Can FBM KLCI stays above key support with renge bound shortened Raya week?

SHARE prices on Bursa Malaysia rebounded in tandem with the follow-through rebounds on Wall Street and regional stock markets. The FTSE Bursa Malaysia Composite Index (FBM KLCI) continued to stay above its major psychological support of 1,200 points when it closed at 1,221.20 yesterday.

It had been another bullish week for the local stock market, with the benchmark FBM Kuala Lumpur Composite Index (FBM KLCI) managing to punch through new 15-month high territories. This upbeat momentum prevailed as share prices on Bursa Malaysia traced the positive trends taking place in the equity markets of the United States and of the region.

Major Markets Weekly Gains / Losses

The FBM KLCI posted a week-on-week gain of 12.92 points, or 1.07 per cent. On the foreign front, follow-through technical rebounds sent the Dow Jones Industrial Average higher to close at 9,783.92 points on Thursday, giving a four-day gain of 178.51 points, or 1.86 per cent.

Tokyo stocks staged a follow-through consolidation, above the 10,000 level over the last five trading days. The Nikkei 225 Index closed at 10,370.54 yesterday, giving a weekly loss of 73.79 points, or 0.71 per cent.

The Hong Kong stock market continued to stay above its overhead resistance of 21,000. The Hang Seng Industrial closed at 21,623.4, recording a week-on-week gain of 462.03 points, or 2.18 per cent.

In conjunction with the Hari Raya Aidilfitri public holidays, the Malaysian stock market will be closed for two days. Operations will resume on Wednesday.
Given the three-day holiday-shortened week, trading of Bursa Malaysia shares is expected to be thin, and range-bound. But there is also a high possibility of buying momentum staging a strong comeback after the long market break, given the prevailing bullish market sentiment, as some technical analysts point out.

The following are the readings of some of the FBM KLCI's technical indicators:

Moving Averages: The FBM KLCI continued to stay above its 10-, 20-, 30-, 50-, 100- and 200-day moving averages.

Momentum Index: Its short-term momentum index continued to stay above the support of its neutral reference line.

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

Relative Strength Index (RSI): Its 14-day RSI stood at the 73.21 per cent level yesterday.

Technical Outlook

The FBM KLCI's mild technical pullback hit its intra-week low of 1,202.62 on Tuesday, staging a re-test of this column's envisaged support zone (1,170 to 1,204 levels). Subsequent technical rebounds over the last three trading days hit its intra-week high of 1,221.20 yesterday, moving into the confines of this column's envisaged resistance zone (1,211 to 1,245 levels). The FBM KLCI's weekly chart continued to stay above the support of the neckline (see FBM KLCI's weekly chart A1:A2) of its head-and-shoulders pattern formation. It continued to stay above its intermediate-term uptrend (A3:A4).

Chartwise, the FBM KLCI's daily trend continued to stay within the confines of its intermediate-term uptrend channel (See FBM KLCI's daily chart B3:B4 and B5:B6) yesterday. It continued to stay above its immediate overhead resistance (B1:B2). The FBM KLCI's daily, weekly and monthly fast Moving Average Convergence Divergence indicators (MACDs) stayed above their respective slow MACDs yesterday. Its overall market sentiment remains upbeat for another trading week.

CIMB, Genting, RHB Capital and DiGi posted week-on-week gains of 38 sen, 38 sen, 28 sen and 24 sen respectively. Their combined gains of RM1.28 provided the momentum thrust for the FBM KLCI in tracing out a week-on-week gain of 12.92 points, or 1.07 per cent. After staging a mild pre-Hari Raya rally over the last few trading days, the FBM KLCI may catch a breather next week. Consolidation is in technical order for the coming three-trading-day week.

They believe that investors would not want to miss out on this rally.

Technical analysts are pegging the support line for FBM KLCI at around 1,200 to 1,210 points, with immediate resistance at 1,220 - 1,240 points. The breakout level is marked at around 1,190 to 1,195 points.

In their daily market reports over the week, however, most has been urging investors to remain cautious at the present “lofty” levels that the local stock market have attained. They points out the ample share placements and off-market deals that have been happening in the background, arguing that these are obvious pre-cursor to an impending market correction.

With market breadth and volumes shrinking, coupled with the emerging weak and bearish technical signals, Lee writes that it is just a matter of time before the benchmark index heads south. Thus, he advises investors to trade with a short-term time frame.

Next week, the FBM KLCI's envisaged resistance zone hovers at the 1,224 to 1,258 levels while its immediate downside support is at the 1,183 to 1,217 levels.

HAPPY TRADING & GOODLUCK2ALL!!!