Stocks on Bursa Malaysia ended last Thursday’s trading on a weak note, as heavy selling in blue-chips dampens trading on Bursa Malaysia and pushed it to finish easier, ahead of the Malaysia Day holiday on Friday. The FBM KLCI dropped 6.68 points or 0.46% to 1,430.93 after opening 5.06 points higher at 1,442.67, and week-on-week, it lost 38.19 points, or 2.6% from 1,469.12 previously. Sime Darby, which fell 47 sen to RM8, was affected by the Securities Commission’s investigation into its acquisition of a 30 per cent stake in property developer Eastern & Oriental Bhd. Losers beat gainers by 393 to 291 while 296 counters were unchanged. Turnover decreased to 729.26 million shares worth RM1.53 billion from Wednesday’s 766.82 million shares worth RM1.31 billion. The holiday-shortened week saw total market volume decreasing to 2.88 billion shares valued at RM4.88 billion from 3.5 billion shares valued at RM6.29 billion previously.

Taking cue from the Dow’s -303.68 points decline on previous Friday, the FBM KLCI opened on Monday with a down gap of 4.33 points at 1,464.79 and continued to plunge lower to end 22.86 points lower at 1,446.26. The key index rebounded mildly on Tuesday to close 1.74 points higher at 1,448.00 after opening 3.23 points better at 1,450.09. On Wednesday, persistent selling in heavyweights and big-cap stocks weighed down the key index amid mounting fears that Greece could soon default, and the FBM KLCI dropped 10.39 points to 1,437.61. The key index shed another 6.68 points to end the week at 1,430.93 on extended selling on Thursday after hitting the intra-week low of 1,427.75, ignoring the overseas rebound, as most investors were reluctant to participate ahead of the long weekend, as Friday was a public holiday.

On the weekly chart, the FBM KLCI formed a bearish long black candlestick which reflected the heavy selling pressure over the week. The key index had broken the support level at 1,442 and is likely to head towards the next critical lower support zone of 1,423 to 1,410-point. This support zone is especially critical as the 100-week moving average (MA) support is at 1,419, and the 23.6% Fibonacci Retracement (FR) level is at 1,410-point. If this support zone could not hold, then the FBM KLCI is likely to fall lower towards the 120-week MA at 1,375, follow by the psychological support level at 1,350 and the 38.2% FR level of 1,293.

On the daily chart, the FBM KLCI also formed a long black candlestick, and this is the fifth black candle formed consecutively, indicating a very bearish sentiment. The key index slid to the intra-day low of 1,427.75 before rebounding slightly, and is now very near the critical support level of 1,423. There is a high likelihood that the key index may re-test this critical support level this week, a breach will likely see the key index moving lower to test the 1,400 psychological support. 

Weekly MACD continued to slide lower below the zero line, implying further correction ahead, while the daily MACD had made a dead-cross over the daily signal line, sending out a strong sell signal. Weekly RSI (14) has slid lower to 33.4, and daily RSI (14) is at 31.6, both readings showed that the FBM KLCI is currently in a bearish state. Weekly Stochastic continued to slide lower to 19.9, moving into the oversold zone, and the daily Stochastic is at 6.4, had continued to move deep into the oversold zone. Both weekly and daily indicators showed that the FBM KLCI is currently very weak and bearish, and as it is oversold, some rebound might be expected. 

The trend of the FBM KLCI remained down and bearish as the key index is currently staying below the short, medium and long term MAs. Nonetheless, oversold signals on the indicators implies the likelihood for a technical rebound upside early this week, supported further by the recovery on global markets late last week on optimism governments and central bankers in developed economies would help relieve the European debt crisis. For the coming week, the FBM KLCI is likely to continue its consolidation with intermittent mild rebound. However, any near-term strength should be taken as an opportunity to sell ahead of a deeper correction. Immediate downside support zone is at 1,427to 1,400, while the overhead resistance zone is at 1,437 to 1,465. 

Last Friday, the Dow rose +75.91 points or +0.66% to close at 11,509.09. This week, the FBM KLCI is likely to trade within a range of 1,380 to 1,502, and for today it is likely to trade within a range of 1,408 to 1,460. 

This week's expected range: 1380 – 1502

Today’s expected range: 1408 – 1460

Resistance: 1441, 1450, 1460

Support: 1408, 1418, 1424