Stocks on Bursa Malaysia ended higher last Friday following a string of positive local economic data including a strong first-quarter gross domestic product (GDP) growth of 5.6%. The GDP numbers and industrial production index (IPI), which rebounded in March to 6.9% year-on-year from a seasonally weak Lunar New Year month, suggested resilient economic output despite the volatility seen in the ringgit and commodity prices. The benchmark FBM KLCI rose 4.37 points or 0.24% to 1,811.92, after hovering between 1,802.05 and 1,811.92 throughout the day. On a weekly basis, the FBM KLCI rose 4.27 points or 0.23% from 1,807.65 previously. Gainers led losers 411 to 358, with 334 counters unchanged. Total volume rose to 1.74 billion units worth RM1.84 billion from Thursday’s 1.57 billion units worth RM1.79 billion. Weekly turnover declined to 6.81 billion units, worth RM8.94 billion, from 6.81 billion units, worth RM7.63 billion, previously.
The FBM KLCI opened last Monday 1.57 points higher at 1,809.22 and climbed higher to hit the intra-day high which later turned out to be the intra-week of 1,814.24 in the first hour after opening. However, the rise could not sustain and the key index slipped lower on profit taking activity to close 2.16 points lower at 1,805.49. Tuesday saw the FBM KLCI opened 6.85 points lower with a downside gap at 1,798.64 and ended the day 6.88 points lower at 1,798.61, after hovering between 1,797.01 and 1,802.54 throughout the day. The FBM KLCI hit an intra-week low of 1,795.16 on Wednesday before rebounding to close 4.41 points at 1,803.02. The rebound continued into Thursday and Friday which saw the key index gaining 4.53 points and 4.37 points to close higher at 1,807.55 and 1,811.92 respectively.
On the weekly chart, the FBM KLCI formed a bullish white hammer candlestick, a bottom reversal candlestick pattern, which indicates initial dominance by sellers but buyers later took control to push up the index. Hence, the FBM KLCI is likely to continue its rebound to climb higher in the coming week. On the daily chart, the FBM KLCI formed a bullish white candlestick which continued the uptrend from Thursday, and hence, is likely to continue moving higher today. Immediate overhead resistance zone is at 1,814 to 1,831, while the downside support zone is at 1,802 to 1,795.
Weekly MACD continued to slide lower but is still above the signal-line and the zero-line, and the histogram contracted for the third bar, indicating short term correction and consolidation. Daily MACD, however, hooked upward, but is still below the signal-line as well as the zero-line, and its histogram contracted upward for the third bar, indicating technical rebound. Weekly RSI (14) hooked upward to 49.1 from 48.8, indicating technical rebound and the weekly relative strength is mildly bearish. Daily RSI (14) was higher at 43.4 from 40.8, indicating an improvement in the daily relative strength to the bullish side in the mildly bearish zone. Weekly Stochastic slipped lower to 41.1 from 63.8, indicating continuation of the weekly down cycle and weakening of the key index. Daily Stochastic, however, rose to 17 from 10.1 and is above the slow stochastic line, indicating a rebound and possibly the beginning of a short term up cycle. Readings from the weekly indicators showed that the FBM KLCI is still in a correction and consolidation mode with early sign of a rebound, while readings from the daily indicators showed that the key index has rebounded and may possibly rise further on the daily perspective.
The immediate short term trend or near term trend of the FBM KLCI has turned up as the key index has closed above the 5 and 10-day simple moving averages (SMA). Hence, the FBM KLCI is likely to continue with its upswing to move higher today. Nonetheless, the short and medium term is still down while the long term trend is sideways range-bound. For the coming week, the FBM KLCI is likely to stay range-bound with an upward bias as the key index issued a reversal signal with the formation of a hammer candlestick on the weekly chart and a morning-star bottom reversal pattern was formed on the daily chart. The FBM KLCI has also found support and rebounded near the 38.2% Fibonacci retracement support level of 1,793-point for the up leg from 1,671.82 on Dec 17 last year to the 1,867.53 on April 27. Hence, the FBM KLCI is likely to continue its rebound to test the 23.6% Fibonacci resistance of 1,821, and a successful break of this resistance level will see the FBM KLCI moving higher toward the 1,831-point level. On the economic front, the tabling of the 11th Malaysia Plan on 21st May will likely give some boost to the market.
Last Friday, the Dow rose 20.32 points or 0.11% to close at 18,272.56. This week, the FBMKLCI is likely to trade within a range of 1,780 to 1,833, and today, the FBMKLCI is likely to trade within a range of 1,795 to 1,821.
This week's expected range: 1780 – 1833
Today’s expected range: 1795 – 1821
Resistance: 1815, 1818, 1821
Support: 1795, 1798, 1805
Stocks to watch: ECONBHD, EWEIN, GADANG, GLBHD, k1, MAGNA, MPAY, MMSV, PRTASCO, UCHITEC, ULICORP, WILLOW, YSPSAH
Stock pick highlight: K1 (0111)
Last Price: RM0.615 +0.05
Support Level: RM0.55, RM0.535, RM0.50
Resistance Level: RM0.63, RM0.645, RM0.655, RM0.665, RM0.685, RM0.70, RM0. 71, RM0.725, RM0.745, RM0.765, RM0.80
Entry Level: RM0.61 – RM0.62
K1 (0111) rebounded from its intra-day low of 0.55 to close higher at 0.615 after hitting the intra-day high of 0.63. Technically, the chart of K1 formed a bullish white candlestick with increasing volume indicating strong buying interest came into the stock on Friday. It breaks out from the consolidation range forming a Saucer 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 69.9 from 61.3, indicating the stock is turning very bullish. Stochastic rose to 90.6 from 84 and is above the slow stochastic line, indicating a continuation of the up cycle but is approaching the overbought level. The medium and long term trend of K1 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 RM0.63 will see an upside target of RM0.645, follow by RM0.655, RM0.665, RM0.685, RM0.70, RM0.71, RM0.725, RM0.745, RM0.765 and RM0.80.
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 (RM0.63). Those with lower risk appetite should wait at the side-line and buy on the dip.
Short Term – target price at (RM0.285, RM0.30, RM0.31, RM0.325, RM0.37), stop loss (RM0.23)
Mid Term – target price at (RM0.385, RM0.41, RM0.435, RM0.47, RM0.50), stop loss (RM0.205)
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