Bullish momentum gaining traction
Last week, we expected the market to turn bullish after the FBM KLCI broke above the immediate resistance level at 1,780 points and climbed to a fresh three-month high. The market was supported by generally bullish global markets performances especially in the US where its benchmark index, the Dow Jones Industrial Average, rose to historical high. Higher commodities prices has also help create opportunities.
The FBM KLCI rose 0.4 per cent in a week to 1,786.33 points last Friday. Trading volume increased marginally last week.
The average daily trading volume last week increased to 2.7 billion shares from 2.6 billion shares two weeks ago. The average daily trading value increased to RM2.4 billion from RM2.3 billion.
Interestingly, foreign institutions continued to accumulate stocks in Bursa Malaysia and have been doing so in the past few weeks.
Net buy from foreign institutions was RM345 million and net sell from local institutions was RM366 million. Local retail was net buyers at RM21 million.
In the FBM KLCI, gainers continued to beat decliners 15 to 11. The top gainers for the week were AMMB Holdings Bhd (5.6 per cent in a week to RM4.53), IOI Corporation Bhd (2.4 per cent to RM4.66) and IHH Healthcare Bhd (2.4 per cent to RM6).
The top decliners were Petronas Chemicals Group Bhd (1.6 per cent to RM7.33), Genting Bhd (1.1 per cent to RM9.85) and Genting Malaysia Bhd (0.7 per cent to RM5.82).
Markets performances globally were mixed. China markets, including Shanghai and Hong Kong pulled back from multimonths highs for a correction. Most bearish was Singapore Straits Times Index which fell to a two month low. As mentioned earlier, the US indices rose to historical highs. In Europe, most markets ended up higher expect London’s FTSE100 index which fell 2.2 per centin a week to a four-month low.
The US dollar marginally strengthened against major currencies. The US dollar index rose from 91.3 points two weeks ago to 91.9 points last Friday. The Malaysian ringgit strengthened was firm against the US dollar from the previous week at M4.19 to a US dollar last Friday.
Gold ( COMEX) pulled back from a one-year high on profit taking last week but is still technically bullish. The price declined two per cent to US$1,323.50 an ounce last Friday.
Crude oil (Brent) continued to increase last week and the price rose 3.4 per cent to US$55.48 per barrel, the highest in five months. In the local market, crude palm oil futures rose 2.3 per cent in a week to RM2,860 per metric tonne.
The FBM KLCI climbed above the immediate resistance level two weeks ago and managed to stay above this level last week. This indicates that the market is being supported week and that immediate resistance level at 1,780 points now turns into an immediate support level. The crucial support level is at 1,755 points. The next resistance levels are at 1,800 and 1,820 points.
Technically, the FBMKLI remained bullish above the short term 30-day moving average and is also above the Ichimoku Cloud indicator.
The Cloud is turning bullish moving forward and hence we expect the market to remain bullish as long as the index stays above the Cloud, which support is currently at 1,768 points.
Momentum indicators like the RSI, Momentum Oscillator on the FBM KLCI are increasing above their mid-levels and this indicates that bullish momentum is gaining traction.
These indicators have not indicated price being overbought and hence there is still room for the index to climb higher.
Furthermore, the MACD indicator is above its moving average and increasing and the index is above the middle band of the Bollinger Bands indicator.
In conclusion, we have enough evidence and catalysts for the market to trend higher.
Technically, the FBM KLCI is expected to trend higher towards the next resistance levels at 1,800 and 1,820 points as long as it can stay above the support level at 1,780 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.