Market may stage a technical rebound
The market remained bearish last week, bucking the global markets performances. The FBM KLCI closed lower for the fifth week and to a 27-month low.
Expectations of slower economic growth and weaker ringgit has dampened market sentiment in the past few weeks. The benchmark index fell 0.5 per cent in a week to 1,622.07 points last Friday.
The trading volume, however, has declined last week and this indicates that the selling pressure has eased.
The average daily trading volume has fallen to 3.0 billion shares last week from 3.7 billion shares the week before. However, the average daily trading value fell to RM2.0 billion from RM2.6 billion.
In the FBM KLCI, decliners beat gainers 18 to 11. The top three gainers were Westports Holdings Bhd (4.6 per cent in a week to RM3.87), Genting Malaysia Bhd (4.2 per cent to RM3.24) and Sime Darby Bhd (2.7 per cent to RM2.25).
The top three decliners were Maxis Bhd ( 2.9 per cent to RM5.60), Axiata Group Bhd (2.7 per cent to RM4.43) and Malayan Banking Bhd (1.9 per cent to RM7.11).
Global market indices closed mostly higher last week. In Asia, China’s Shanghai Stock Exchange Composite Index rose to its highest in 13 months and other markets closed at multimonths high.
In the west, Germany’s DAX Index, London’s FTSE100 index and the Dow Jones Industrial Average rose to a 6-month high.
The US dollar strengthened against major currencies. The US dollar Index increased to 97.4 points last Friday from 97.0 points in the previous week.
The Malaysian ringgit weakened against the US dollar at RM4.13 per dollar last Friday as compared to RM4.11 in the previous Friday.
Gold prices were weak on stronger US dollar. COMEX
gold futures fell one per cent in a week to US$1,295.90 an ounce last Friday, the lowest in four months. However, Crude oil (Brent) increased 1.6 per cent to US$71.95 per barrel. Crude palm oil (BMD) held firm, rising only 0.2 per cent in a week to RM2,190 per metric ton.
The FBM KLCI broke below the support level at 1,630 points and remained below it. The broken support level is now the immediate resistance level.
The next support level is at 1,600 points.
Trend-wise, the FBM KLCI is bearish below both the shortterm and long-term 30- and 200day moving averages.
The index is also below the Ichimoku Cloud indicator and the Cloud is expanding downwards. Furthermore, short term up and down swings are getting lower.
The bearish momentum, however, has eased last week. The RSI and Momentum Oscillator continued to decline but at a relatively lower pace.
These indicators also formed a positive divergence against the index that indicates a weak bearish momentum.
A weaker bearish trend indicates some support in the down trend.
Hence, we expect the market to stage a technical rebound and test the immediate resistance level at 1,630 points.
However, if the index fails to overcome this resistance level, the sentiment is still bearish and the index may fall to the next support level at 1,600 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.