Stocks on Bursa Malaysia ended lower yesterday on lack of investor participation despite the announcement of a gradual corporate tax reduction by Prime Minister Najib Abdul Razak, as investors remained on the sidelines pending first-quarter corporate earnings announcements. The FBM KLCI fell 6.88 points or 0.38% to close at 1,798.61, after hovering between 1,797.01 and 1,802.54 throughout the day. Losers thrashed gainers by 576 to 240, with 319 counters unchanged. Total volume was slightly higher at 1.62 billion units worth RM1.7 billion from Monday’s 1.54 billion units worth RM1.6 billion.
Taking cue from overnight losses on Wall Street, the FBM KLCI opened 6.85 points lower with a downside gap at 1,798.64 and rebounded to hit the intra-day high of 1,802.54 at midmorning. However, the rebound could not sustain and the key index slipped lower on continued selling pressure to hit the intra-day low of 1,797.01 at late afternoon before rebounding slightly to close off low. Chart-wise, the FBM KLCI formed a Doji candlestick which indicates uncertainty of market direction and consolidation. Hence, the FBM KLCI is likely to further consolidate. Immediate downside support zone is at 1,797 to 1,790, while the immediate overhead resistance zone is at 1,802 to 1,805.
MACD continued to slide lower and its histogram extended southward, indicating an increased in the bearish momentum after pausing for a while. RSI (14) dropped to 35.4 from 37.8, indicating an increased in the bearishness of the key index. Stochastic, however, hooked upward to 3.1 from 2.4, indicating a deeply oversold situation and a rebound is imminent. Readings from the indicators showed that the FBM KLCI is still weak and bearish but is deeply oversold, and a technical rebound is expected ahead.
The technical picture of the FBM KLCI still remained down and bearish for the short and medium term, while the long term trend has turned sideways with a bearish bias as the key index has closed below the 150-day simple moving average (SMA) yesterday but is still above the 100 and 120-day SMA which is currently at 1,795. Thus, a further break of the long term moving average support at 1,795 would see the FBM KLCI sliding lower to the next lower support zone of 1,790 to 1,774. On the broader market, rotational play activity has greatly reduced as reflected by the thin volume traded and consolidation in small caps and ACE market counters is likely to prolong.
Overnight, the Dow fell 36.94 points or -0.20% to close at 18,068.23. Today, the FBMKLCI is likely to trade within a range of 1,790 to 1,808.
This week's expected range: 1772 – 1856
Today’s expected range: 1790 – 1808
Resistance: 1801, 1804, 1808
Support: 1790, 1793, 1796
Stocks to watch: BJAUTO, HHGROUP, LONBISC, MAGNA, MAGNUM, OWG, RCECAP, TECFAST, TECNIC, TEXCHEM, UMSNGB, YINSON
Stock pick highlight: RCECAP (9296)
Last Price: RM0.34 +0.01
Support Level: RM0.335, RM0.32
Resistance Level: RM0.345, RM0.355, RM0.37, RM0.38, RM0.39, RM0.405, RM0.425, RM0.455, RM0.47, RM0.49
Entry Level: RM0.335 – RM0.345
RCECAP (9296) rebounded from its intra-day low of 0.335 to close higher at 0.34 after hitting the intra-day high of 0.345. Technically, the chart of RCECAP formed a bullish white candlestick with a breakaway gap and increasing volume indicating buying interest came into the stock yesterday. It breakouts from the consolidation forming a Descending Triangle pattern breakout. MACD hooked upward but is still below the signal-line, and its histogram also contracted upward strongly, indicating an increased in momentum to the upside and a buy signal. RSI (14) rose to 59.2 from 51.6, indicating the stock is turning bullish. Stochastic rose to 38.1 from 31.8, and made a golden-cross over the slow stochastic line, issuing a stochastic buy signal and indicating the stock is turning stronger after recent consolidation. The medium and long term trend of RCECAP is up, and the short term trend is also up with the 5-day SMA crossing above the 10-day SMA and both are above the 30-day SMA, and a confirmed breakout above RM0.345 will see an upside target of RM0.355, follow by RM0.37, RM0.38, RM0.39, RM0.405, RM0.425, RM0.455, RM0.47, and RM0.49.
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 (RM0.345). Those with lower risk appetite should wait at the side-line and buy on the dip.
Short Term – target price at (RM0.355, RM0.37, RM0.38, RM0.39, RM0.405), stop loss (RM0.33)
Mid Term – target price at (RM0.425, RM0.455, RM0.47, RM0.49), stop loss (RM0.315)
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