FBM KLCI market found support
The market extended its bearish momentum early last week but rebounded as market confidence returned after strong rebounds in the regional market.
However, the rebound was weakened by weaker ringgit and crude palm oil price falling to its lowest level in three years.
The FBM KLCI fell 0.3 per cent in a week to close 1,708.09 points last Friday, after rebounding from a low of 1,678.82 points.
Trading volume fell last week as market were cautious despite the rebound.
The average daily trading volume has declined to two billion from two billion shares in the previous week and the average daily trading value fell to RM1.8 billion from RM2.5 billion.
This indicates more low-market capped stocks were being traded and lower capped stocks are normally traded more by retail participants.
Last week, foreign institutions were selling but the main buyers were not local institutions.
Net sell from foreign institutions was RM198 million while net buys from local retail and institutions were RM169 and RM29 million respectively.
In the FBM KLCI, gainers pared decliners. The top gainers were Genting Bhd (3.1 per cent in a week to RM6.99), Hong Leong Financial Group Bhd (3.1 per cent in a week to RM19.38) and Nestle (M) Bhd (2.3 per cent to RM147).
The top three decliners were IOI Corporation Bhd (3.7 per cent to RM4.39), Digi.com Bhd (2.9 per cent to RM4.32) and IHH Healthcare Bhd (2.3 per cent to RM4.74).
Markets were mixed across continents. In Asia, most markets rebounded and closed higher except for Japan. The decline in the US market has also led to UK and European markets declines.
US dollar was slightly weaker against major currencies. The US dollar Index fell to 96.4 points last Friday from 96.9 points the week before.
However, the Malaysian ringgit weakened against the US dollar at RM4.19 as compared to RM4.17 the week before. This could have been caused by weaker commodities prices.
In the commodities market, prices of gold increased while crude oil fell. Price of gold in COMEX increased 1.0 per cent in a week to US$1,222 an ounce. Brent crude oil fell for the sixth week, falling 4.0 per cent in a week to US$67.10 a barrel, the lowest levels since April 2018. Palm oil in Bursa Malaysia fell 3.3 per cent to RM1,975 per metric ton, the lowest in 3 years.
The FBM KLCI has established a new support level after rebounding last week. The support level was at 1,679 points, higher than the previous support level at 1,670 points.
This formed an inverted head and shoulders chart pattern and this pattern indicates that the bearish trend has found support. However, the chart pattern is confirmed only when the index climbs above the pattern’s neckline or confirmation at 1,720 points.
Technically, the FBM KLCI trend remained bearish below the short term 30-day moving average.
Furthermore, the index stays below the Ichimoku Cloud indicator. The 30-day moving average is currently at 1,716 points and the Ichimoku resistance line is at 1,750 points. A breakout above these levels could turn the trend to be bullish.
Momentum indicators continued to climb higher with higher swings. The RSI and Momentum Oscillator indicators showed a positive divergence against the bearish FBM KLCI. This indicates that the bullish momentum is starting to build up in the down trend.
Henceforth, we may expect the trend to turn bullish only if the FBM KLCI is able to stay above the immediate support level at 1,679 points and break above the resistance level at 1,720 points.
The index may test the next resistance level at 1,750 points. However, the index may be another dead cat bounce (a technical term we use to describe failed rebounds) and the bearish trend may continue.
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.