Stocks on Bursa Malaysia closed broadly lower last Friday with last-minute buying on selected blue-chips which pushed the benchmark index into the positive territory at close. Market sentiments were cautious as the recent sharp gain was just a temporary relief, as two other major catalysts were still keeping investors jittery and on the sidelines, namely Greece’s exit from the Eurozone and the three-day US FOMC meeting beginning today, July 6, which may decide on raising interest rates. At close, the FBM KLCI finished at 1,734.24, up 0.36 point, or 0.02%, after moving between 1,724.50 and 1,738.09 throughout the day. On a weekly basis, the key index gained 23.77 points from 1,710.47 previously. Losers thumped gainers by 459 to 259, while 298 counters were unchanged. Total volume eased to 1.45 billion units worth RM1.39 billion from Thursday’s 1.46 billion units valued at RM1.85 billion. Weekly turnover rose to 8.27 billion units worth RM9.37 billion from 7.35 billion units worth RM8.19 billion previously.
Following the announcement of capital control by the Greek government on previous Sunday, the FBM KLCI opened last Monday 1.12 points lower at 1,709.35 and slipped lower for the rest of the day. It hits the intra-week low of 1,688.44, losing 22.03 points at its worst, before rebounding slightly to close 18.55 points lower at 1,691.92, impacted by concerns over Greece’s debt default and sentiment was also affected by the likelihood of Fitch Ratings credit-rating downgrade of Malaysia. Tuesday saw the FBM KLCI rebounded 14.72 points to 1,706.64 on mid-year window dressing, in line with most regional bourses. The FBM KLCI reacted positively on Wednesday to the “stable” outlook status accorded by Fitch Ratings on the Malaysian economy to close 21.32 points higher at 1,727.96. Continuing the overnight bullish sentiments, the FBM KLCI rose another 5.92 points to 1,733.88 on Thursday after hitting an intra-week high of 1,738.67, and the key index rebounded to close almost unchanged on Friday after plunging to an intra-day low of 1,724.50.
On the weekly chart, the FBM KLCI formed a bullish white candlestick with a long lower shadow in bullish engulfing position, a bottom reversal candlestick pattern, which indicates the bulls took control after being beaten initially, and hence, the FBM KLCI is likely to continue with its upward momentum to climb higher in the coming week. On the daily chart, the FBM KLCI, on the contrary, formed a bearish black hanging-man candlestick, a top reversal candlestick pattern, which indicates the appearance of selling pressure and a change in momentum from bullish to bearish and hence the possible end to the rebound which started on last Tuesday. Thus, the FBM KLCI may consolidate or pullback to correct downward after a three-day technical rebound. Nevertheless, the conflicting signals shown on the weekly and daily chart showed uncertainty ahead of the Greek referendum on Sunday. Immediate overhead resistance zone is at 1,738 to 1,759, while the downside support zone is at 1,724 to 1,700.
Weekly MACD was lower but showed sign of tapering, while its histogram contracted upward for the first bar after contracted and extended southward for nine consecutive bars, indicating a reduction in the bearish momentum on the weekly timeframe. On the contrary, daily MACD continued to climb higher, albeit still below the zero-line, and its histogram also extended upward, indicating an increased in momentum to the upside. Weekly RSI (14) swung upward to 39.5 from 33.1, indicating a change in the index’s weekly relative strength from bearish to mildly bearish. Daily RSI (14) was marginally higher at 48.9 from 48.7, indicating consolidation. Weekly Stochastic swung upward to 11 from 3.4 and made a golden-cross over the slow stochastic line, issuing a stochastic buy signal on the weekly timeframe and indicated an oversold technical rebound. Daily Stochastic rose to 85.5 from 64.8, indicating continued strengthening of the key index on the daily timeframe and continuation of the daily up cycle. Readings from the weekly indicators showed a strong technical rebound took place last week after the FBM KLCI stayed in the oversold territory for five consecutive weeks, and readings from the daily indicators showed a continuation of the technical rebound which started on Tuesday but with signs of weakening on Friday. Hence, the FBM KLCI is likely to stage further rebound if the buying momentum continues into this week, otherwise, it may pause for a consolidation.
The short term trend of the FBM KLCI has turned up as the key index has now closed above the 5, 10, 15, 20 and 30-day simple moving averages. On top of that, the FBM KLCI has also broken out from the downtrend channel measured from the pivot high of 1,867.53 to the pivot low of 1,688.44, signaling a short term trend change from down to up. Nonetheless, the medium to longer term trend of the FBM KLCI is still down and bearish as the key index continued to stay below the medium and long term moving averages. On the weekly chart, the FBM KLCI has formed the classical Head-and-Shoulder chart pattern with the Head at 1,896.23, and the Left-Shoulder (L.S) at 1,882.20-point on January 3rd, 2014 and the Right-Shoulder (R.S) at 1,867.53 on 30th April, 2015; and a break of the neck-line currently at around the critical support of 1,671-point level will see a possible downside target of 1,448 in the medium to longer term. For the coming week, in wake of a Greek ‘No’ vote on Sunday, the market is likely to see more volatility and trigger a stocks selloff in the near term as investors assess how the European Central Bank works to stop contagion spreading from Greece.
Last Friday, US market was closed for the Independence Day holiday, and over in Europe the German DAX fell 40.96, points or -0.37% to close at 11,058.39. This week, the FBMKLCI is likely to trade within a range of 1,652 to 1,788, and today, the FBMKLCI is likely to trade within a range of 1,712 to 1,751.
This week's expected range: 1652 – 1788
Today’s expected range: 1712 – 1751
Resistance: 1740, 1745, 1751
Support: 1712, 1718, 1726
Stocks to watch: CAREPLS, CENBOND, CHINA50-H1, CHINA50-H2, FBMKLCI-HH, FBMKLCI-HK, FBMKLCI-HM, HUPSENG, KHEESAN, MPAY, MIECO, OSK, PESONA, POHUAT, SYF
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