TREND IN­DI­CA­TORS

New Straits Times - - Business -

The FTSE Bursa Malaysia KLCI (FBM KLCI) came off a fresh 22-month high early last week due to over­bought tech­ni­cal mo­men­tum, which en­cour­aged profit-tak­ing on blue chips, but strong re­tail in­ter­est on penny and ACE Mar­ket stocks helped lift trad­ing vol­ume to the sec­ond high­est on record.

The Wall Street cor­rec­tion, sparked by over­val­u­a­tion con­cerns, forced a healthy pull­back in mid-week, but selec­tive small­cap penny and ACE Mar­ket stocks in the in­for­ma­tion and com­mu­ni­ca­tions tech­nol­ogy and In­ter­net busi­ness staged sharp ral­lies on hopes they will be in­volved in the dig­i­tal free trade zone.

For the week, the FBM KLCI edged 0.55 point up to 1,745.75, with gains in Gent­ing Malaysia (+10 sen), Petronas Chem­i­cals (+9 sen), May­bank (+9 sen) and Maxis (+7 sen) off­set­ting losses on BAT (-74 sen), KLK (-28 sen) and PPB Group (-24 sen).

Av­er­age daily traded vol­ume and value bal­looned to 4.45 bil­lion shares and RM3.05 bil­lion, com­pared with the 3.88 bil­lion shares and RM3.44 bil­lion av­er­age the pre­vi­ous week, fu­elled by strong buy­ing mo­men­tum on lower lin­ers, small caps and ACE Mar­ket stocks, which pushed daily vol­umes to near record highs.

The im­pact of cost-push in­fla­tion con­tin­ued to be vis­i­ble last Fri­day when the con­sumer price in­dex for last month was an­nounced.

The 4.5 per cent year-on-year (YoY) growth in in­fla­tion was steeper than the con­sen­sus ex­pec­ta­tions of 3.9 per cent YoY, no thanks to the re­bound in fuel prices and the weaker ring­git.

The in­dex of trans­port group showed a sig­nif­i­cant in­crease of 17.9 per cent YoY mainly due to the fuel price in­crease.

Last Thurs­day, the cen­tral bank raised its in­fla­tion ex­pec­ta­tions for the year to be­tween three and four per cent, from two and three per cent pre­vi­ously.

As banks would be the biggest ben­e­fi­cia­ries due to ex­pan­sion in their net in­ter­est mar­gin, buy­ing in­ter­est in th­ese blue chips will un­der­score con­tin­ued strength in the bench­mark FBM KLCI.

An­tic­i­pa­tion of the 14th gen­eral elec­tion would cush­ion any profit-tak­ing pres­sures in the short-term.

Tech­ni­cal Outlook

The blue-chip bench­mark in­dex eased off a fresh 22-month high early last Mon­day due to profit-tak­ing in­ter­est, but strong re­tail in­ter­est on penny and ACE Mar­ket stocks helped lift trad­ing vol­ume to the sec­ond high­est on record. The FBM KLCI climbed 4.21 points to set­tle at 1,749.41, off the open­ing low of 1,744.07 and high of 1,755.26, as gain­ers led losers 546 to 421 on very strong turnover to­talling 6.02 bil­lion shares worth RM3.02 bil­lion.

Stocks closed higher the fol­low­ing day.. The FBM KLCI added 5.26 points to end at 1,754.67, off the high of 1,757.99 and low of 1,748.82, as gain­ers edged losers 496 to 477 on less ro­bust turnover to­talling 4.58 bil­lion shares worth RM3.28 bil­lion.

The lo­cal stock mar­ket re­cov­ered from an ear­lier sell-off on Wed­nes­day. The in­dex ended 6.37 points down at the day’s high of 1,748.3, off an ear­lier low of 1,738.4, as losers swarmed gain­ers 605 to 328 on much lower turnover of 3.16 bil­lion shares worth RM2.75 bil­lion. While blue chips closed weaker due to profit-tak­ing in­ter­est the next day, small-cap penny and ACE Mar­ket stocks were ac­tively traded with selec­tive coun­ters stag­ing sharp ral­lies.

The FBM KLCI ended 1.3 points down at the day’s low of 1,747, off an ear­lier high of 1,753.76, as gain­ers led losers 596 to 378 on ro­bust trade to­tal­ing 4.78 bil­lion shares worth RM3.66 bil­lion.

Blue chips con­tin­ued trad­ing side­ways due to profit-tak­ing con­sol­i­da­tion, but ac­tive ro­ta­tional plays stayed keen in ICT and In­ter­net-re­lated small-cap stocks. The in­dex eased 1.25 points to end Fri­day at 1,745.75, off an early high of 1,749.61 and low of 1,745.43, but losers over­came gain­ers 590 to 312 on re­duced turnover to­talling 3.7 bil­lion shares worth RM2.53 bil­lion.

Trad­ing range for the blue-chip bench­mark in­dex last week halved to 19.59 points, com­pared with the pre­vi­ous week’s 38.18 points, as blue chips slipped into profit-tak­ing side­ways trade. For the week, the FBM Emas In­dex edged 24.52 point, or 0.2 per cent, higher to 12,365.86, while the FBM Small Cap In­dex ap­pre­ci­ated 101.59 points, or 0.6 per cent, to 16,950.05, as small-cap stocks con­tin­ued to out­per­form sub­stan­tially on very ac­tive ro­ta­tional trad­ing plays.

A short-term sig­nal flashed on the daily slow sto­chas­tic in­di­ca­tor for the FBM KLCI, while the weekly in­di­ca­tor’s sig­nal line stayed stub­bornly in the over­bought zone. The 14-day Rel­a­tive Strength In­dex (RSI) in­di­ca­tor also trig­gered a sell after hook­ing down from the over­bought zone, while the 14-week RSI lev­elled with an el­e­vated read­ing of 69.62 as of last Fri­day.

The daily Mov­ing Av­er­age Con­ver­gence Di­ver­gence (MACD) trend in­di­ca­tor’s sig­nal line lost some up­side mo­men­tum after last week’s profit-tak­ing con­sol­i­da­tion, but the weekly MACD in­di­ca­tor con­tin­ued on its bullish tra­jec­tory. The +DI and -DI lines on the 14-day Direc­tional Move­ment In­dex trend in­di­ca­tor also sus­tained their bullish ex­pan­sion on a firm­ing ADX line, re­in­forc­ing the up­trend mode.

Con­clu­sion

While mo­men­tum in­di­ca­tors for the FBM KLCI are short-term bear­ish and point to fur­ther cor­rec­tion this week, fol­low­ing last week’s shal­low profit-tak­ing dip, trend in­di­ca­tors stayed in bullish mode, with ro­bust buy­ing mo­men­tum on lower lin­ers, small caps and ACE Mar­ket stocks driv­ing bullish sen­ti­ment on the broader mar­ket.

More­over, a good pos­si­bil­ity for end first-quar­ter win­dow dress­ing by late week should boost mar­ket sen­ti­ment and pro­mote fur­ther up­side mo­men­tum ahead.

For the in­dex, im­me­di­ate up­side hur­dles were at 1,758, the 23.6 per cent Fi­bonacci Re­trace­ment (FR) of the 1,310 to 1,896 up­swing match­ing last week’s high, and 1,782, the 76.4 per cent FR of the 1,867 to 1,503 cor­rec­tion, fol­lowed by 1,800 and the May 18 2015 high of 1,823. Im­me­di­ate up­trend sup­ports were at 1,739 and 1,720, rep­re­sent­ing the ris­ing 10- and 30-day mov­ing av­er­ages.

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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