Stocks on Bursa Malaysia closed broadly lower yesterday, reversing Tuesday’s gains as profit taking emerged mostly in key blue-chips and small-capitalised stocks, in tandem with the lack-lustre South-east Asian markets. At close, the benchmark FBM KLCI fell 8.03 points or 0.43% to 1,854.77 after fluctuating between 1,853.72 and 1,863.61 throughout the day. Losers overwhelmed gainers by 564 to 293 while 345 counters were unchanged. Total volume rose to 3.04 billion shares worth RM2.74 billion from 2.12 billion shares worth RM2.47 billion on Tuesday.
Continuing the upward momentum from Tuesday, the FBM KLCI opened 0.81 of a point higher at 1,863.61, the intra-day high, and slipped lower for the rest of the day on persistent profit taking activity to hit the intra-day low of 1,853.72, before rebounding slightly to close off low. Chart-wise, the FBM KLCI formed a bearish dark-cloud-cover candlestick pattern, a top reversal candlestick pattern which indicates heavy profit taking activity. Hence, the FBM KLCI is likely to further correct downward or consolidate today. Immediate downside support zone is at 1,853 to 1,850, while the overhead resistance zone is at 1,863 to 1,880.
MACD hooked downward slightly but is still above the signal-line, and its histogram also contracted slightly, indicating mild pullback on profit taking. RSI (14) fell to 62.9 from 69.4, indicating a pullback correction, and the short term relative strength of the key index is still in the bullish state. Stochastic was higher at 83.8 from 81.9, indicating the short term up cycle is still intact. Readings from the indicators showed that the FBM KLCI is undergoing a mild pullback correction which is healthy after the recent gains.
The uptrend of the FBM KLCI still remained intact as the key index continue to stay above the short, medium and long term moving averages. The pullback yesterday is being viewed as a healthy correction after the strong gains on Tuesday, and the key index is likely to continue its uptrend after the correction is over to test the next overhead resistance zone of 1,863 to 1,880. As the market is coming to the reporting season, the performance of the FBM KLCI is likely to be influenced by the results of the blue-chips. On the broader market, rotational play on small-caps and ACE market counters is likely to remain active.
Overnight, the Dow rose 88.68 points or 0.49% to close at 18,038.27. Today, the FBMKLCI is likely to trade within a range of 1,841 to 1,873.
This week's expected range: 1820 – 1869
Today’s expected range: 1841 – 1873
Resistance: 1861, 1867, 1873
Support: 1841, 1847, 1851
Stocks to watch: ACOSTEC, ASB, ANCOM, CARIMIN, CHUAN, EFFICEN, GESHEN, GKENT, GOCEAN, LEONFB, LONBISC, OMESTI, PERWAJA, QL, SANBUMI, SASBADI, SAUDEE, SBCCORP, SERSOL, SMI, SUNWAY, XINQUAN
Stock pick highlight: XINQUAN (5155)
Last Price: RM0.615 +0.025
Support Level: RM0.58, RM0.56
Resistance Level: RM0.635, RM0.68, RM0.705, RM0.73, RM0.76, RM0.80, RM0.85, RM0.885, RM0.95, RM1.00
Entry Level: RM0.615 – RM0.625
XINQUAN (5155) rebounded from its intra-day low of 0.58 to close higher at the intra-day high of 0.615. Technically, the chart of XINQUAN formed a bullish white candlestick with increasing volume, indicating strong buying interest came into the stock yesterday. It breaks out from the consolidation range 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 70.5 from 64.5, indicating the stock is turning very bullish. Stochastic swung upward to 83.3 from 68.9, and made a golden-cross over the slow stochastic line, issuing a stochastic buy signal and indicated the stock is turning strong after recent consolidation. The medium and long term trend of XINQUAN is up, and the short term trend is 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 RM0.635 will see an upside target of RM0.68, follow by RM0.705, RM0.73, RM0.76, RM0.80, RM0.85, RM0.885, RM0.95 and RM1.00.
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 (RM0.635). Those with lower risk appetite should wait at the side-line and buy on the dip.
Short Term – target price at (RM0.68, RM0.705, RM0.73, RM0.76), stop loss (RM0.575)
Mid Term – target price at (RM0.80, RM0.85, RM0.885, RM0.95, RM1.00), stop loss (RM0.55)
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