Stocks on Bursa Malaysia closed lower yesterday on continued losses in selected index-linked companies, in line with the weaker regional performances. China saw its shares down by 8% amid renewed fears about the country’s economic outlook, influenced by the unprecedented government intervention in early July. The ringgit dropped to its 17-year low of 3.811 against the US dollar. The FBM KLCI fell 11 points, or 0.64%, to 1,709.76, after fluctuating between 1,709.76 and 1,718.60 throughout the day. Losers outnumbered gainers by 609 to 290 with 266 counters unchanged. Total volume rose to 2.22 billion units valued at RM1.8 billion from 1.74 billion units valued at RM1.5 billion.
Following the weak performance of Wall Street last Friday which fell for the fourth consecutive sessions, the FBM KLCI opened 9.79 points lower at 1,710.97, but rebounded to hit the intra-day high of 1,718.60 near lunch break. However, heavy profit taking appeared in the afternoon session influenced by the weaker regional bourses with China market falling 8%, and the FBM KLCI retreated from the intra-day high to close at the lowest point of the day. Chart-wise, the FBM KLCI formed a black inverted hammer candlestick which is a bottom reversal candlestick pattern with a bearish bias. Hence, the FBM KLCI is likely to consolidate or further correct downward today. Immediate downside support zone is at 1,707 to 1,697, while the overhead resistance zone is at 1,715 to 1,727.
MACD hooked downward, and its histogram also further contracted downward, indicating further loss in momentum. RSI (14) slipped lower to 41.9 from 46.9, indicating the relative strength of the key index is turning more bearish from a mildly bearish state. Stochastic was lower at 63 from 74.5, indicating the index was weakening further and continuation of the short term down cycle. Readings from the indicators showed that the FBM KLCI was turning weak and bearish, and hence is likely to further correct downward.
The general technical picture of the FBM KLCI still remained very much unchanged in that the short term trend is sideways range-bound, while the medium and long term trend is still down. Nonetheless, the bearish downward move yesterday has caused the near term trend to turn down as the 5-day SMA has made a dead-cross over the 10-day SMA, and the key index was also closing below the short term moving averages, and hence the FBM KLCI is likely to fall further. Immediate critical downside support zone is at 1,700 to 1,685, in which 1,685 is the pivot low formed on July 9th, and a break of this important support will see the FBM KLCI falling lower to test the critical support of 1,671-point, which is also the neckline for the Head-and-Shoulder pattern, and a break of this critical neckline support will see a possible downside target of 1,448-point for the medium to long term.
Overnight, the Dow fell 127.94 points or -0.73% to close at 17,440.59. Today, the FBMKLCI is likely to trade within a range of 1,697 to 1,727.
This week's expected range: 1686 – 1759
Today’s expected range: 1697 – 1727
Resistance: 1715, 1721, 1727
Support: 1697, 1703, 1706
Stocks to watch: A&M, ASIAPLY, BHS, BTM, DESTINI, DOMINAN, EATECH, EFFICEN, FBMKLCI-HG, FBMKLCI-HI, FBMKLCI-HK, IDMENSN, IMASPRO, KAREX, KESM, LEONFB, LEWEKO, MCLEAN, OCK, OPCOM, SIGN, SKPRES, XINQUAN
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