Stocks on Malaysia ended higher last Friday on technical rebound following bargain hunting and month end window dressing activity. The stable ringgit following the prime minister’s cabinet reshuffle, Standard & Poor’s reaffirmation on Malaysia’s rating, and a respite in oil price also helped lift the local bourse. The FBM KLCI gained 23.22 points, or 1.37%, to 1,723.14 after fluctuating between 1,701.31 and 1,723.14 throughout the day. On a weekly basis, the key index rose 2.38 points from 1,720.76 on previous Friday. Gainers outpaced losers by 467 to 365 with 315 counters unchanged. Total volume rose to 1.68 billion units valued at RM2.01 billion from Thursday’s 1.61 billion units valued at RM1.58 billion. Weekly turnover rose to 9.01 billion units, worth RM9.36 billion, from last week’s 8.35 billion units worth RM7.93 billion.
Following the weak performance of Wall Street on previous last Friday, the FBM KLCI opened last Monday 9.79 points lower at 1,710.97, but rebounded to hit the intra-day high of 1,718.60. However, heavy profit taking activity which appeared in the afternoon session influenced by the weaker regional bourses with China market falling 8% dragged the FBM KLCI 11 points lower to 1,709.76. Tuesday saw the FBM KLCI falling another 10.06 points to end the day at the lowest point of 1,699.70 after a cabinet reshuffle which saw the removal of Muhyiddin Yassin as the deputy prime minister and replaced with Ahmad Zahid Hamidi. The market was trading sideways range-bound on Wednesday throughout the day, dampened by resurgence in concerns over weak global and China’s economic growth which saw the FBM KLCI slipping 0.71 point to 1,698.98. Thursday saw the FBM KLCI opening 2.25 points lower at 1,696.74 and slipped lower to hit the intra-week low of 1,695.66 before rebounding to close 0.93 point higher at 1,699.92, and Friday saw a strong rebound with a gain of 23.22 points to end the week at the highest point of 1,723.14.
On the weekly chart, the FBM KLCI formed a bullish white hammer candlestick, a bottom reversal candlestick pattern, which indicates the bears were initially in control but were later, took over by the bulls, and a temporary bottom was seen at 1,695.66. Hence, the FBM KLCI is likely to stage further rebound in the coming week. On the daily chart, the FBM KLCI formed a bullish long white Marubozu candlestick which indicates the bulls were in full control for the day, and hence the key index is likely to continue with its upward momentum to move higher today. Immediate overhead resistance zone is at 1,727 to 1,738, while the immediate downside support zone is at 1,712 to 1,695.
Weekly MACD turned flat, while its histogram further contracted upward, indicating further reduction in the bearish momentum and a state of consolidation with an upward bias. Daily MACD hooked upward and made a golden-cross over the signal-line, issuing a bullish MACD buy signal on the daily timeframe and indicated the pullback correction over the last eight sessions was over. Weekly RSI (14) hooked upward to 39.1 from 38.4, indicating a mild rebound on the weekly and the weekly relative strength was turning less bearish. Daily RSI (14), however, swung strongly upward to 51.3 from 38.3, indicating a strong change in the index’s daily relative strength from bearish to a mildly bullish state. Weekly Stochastic hooked upward to 21.1 from 19.7, indicating a mild rebound. Daily Stochastic swung upward strongly and was staying just slightly below the slow stochastic line, indicating a strong change in the index strength to the upside. In short, readings from the weekly indicators showed that the FBM KLCI has staged a mild rebound, and the downward momentum was waning, and hence is likely to further consolidate with a bullish bias. However, readings from the daily indicators showed a more bullish scenario as the MACD had made a golden-cross and the RSI has crossed above the 50 level, indicating further upside is in store for the FBM KLCI.
The general trend of the FBM KLCI still remained very much the same in that the short term trend is sideways range-bound, while the medium and long term trends are still down. Nonetheless, the FBM KLCI has formed a bullish Inverse Head-and-Shoulder pattern on the daily chart with the neckline at 1,736-point level, and a breakout from the neckline will see a potential upside target of 1,788-point. For the coming week, the FBM KLCI is likely to move range-bound with an upward bias within a range of 1,695 to 1,738.
Last Friday, the Dow fell 56.12 points or -0.32% to close at 17,689.86. This week, the FBMKLCI is likely to trade within a range of 1,677 to 1,750, and today, the FBMKLCI is likely to trade within a range of 1,686 to 1,745.
This week's expected range: 1677 – 1750
Today’s expected range: 1686 – 1745
Resistance: 1730, 1737, 1745
Support: 1686, 1694, 1708
Stocks to watch: AHB, BHS, BTM, CONNECT, CCB, DOMINAN, ESCERAM, FFHB, GENETEC, GPACKET, HARVEST, IBHD, IMASPRO, IRCB, IRETEX, JIANKUN, LEONFB, LUXCHEM, OCK, OMEDIA, PMCORP, PRLEXUS, RUBEREX, SALCON, SIGN, SUPERMX, TAKASO, TEOSENG, TOMYPAK, XDL
Stock pick highlight: ESCERAM (0100)
Last Price: RM0.35 +0.03
Support Level: RM0.32, RM0.30
Resistance Level: RM0.355, RM0.385, RM0.40, RM0.425, RM0.45, RM0.475, RM0.50, RM0.525, RM0.55, RM0.575, RM0.60
Entry Level: RM0.345 – RM0.355
Technical Analysis
ESCERAM (0100) rebounded from its intra-day low of 0.32 to close higher at 0.35 after hitting the intra-day high of 0.355. Technically, the chart of ESCERAM formed a bullish long white candlestick with increasing volume indicating strong buying interest came into the stock on Friday. It breaks out from the consolidation forming a Rectangle pattern breakout. MACD surged upward and is above the signal-line, and its histogram also extended upward strongly, indicating an increased in momentum to the upside and a buy signal. RSI (14) rose to 73.2 from 68.2, indicating the stock is turning very bullish from a bullish state. Stochastic was higher at 89.5 from 79.4 and is above the slow stochastic line, indicating an increased in strength and continuation of the up cycle. The medium and long term trend of ESCERAM is up, and the short term trend is also up with the 5-day SMA staying above the 10-day SMA and both are above the 30-day SMA, and a confirmed breakout above RM0.355 will see an upside target of RM0.385, follow by RM0.40, RM0.425, RM0.45, RM0.475, RM0.50, RM0.525, RM0.55, RM0.575, and RM0.60.
Since the short term trend is bullish, day traders with shorter time frame perspective may ride on the short term bullishness and buy on breakout level (RM0.355). Those with lower risk appetite should wait at the side-line and buy on the dip.
Price Objective
Short Term – target price at (RM0.385, RM0.40, RM0.425, RM0.45, RM0.475), stop loss (RM0.315)
Mid Term – target price at (RM0.50, RM0.525, RM0.55, RM0.575, RM0.60), stop loss (RM0.295)
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