A pull back for a correction expected
The FBM KLCI bucked global market trend last week and closed higher for the fourth week. The FBM KLCI increased 0.6 per cent in a week to 1,780.09 points last Friday. The index climbed to a two-month high last Wednesday at 1,788.31 points before pulling back on profit taking.
Surprisingly, foreign institutions were net buyers despite weakening ringgit. Commodities based stocks, which benefit from weaker ringgit, helped support the market.
Trading volume declined last week. This shows that the market is cautious despite the index closing higher.
The average daily trading volume fell to 2.3 billion shares from 3.2 billion shares two weeks ago and the average daily trading value fell to RM2.3 billion from RM2.7 billion.
After being net sellers for weeks, foreign institutions turned net buyers. Net buy from foreign institutions was RM349 million and net sell from local institutions was RM355 million. Meanwhile, local retail was net buyer at RM6 million.
In the FBM KLCI, gainers outpaced decliners 18 to 11. The top three gainers were Malaysia Airports Holdings Bhd (7.7 per cent in a week to RM9.80), Dialog Group Bhd (7.6 per cent to RM3.38) and Press Metal Aluminium Holdings Bhd (4.4 per cent to RM4.70).
The top three decliners were Telekom Malaysia Bhd (6.8 per cent to RM3.68), IHH Healthcare Bhd (2.5 per cent to RM5.90) and CIMB Group Holdings Bhd (1.7 per cent to RM5.79).
Global markets were generally bearish. In Asia, the declines led by Shanghai Stock Exchange Composite index which fell 4.6 per cent in a week as the market remained concerned over the US-China trade war.
Germany led the fall in Europe with a 1.9 per cent decline while the US Dow Jones Industrial Average remained firm.
The US market was support by Apple Inc which became the first company in the world to be worth US$1 trillion.
The US dollar continued to strengthen against major currencies. The US dollar Index closed at 95.2 points last Friday as compared to 94.7 points the week before. The Malaysian ringgit weakened against the US dollar at RM4.08 to a US dollar as compared to RM4.06 the week before.
Commodities prices were generally directionless last week. Gold ( COMEX) closed almost unchanged at US$ 1,221.90 an ounce last Friday as compared the previous Friday’s close.
Crude oil (Brent) fell 1.3 per cent to US$73.42 a barrel. Back home, crude palm oil futures found some support and increased 0.5 per cent to RM2,197 per metric tonne last Friday.
The FBM KLCI closed higher for the fourth week.
However, the index failed to overcome the 1,790 points resistance level despite testing it. The immediate support level is currently at 1,760 points.
Technically, the FBM KLCI remained bullish in the short term above the short term 30-day moving average and even climbed and stay above the Ichimoku Cloud indicator.
The cloud seems to be converging and changing direction from being bearish to bullish.
However, the index tested the long term 200-day moving average but failed to climb above it.
The momentum of the bullish trend, however, has weakened. This can be seen on the weekly change in the past four weeks.
Furthermore, the RSI and Momentum Oscillator indicators are starting to pull back.
However, the MACD indicator is still above its moving average.
The trend may be bullish but it is near resistance level. Furthermore, the momentum of the bullish trend has weakened and this shows that the bullish market sentiment is getting weaker.
Henceforth, we expect the FBM KLCI to pull back for a correction if it stays below the immediate resistance level at 1,790 points. It may test the support level at 1,760 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.