Low volatility indicates uncertainty
The market rebounded last week as we have expected but there is still cautiousness. The strong GDP data and ringgit two weeks ago was only able to slightly boost market confidence. The FBM KLCI increased only 0.2 per cent in a week to 1,772.30 points last Friday on lower trading volume.
The average trading volume declined from 3.5 billion shares two weeks ago to 3.3 billion shares last week. The average daily trading value fell from RM3.3 billion to RM3.0 billion.
Foreign institutions and local retail market participants remained as net buyers in Bursa Malaysia.
Net buys from foreign institutions and local retail were RM224 million and RM37 million respectively. Net sell from local institutions was RM261 million.
Gainers pared decliners in the FBM KLCI. The top gainers for the week were CIMB Group Holdings Bhd (6.5 per cent in a week to RM6.35), Genting Malaysia Bhd (3.8 per cent to RM6.02) and Hap Seng Consolidated Bhd (2.9 per cent to RM9.20).
The top decliners were IHH Healthcare Bhd (6.3 per cent to RM5.62), Westports Holdings Bhd (4.9 per cent to RM3.71) and Axiata Group Bhd (2.5 per cent to RM5.02).
Global Markets performances were generally bullish last week. Most markets in Asia were marginally except Hong Kong. The Hang Seng index increase 1.8 per cent in a week to 25,639.27, the highest in 22 months.
London’s FTSE100 index rose one per cent to a historical high at 7,547.63 points and the Dow Jones Industrial Average increased 1.3 per cent to near historical high at 21,050.49 points.
The US dollar index, which measures the US dollar against a basket of major currencies, found support last week and increased from 97.1 points of 97.4 points last Friday. The ringgit strengthened from RM4.32 to RM4.27 to a US dollar.
Crude oil (Brent) increased 2.9 per cent in a week to US$52.23 per barrel. Gold price in COMEX rose 0.9 per cent to US$1,266.70 an ounce.
Crude palm oil declined 3.1 per cent in a week to RM2,554 per metric ton last Friday on stronger ringgit.
The market was mostly directionless last week. There are many “doji” Japanese Candlesticks chart patterns in the past one week and this indicates that the market was uncertain.
Furthermore, the FBM KLCI continued to trade between the immediate support level at 1,750 and resistance level at 1,780 points.
Nevertheless, the FBM KLCI is technically still in a bullish trend. The index is above the short and long term 30 and 200-day moving averages, up trend channel support line and the Ichimoku Cloud.
The index is near these levels. Furthermore, the Ichimoku Cloud continued to expand upwards but the narrowing cloud indicates weak support to the up trend.
Momentum indicators like the RSI, Momentum Oscillator and MACD indicators show weak bullish trend.
The narrowing Bollinger Bands indicate low volatility. These indicators indicate that the market is in a bullish trend consolidation.
The market has been directionless in the past three weeks and is expected to remain directionless as long as the FBM KLCI stays between the support and resistance levels at 1,750 and 1,780 points.
The short term direction of the FBM KLCI will be determined by a breakout from these levels.
A breakout above 1,780 points indicates stronger market confidence and the FBM KLCI is expected to test the next resistance level at 1,800 points.
However, a breakout below 1,750 points indicates weak confidence and the index may fall to the next support level at 1,730 points.
The above commentary is solely used for educational purposes and is the contributor’s point of view using technical al analysis. The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment advisor.