Bearish trend to extend
The market rebounded early last week but weak as the FBM KLCI failed to rally and rise above its short term 30-day moving average.
The failure to rally indicates weak market sentiment and hence the index fell sharply on Friday and closed at its lowest level in two months. The FBM KLCI declined 0.2 per cent in a week to 1,759.93 points last Friday.
Trading volume hasn’t really recovered to pre-holiday levels. The average daily trading volume declined to 1.6 billion shares last week from 1.5 billion shares two weeks ago.
The average daily trading value declined to RM1.8 billion as compared to RM2 billion two weeks ago.
Foreign institutions continued to sell as ringgit weakens further. Net sell from foreign institutions was RM205 million while net buy from local institutions was RM207 million.
The ringgit weakened from RM4.29 two weeks ago to RM4.30 to a US dollar last Friday.
Decliners outpaced gainers 17 to 10. The top gainers for the week were Sapura Energy Bhd (3.8 per cent in a week to RM1.65), Genting Malaysia Bhd (2.9 per cent to RM5.66) and IHH Healthcare Bhd (2.8 per cent to RM5.91).
The top decliners were KLCC Properties & REITS – Stapled Securities Bhd (3.1 per cent to RM7.74), Axiata Group Bhd (2.7 per cent to RM4.70) and British American Tobacco (M) Bhd (2.7 per cent to RM42.26).
Asian markets were mixed last week. Hong Kong market fell 1.6 per cent in a week while Japan Nikkei 225 index fell 0.5 per cent. Singapore and Shanghai declined marginally.
However, the US and European markets rebounded.
Commodities prices fell as US dollar strengthens. The US dollar index increased from 95.6 points to 96.0 points last Friday.
Gold (COMEX) declined 2.4 per cent in a week to US$1,211.90 an ounce. Crude palm oil started on a bullish note after the US holiday but ended 2.1 per cent lower in a week at US$46.88 per barrel.
In the local market, crude palm oil futures increased 4.0 per cent to RM2,554 per metric tonne.
The FBM KLCI fell below the two month support level at 1,760 points after failing to climb above the immediate resistance level at 1,776 points based on the short term 30- day moving average. This primarily indicates a weak market sentiment.
Trend-wise, the FBM KLCI remained bearish in the short term below the short term 30-day moving average and the two-month support level.
The index also went into the Ichimoku Cloud indicator and this indicates that the market is how at crucial support level.
The last support level for the Ichimoku Cloud is at 1,750 points.
A breakout below this level indicates that the market is set for a bigger correction. The long term 200-day moving average is at 1,703 points.
Momentum indicators like the RSI and Momentum Oscillator continued to decline.
This indicates that the bearish momentum is strengthening further. Also, the index continues to trade at the bottom band of the Bollinger Bands indicator.
Market sentiment is still bearish on declining crude oil prices, weakening ringgit and foreign institutions selling. Some analysts have revised higher GDP for this year but this did not affect the market positively.
Last week, the market has turned technically bearish and with the breakout of the twomonth support level, we expect the bearish trend to extend to the next support levels at 1,730 points (38.2 per cent Fibonacci retracement level of the bullish trend that started since the beginning of this year) and 1,705 points (50 per cent retracement level and the 200-day moving average).
The chart does not show any signs of rebound at this moment.
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.