, the KLCI's daily trend continued to stay below the support of its revised intermediate-term uptrend (See KLCI's daily chart - B7:B8) over the last five trading days. It stayed decisively above its intermediate-term downtrend (B5:B6).

The KLCI's weekly fast MACD (moving average convergence divergence) indicator stayed above its weekly slow MACD yesterday. Its daily and monthly fast MACDs continued to stay marginally below their respective slow MACDs. The KLCI's 14-day RSI stayed at 60.03 per cent level on Thursday. Its 14-week and 14-month RSI stayed at 65.97 and 50.61 per cent levels respectively. Last week, this column commented that key heavyweight index-linked counters would continue to maintain their technical composure in holding the KLCI from slipping further. It did.

The KLCI managed to reverse to the upside after hitting its intra-week low of 1,028.14 on Tuesday.The KLCI is likely to hold on to its technical composure in its run-up to the window-dressing exercise on June 30.

Thereafter, the KLCI will ease off to consolidate its recent gains during the later part of next week.

Next week, the KLCI's envisaged resistance zone hovers at the 1,079 to 1,113 levels while its immediate downside support is at the 1,038 to 1,072 levels.

The subject expressed above is based on technical analysis and opinions of the writer. It is not a solicitation to buy or sell