Support level broken, further declines expected
Last week, the FBM KLCI was trading in a directionless manner on a technical support level. However, the index fell slightly below the support level at 1,680 points last Friday and closed lower for the second week.
Market confidence was affected by continuous selling pressure from foreign institutions.
The FBM KLCI fell 1.2 per cent in a week to 1,690.90 points last Friday, the lowest in nearly two months.
The average daily trading volume increased to 3.1 billion shares last week as compared to 2.7 billion in the previous week.
The average daily trading value rose to RM2.7 billion from RM2.5 billion. This indicates more lower capped counters were being traded.
Selling pressure from foreign institutions intensified last week. Net sell from foreign institutions was RM709.9 million. Net buys from local institutions and retail were RM667.4 million and RM42.5 million respectively.
In the FBM KLCI, decliners continued to dominate gainers 18 to five.
The top three gainers were Westports Holdings Bhd (three per cent in a week to RM3.75), Press Metal Aluminium Holdings Bhd (2.9 per cent to RM4.32) and IHH Healthcare Bhd (1.6 per cent to RM5.88).
The top three decliners were CIMB Group Holdings Bhd (5.1 per cent to RM5.39), Malaysia Airports Holdings Bhd (4.6 per cent to RM7.75) and Hartalega Holdings Bhd (2.9 per cent to RM4.99).
The bearish performance in the local market was in line with global markets performances.
The best performing market index this year, the Shanghai Stock Exchange Composite Index snapped an eight-week gain to close lower last week. Most other markets pulled back from its multi-week multi-month highs.
The US dollar strengthened last week. The US dollar index, which measures the US dollar against a basket of major currencies, increased to 97.4 points last Friday from 96.4 points in the previous Friday. The Malaysian ringgit weakened against the US dollar from RM4.08 two weeks ago to RM4.09 to a US dollar last Friday.
Prices of major commodities were mixed. Price of gold (COMEX) increased only 0.3 per cent in a week to US$1,298.75 an ounce last Friday.
Crude oil (Brent) rose 1.1 per cent to US$65.69 per barrel. Locally, crude palm oil (BMD) fell for the fifth week, declining 2.9 per cent in a week to RM2,126 per metric tonne.
The FBM KLCI fell below the psychological support level at 1,700 points. The next support level would be at 1,630 points. The immediate technical resistance level is at 1,730 points.
Technically, the FBM KLCI has turned bearish as it fell below the short-term 30-day moving average.
However, the index is above the Ichimoku Cloud indicator and it at its reversal point.
Henceforth, the market is either going to rebound or decline further.
Momentum indicators turned bearish last week. The RSI and Momentum Oscillator fell below their mid-levels and declining. The MACD indicator continued to decline below its moving average.
This indicates that the trend has turned bearish and the momentum is gaining traction.
With the breakout of the support level and bearish technical indications, the FBM KLCI is expected to decline further. The index may decline and find support at 1,630 points if it fails to rebound and climb above 1,690 points, the highest in the past one week.
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.