Stocks on Bursa Malaysia ended broadly lower last Friday on persistent selling as investors continued to be wary of the gloomy global economy, amid continuing weaknesses on the global stock markets. The FBM KLCI failed to return to the 1,400 level, dragged down by losses mostly in key heavyweights like Maybank and MISC. The benchmark index, which opened 10.59 points lower at 1,377.22, ended the day 21.87 points or 1.58% lower to 1,365.94. On a week-on-week basis, it dropped 64.99 points or 4.54% from previous Thursday's closing of 1,430.93. The market was closed last Friday for Malaysia Day celebration. Losers outnumbered gainers by 624 to 187 while 230 counters were unchanged. Turnover increased to 948.313 million shares worth RM1.847 billion from Thursday's 874.105 million units valued at RM1.71 billion, and total weekly volume surged to 4.039 billion shares worth RM7.481 billion from 2.883 billion units valued at RM4.887 billion last Thursday. 

The FBM KLCI opened 1.18 points higher at 1,432.11 on last Monday and touched the intra-week high of 1,433.81, but selling pressure which appeared pushed the key index to close at 1,413.12. On Tuesday, the benchmark index plunged to the intra-day low of 1,404.27 before rebounding to close 2.48 points lower at 1,410.64. The FBM KLCI rebounded to close 8.4 points higher at 1,419.04 on Wednesday, boosted by buying support from institutional fund managers in selected heavyweights. On Thursday, the key index failed to sustain Wednesday’s gain and plunged 31.23 points to close at the day’s low of 1,387.81, and the selling pressure continued into Friday which saw the FBM KLCI losing another 21.87 points to end the week at 1,365.94 after hitting the intra-week low of 1,358.47. 

On the weekly chart, the FBM KLCI formed a long black candlestick with short lower shadow, which indicates heavy selling pressure throughout the week. The key index had breakthrough the 1,410-point support of the 26.3% Fibonacci retracement (FR) level without much struggle, and had even closed below the 120-week moving average, which showed that the FBM KLCI has turned long term bearish. After breaking the 23.6% FR support level, the benchmark index is expected to test the next lower target of 38.2% FR support level at 1,293 and beyond that would be the 50% FR level of 1,200-point, which is a highly probable target technically.

On the daily chart, the FBM KLCI formed a bearish black candlestick with a huge down gap, which showed that the market was falling on great fear on open, but mild bargain-hunting lifted the key index off low, and with the bearish down move, the key index is likely to fall further to test the next immediate support level at 1,350. After breaking the triangle on September 12th, the FBM KLCI is expected to have a downside target of 1,350 (as shown by the red vertical line), and it is coming near the target, as the low hit on last Friday was 1,358.47. The support level at 1,350 is crucial, if it cannot hold, then the FBM KLCI is likely to visit the next support zone at 1,318 to 1,300.

Weekly and daily MACD continued to plunge further, indicating an increased in the bearish momentum for the short and medium term. Weekly RSI (14) was lower at 26.3, while the daily RSI (14) was at 21.9, indicating a very bearish relative strength and is approaching the oversold level. Weekly Stochastic continued to slide lower to 10.3, while the daily stochastic was at 7.5, both indicates very weak market strength and is oversold. Readings from the weekly and daily indicators portrayed a very bearish picture of the FBM KLCI, and hence, the key index is likely to continue with the consolidation process for the near term until bottoming signs are observed. However, with both RSI and Stochastic flashing oversold signal, some form of rebound may be expected, but could be short-lived. 

The trend of the FBM KLCI remained down and bearish. The question on many investors’ mind is whether now is the time to bottom fish? As there are no sign of bottom yet for the time being, it is advisable to stay sideline and hold cash at the moment, do watch until there is a strong bottom sign before taking a longer term position, any rebound or rally that may happen due to the oversold condition should be taken an opportunity to get out from the market. Immediate downside support zone is at 1,358 to 1,350, while the immediate overhead resistance zone is at 1,377 to 1,387. 

Last Friday, the Dow rose +37.65 points or +0.35% to close at 10,771.48. This week, the FBM KLCI is likely to trade within a range of 1,263 to 1,461, and for today, it is likely to trade within a range of 1,338 to 1,396. 

This week's expected range: 1263 – 1461

Today’s expected range: 1338 – 1396

Resistance: 1376, 1386, 1396

Support: 1338, 1348, 1357