Bullish momentum to continue
The market staged a technical rebound last week on strong gains in banking stocks. Last week, we mentioned that the market has found good support and expect some window-dressing activities where fund managers rebalance their portfolio by selling less performing stocks and buy better performing stocks. The FBM KLCI increased 1.9 per cent in a week to 1,753.07 points last Friday.
Trading volume has increased last week on strong buying by institutions. The average daily trading volume increased to 2.4 billion shares from 1.9 billion shares two weeks ago. The average daily trading value rose to RM3.1 billion from RM2.7 billion two weeks ago.
Foreign institutions were the main buyers last week. This group have been seen accumulating in the past few weeks. Net buy from foreign institutions was RM556 million and net sells from local institutions were RM525 million and RM31 million respectively.
In the FBM KLCI, gainers beat decliners two to one. The top gainers for the week were YTL Corporation Bhd (11.9 per cent in a week to RM1.32), AMMB Holdings Bhd (eight per cent to RM4.46) and Genting Malaysia Bhd (7.6 per cent to RM5.65). The top decliners were Astro Malaysia Holdings Bhd (4.8 per cent to RM2.59), IJM Corporation Bhd (4.6 per cent to RM2.71) and Sime Darby Bhd (2.8 per cent to RM2.12).
Starting this week, Press Metal Aluminium Holdings Bhd and Nestle (M) Bhd will be replacing IJM Corporation Bhd and British American Tobacco (M) Bhd in the FBM KLCI component stocks.
The US market climbed to a historical high last week despite a raise in interest rates.
The market sees the interest rate hike as a healthy economic growth. European markets fell last week while London rose. Markets in Asia were mixed and mostly directionless.
The US dollar stays firm at 93.9 points last Friday as compared to the previous week. The Malaysian ringgit has slightly strengthened against the US dollar from RM4.09 two weeks ago to RM4.08 for a US dollar last Friday.
Prices ended up mixed in the past one week for major commodities. crude oil (brent) declined 0.2 per cent in a week to US$63.25 per barrel and gold (COMEX) rebounded from a 5-month low and increased 0.6 per cent to US$1,258.10 an ounce. In the local market, Crude palm oil futures rebounded from a six-month low and rose 1.5 per cent to close at RM2,515 per metric tonne last Friday.
The index broke above the immediate resistance level at 1,730 points and is currently at the expected resistance level at 1,750 points. Last Friday, the market pulled back but was there was still good support.
Technically, The FBM KLCI trend has turned bullish after climbing above the immediate resistance level and the short-term 30-day moving average.
However, the index fell short of climbing above the long-term 200-day moving average. The index is currently in the Ichimoku Cloud indicator and this indicates that the index is currently in a resistance zone of the long term bearish trend.
After finding support in the past few weeks, the short term bullish momentum has been strong last week. Momentum indicators like the RSI and Momentum Oscillator rose above their mid-levels and continued to increase with higher volume. Furthermore, the ADX indicator has started to increase and the MACD indicator continued to rise.
Technically, the bullish momentum is expected to remain strong if the FBM KLCI can stay above 1,740 points, based on the 50 per cent Fibonacci retracement level of the bullish trend that started two weeks ago. Furthermore, the short term 30-day moving average is currently at 1,730 points.
There are two weeks left to the year and hence there will still be rebalancing of portfolios for institutional investors. Technically, the index may climb to the next resistance level at 1,780 points if it can stay above 1,740 points.