Stocks on Bursa Malaysia finished on a firmer note yesterday helped by gains in heavyweights. The firmer bourse was in line with most Asian markets, which rose on bargain hunting in oversold blue chips, as well stock buyback by some of the companies. On the local front, the government announced the set-up of a special economic committee to ensure the country will maintain its economic growth momentum. The FBM KLCI was 31.8 points or 2.08% better at 1,563.64, after moving between 1,503.68 and 1,568.42 throughout the day. Losers outpaced gainers by 487 to 381 with 335 counters unchanged. Total volume rose to 2.78 billion units valued at RM2.76 billion from 2.58 billion units at RM2.5 billion on Monday.
Following another 500 points plunged of the Dow overnight, the FBM KLCI opened 16.41 points lower at 1,515.73 and slipped to the intra-day low of 1,503.68 five minutes after opening. The key index rebounded from the low and rallied higher for the rest of the day with intermittent mild pullback. It touched the intra-day high of 1,568.42 just before closing, but a last minute on profit taking dragged the index to close off high. Chart-wise, the FBM KLCI formed a bullish engulfing candlestick pattern, a bottom reversal candlestick pattern, which indicates a fight back of the bulls after being beaten initially, and the candlestick also filled the gap formed on Monday, making it a possible exhaustion gap from a breakaway gap. Hence, the FBM KLCI is likely to stage a follow through rebound today if the buying momentum continues into today. Immediate overhead resistance zone is at 1,568 to 1,583, while the downside support zone is at 1,536 to 1,503.
MACD hooked slightly upward, but the histogram contracted upward strongly, indicating a strong reduction in the bearish momentum. RSI (14) swung upward to 31.4 from 19.6, indicating a strong change in the index’s relative strength from an extremely bearish state to a bearish state. Stochastic also swung upward to 13.2 from 5.9 and made a golden-cross over the slow stochastic line, the stochastic also formed bullish divergence to the underlying FBM KLCI. Readings from the indicators showed that the FBM KLCI has staged a strong rebound yesterday, and may likely to continue its upward momentum to move higher.
The overall technical picture of the FBM KLCI still remained very much unchanged in that the trend is still down. However, the very bullish moved yesterday had issued a strong reversal signal and a temporary bottom was seen at 1,503-point. The significance of yesterday’s bullish move is that: 1) it caused the bearish breakaway gap formed on Monday to become a possible exhaustion gap, indicating the bulls had come in to take over from the bears; 2) The strong rebound at 1,503-point also bear significant meaning as the 50% Fibonacci projection support level is at 1,504-point for the down wave starting from 1,744-point. 3) The FBM KLCI also rebounded off the trend-line support projected from the pivot low of 1,234 on February 8th 2010 to the pivot low of 1,310 on September 1st 2011 which gives a support at around 1,510-point. 4) The rebound had avoided a technical bear market as a 20% drop from the peak of 1,896.23 is at 1,516-point, and the rebound showed that the rescuer had appeared, as least for the time being. Nevertheless, the rebound may also turn into a bull trap if the bear force continues to dominate.
Overnight, the Dow fell another 204.91 points or -1.29% to close at 15,666.44. Today, the FBMKLCI is likely to trade within a range of 1,457 to 1,633.
This week's expected range: 1518 – 1632
Today’s expected range: 1457 – 1633
Resistance: 1587, 1610, 1633
Support: 1457, 1480, 1522
Stocks to watch: AXIATA, DIGI, FBMKLCI-C4, KPJ, LIIHEN, NCB, PETDAG, TM
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. The Stocks to watch is not a recommendation to buy or sell the particular stock, as it is only meant for graduates of the "Share Trading the Pro Way" course as case study. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.