FBM KLCI is set to test next resistance level at 1,805 points
The benchmark index for Bursa Malaysia, the FBM KLCI, rose 1.2 per cent in a week to 1,778.32 points last Friday. Generally bullish global markets performances have lifted market confidence to bargain hunt after two weeks of declines.
However, the market was supported by local participants while foreign participants continued to sell. Foreign institutions have been selling since the general election a month ago.
Trading volume continued to rise last week. The average daily trading volume rose to 4.3 billion shares from 3.4 billion two weeks ago. However, the average daily trading value fell to RM3.5 billion from RM4.7 billion. This indicates more lower-capped stocks, which are normally traded by local retail participants, were being traded.
In the market volume mix, foreign institutions remained as net sellers. Net sell from foreign institutions was RM903 million while net buys from local institutions and local retail were RM784 million and RM119 million respectively.
In the FBM KLCI, gainers trashed decliners four to one. The top gainers for the week were Astro Malaysia Holdings Bhd (19.9 per cent to RM1.69), RHB Bank Bhd (5.7 per cent to RM8.10) and AMMB Holdings Bhd (3.8 per cent to RM3.61). The top decliners were Malayan Banking Bhd (2.4 per cent to RM9.80), Press Metal Bhd (2.2 per cent to RM4.47) and Genting Bhd (1.4 per cent to RM8.78).
Globally, markets performances were mixed. Markets in Asia closed mostly higher except for China. In Europe, only Germany DAX index closed higher while other European markets including London fell. The US Dow Jones Industrial Average climbed to its highest level in three months.
The US dollar weakened against major currencies after weeks of strength. The US dollar index closed at 93.5 points last Friday as compared to 94 points the week before. The ringgit was firm against the US dollar at RM3.99 per US dollar last Friday as compared to the previous week.
Commodities were direction- less last week. Crude oil (Brent) declined 0.5 per cent in a week to US$76.34 a barrel while gold (COMEX) rose 0.4 per cent to US$1,303.50 an ounce. In the local market, crude palm oil futures fell three per cent to RM2,365 per metric tonne on weak demand.
Last week, the FBM KLCI covered the gap made two weeks ago. It managed to climb above the immediate resistance level at 1,775 points and stayed above it. This indicates support. However, an ‘Engulfing Bear’ Japanese candlesticks chart pattern was formed last Friday and this indicates resistance.
However, the pattern is confirmed only when the FBM KLCI falls below 1,773 points. Therefore, this is the immediate support level.
The immediate resistance level is at 1,805 points based on the down trend Fibonacci retracement levels.
Technically, the trend remained bearish despite the rebound last week. The FBM KLCI is below both the short and long term 30- and 200- day moving averages. Furthermore, the index is below the Ichimoku Cloud and the Cloud is also bearish.
Momentum indicators like the RSI, MACD and Momentum Oscillator are below their mid-levels and this indicates that the trend is bearish. However, these indicates increased because of the rebound last week and this indicates a weak bearish momentum.
The rebound momentum is expected to continue this week and the FBM KLCI is set to test the next resistance level at 1,805 points. The index is technically still in a bearish trend if it stays below this level.
However, the bearish candlesticks chart pattern last Friday indicates that the index may pull back for a correction of last week’s bullish trend if its falls below 1,773 points. Therefore, the FBM KLCI may continue its bullish momentum towards 1,805 points if the FBM KLCI stays above 1,773 points.
The above commentary is solely used for educational purposes and is the contributor’s point of view using technical 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.