Stocks on Bursa Malaysia ended higher for the second consecutive day yesterday lifted by gains on selected heavyweights. The local market received a boost from the stimulus measures in China after recovering from Monday’s global selloff. China’s central bank cut its key lending rate by 0.25 percentage points to 4.6%, the fifth interest rate cut since November, in an effort to stabilise the country’s stock markets. The world’s second-largest economy’s central bank also reduced the statutory reserve requirement to effectively freeing the country’s banks to lend more cash. At close, the FBM KLCI rose 16.43 points or 1.05% to 1,580.37, after moving between 1,554.37 and 1,585.59 throughout the day. Gainers and losers stood at 407 each, while 320 counters remained unchanged. Total volume fell to 2.15 billion units valued at RM2.27 billion from 2.78 billion units valued at RM2.76 billion on Tuesday.
Following the fifth consecutive day of losses on Wall Street overnight, the FBM KLCI opened 4.19 points lower at 1,559.75 and slipped lower to hit the intra-day low of 1,554.37 ten minutes after opening, losing 9.57 points at its worst. The key index rebounded from the low and climbed higher for the rest of the day to touch the intra-day high of 1,585.59 just before closing, but a last minute profit taking dragged the index to close off high. Chart-wise, the FBM KLCI formed a bullish white candlestick which continued the uptrend from Tuesday, and also, confirmed the reversal signal issued by the Bullish Engulfing pattern formed on Tuesday. Hence, the FBM KLCI is likely to move higher today on follow through buying momentum. Immediate overhead resistance zone is at 1,585 to 1,600, while the downside support zone is at 1,554 to 1,536.
MACD swung upward, and its histogram also contracted upward strongly, indicating a change in momentum direction from down to up. Nonetheless, as MACD is still below the signal-line, the upswing in momentum may turn out to be just a technical rebound in bearish market. RSI (14) was higher at 36.5 from 31.4, indicating an improvement in the key index’s short term relative strength to the bullish side of the bearish zone, or turning less bearish. Stochastic was higher at 22.5 from 13.2, indicating further strengthening of the key index and the beginning of a short term up cycle as stochastic has move above the 20-level. Readings from the indicators showed that the FBM KLCI is turning less bearish, and is likely to move higher on follow through buying momentum.
The general trend of the FBM KLCI is still down. However, with the strong upward move over the last two days, the key index has closed above the 5 and 10-day simple moving average (SMA) for the first time in fourteen consecutive sessions, indicating a very short or near term trend change from down to up, and hence, the FBM KLCI is likely to move higher to challenge the overhead resistances of 1,585, follow by 1,594 and the psychological resistance of 1,600. Nonetheless, to reverse the short term downtrend, the FBM KLCI must at least close above the 15 and 20-day SMA which are currently at 1,603 and 1,633.
Overnight, the Dow rose 619.07 points or 3.95% to close at 16,285.51. Today, the FBMKLCI is likely to trade within a range of 1,530 to 1,616.
This week's expected range: 1518 – 1632
Today’s expected range: 1530 – 1616
Resistance: 1592, 1604, 1616
Support: 1530, 1542, 1561
Stocks to watch: ESCERAM, KOSSAN, LIONIND, MAYBANK, MYEG, NCB, PBBANK, PETDAG, SAM, SIME, TENAGA
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