Stocks on Bursa Malaysia ended lower last Friday on continued sell down by foreign funds on the back of volatility in the Chinese yuan, falling oil prices, and the softer ringgit. China’s devaluation of the yuan continued to impact regional markets and currencies coupled with the fall in commodity prices, the local bourse failed to defend its crucial psychological level of 1,600 points. The FBM KLCI fell 24.8 points to close at 1,596.82, after fluctuating between 1,590.57 and 1,626.90 throughout the day. On a weekly basis, the benchmark index fell 85.83 points from 1,682.85 on extensive selling. Losers trounced gainers by 782 to 148, while 249 counters were unchanged. Weekly turnover rose to 10.26 billion units worth RM10.76 billion from previous week’s 7.38 billion units worth RM7.99 billion.
The FBM KLCI opened last Monday 10.08 points lower at 1,672.57, the highest point for the day, and slipped lower on persistent selling pressure to close 28.28 points or 1.68% lower at 1,654.37. Tuesday saw the FBM KLCI fell 17.66 points or 1.07% to 1,636.71 after China’s central bank devalued its yuan by 2%. The FBM KLCI fell another 26.78 points or 1.64% to 1,609.93 on Wednesday as the ringgit fell past the 4.000 level to the US dollar on continued foreign selling after China devalued its currency. The FBM KLCI rebounded on Thursday to close 11.69 points, or 0.73%, higher at 1,621.62, following the release of positive second quarter 2015 gross domestic product (GDP) figures where the second quarter GDP growth of 4.9% was better than market expectation of 4.5%. And Friday saw the FBM KLCI losing 24.8 points to end the week at 1,596.82.
On the weekly chart, the FBM KLCI formed a bearish long black candlestick with a downside breakaway gap which indicates the bears or sellers were in control for the week, and hence, the FBM KLCI is likely to continue its downtrend to slide lower in the coming week. On the daily chart, the FBM KLCI formed a bearish engulfing candlestick pattern which indicates a reversal of the prior day rebound, and the key index is like to continue its downward move to slide lower. Immediate downside support zone is at 1,590 to 1,550, while the overhead resistance zone is at 1,600 to 1,629.
Weekly MACD plunged lower and its histogram also extended southward substantially, indicating a big increase in the bearish momentum. Daily MACD and its histogram also slipped lower, indicating an increase in the downward momentum. Weekly RSI (14) plunged lower to 23.6 from 32.6, indicating the FBM KLCI has turned very bearish on the weekly timeframe and is oversold. Daily RSI (14) hooked downward to 25.1 from 28.7, indicating the key index is getting very bearish in the oversold zone. Weekly Stochastic was lower at 8.7 from 15.3, and is staying below the slow stochastic line, indicating the key index is very weak and continuation of the down cycle. Daily Stochastic, however, was marginally higher at 7.2 from 6.6, indicating the key index was oversold. In short, readings from both the weekly and daily indicators showed that the FBM KLCI is very weak and bearish, and hence, is likely to further consolidate. Nonetheless, as it is oversold, a technical rebound is expected ahead.
The trend of the FBM KLCI is down and bearish as it is staying below the short, medium and long term moving averages. The bearish downward move of the FBM KLCI last week has seen the key index breaking below the neckline of the Head-and-Shoulder chart pattern, indicating a long term downtrend has started with a possible downside target of 1,448-point. And based on Elliott wave and Fibonacci analysis, the FBM KLCI is currently on wave-3 of the bigger wave-C with possible immediate downside target of 1,561 (100% FP), follows by 1,512 (127.2% FP), 1,491 (138.2% FP), 1,470 (150% FP) and 1,448 (161.8% FP) based on Fibonacci projection (FP) for the impulse wave starting from 1,867.53. Based on Fibonacci retracement support level for the range from 1,310 to 1,896, the support levels are 1,603 (50% FR), follows by 1,534 (61.8% FR), and 1,448 (76.4% FR), and 1,310 (100% FR). A projection of the trend-line support measuring from the pivot low of 1,234 on February 8th 2010 to the pivot low of 1,310 on September 1st 2011 gives a support at 1,510-point.
Last Friday, the Dow rose 69.15 points or 0.40% to close at 17,477.40. This week, the FBMKLCI is likely to trade within a range of 1,485 to 1,701, and today, the FBMKLCI is likely to trade within a range of 1,546 to 1,663.
This week's expected range: 1485 – 1701
Today’s expected range: 1546 – 1663
Resistance: 1618, 1641, 1663
Support: 1546, 1568, 1582
Stocks to watch: COCOLND, FBMKLCI-HG, FBMKLCI-HK, FBMKLCI-HL, FBMKLCI-HM, FBMKLCI-HS, FBMKLCI-HT, FBMKLCI-HW, LITRAK, LUXCHEM, NTPM, OWG, PWROOT, PRLEXUS
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