Stocks on Bursa Malaysia ended broadly higher yesterday, trimming three days of consecutive losses, in tandem with the overnight recovery on Wall Street that was prompted by renewed hopes that European officials would take bold steps to resolve the debt crisis. The FBM KLCI gained 32.40 points or 2.43% to end at 1,364.20 after opening 7.55 points better at 1,339.35. Gainers outnumbered losers by 658 to 162 while 223 counters were unchanged. Turnover decreased to 908.81 million shares, worth RM1.59 billion, from 1.04 billion shares worth RM1.78 billion on Monday.
Taking cue from the strong overnight gain on Wall Street, the FBM KLCI opened 7.55 points higher at 1,339.35 and continued to move higher throughout the day with intermittent minor pullback on profit-taking, it hit the intra-day high of 1,367.55 before settling at 1,364.20. Chart-wise, the FBM KLCI formed a bullish white candlestick which indicates buyers were in control for the day on strong buying momentum. Nonetheless, the strong up move yesterday is considered merely a technical rebound in a deeply oversold market, as the main trend is still down. In order to reversed the current down trend, the FBM KLCI must at least move above the short term 30-days moving average (MA) which is currently at 1,450-point level, and is still a way long to go. The first important hurdle to cross now is the 1,400-point psychological resistance level.
MACD was lower but was tapering off. The histogram, however, has turned shorter upward, indicating a reduction in the bearish momentum. RSI (14) has made a strong rebound to 30.8 from 17.9 a day earlier. As it was mentioned yesterday, the market was expected to stage a rebound when the RSI (14) drop below the 20-point level, and it did. Stochastic also moved upward to 17.8 after hovering at 7-point for two days, indicating a possible beginning of the short term up cycle. Readings from the indicators showed that the FBM KLCI is currently undergoing a rebound, and the upward momentum may be able to carry the key index higher today.
The main trend of the FBM KLCI remained down. Nonetheless, after a long downtrend and deeply oversold, the key index may stage a rebound rally towards the mean level at 1,400, and could this lead into a pre-budget rally? The market shall give the answer. Immediate strong overhead resistance zone is envisaged at 1,378 to 1,400-point level, while the downside support zone is at 1,339 to 1,310. Overnight, the Dow rose another +146.83 points or +1.33% to close at 11,190.69. Today, the FBM KLCI is likely to trade within a range of 1,328 to 1,396.
This week's expected range: 1263 – 1461
Today’s expected range: 1328 – 1396
Resistance: 1375, 1386, 1396
Support: 1328, 1346, 1354