Stocks on Bursa Malaysia closed mostly higher in choppy trading last Friday. However, sentiment remained cautious in view of the poor performance in regional markets which were affected by the weak global economic outlook. This is in spite of positive US economic news and support given by the German authorities to increase Eurozone rescue funds. The FBM KLCI fell 0.33 point to close at 1,387.13 after opening 3.12 points higher at 1,390.58, and week-on-week, it gained 21.19 points or 1.55% from 1,365.94 registered on previous Friday. Gainers beat losers by 389 to 377, while 271 counters were unchanged. Turnover increased to 1.099 billion shares worth RM1.848 billion from 920.957 million shares worth RM1.366 billion on Thursday. Weekly volume increased to 4.825 billion shares, worth RM8.11 billion, from previous week’s 4.039 billion shares, worth RM7.481 billion. 

The FBM KLCI opened with a down gap of 8.20 points at 1,357.74 on last Monday and slid lower to hit the intra-week low of 1,310.53, losing as much as 55.41 points at its worst before bargain hunting activity lifted it to close off low with a loss of 34.14 points at 1,331.80. The FBM KLCI rebounded on Tuesday prompted by renewed hopes that European officials would take bold steps to resolve the debt crisis, and the index recoup 32.40 points to close at 1,364.20. The key index continued to climb on Wednesday to close 7.35 points higher at 1,371.55 amid cautious sentiment. On Thursday, the benchmark index extended its gains to close 15.91 points higher at 1,387.46, moving in tandem with the rebound on other Asian equity markets, driven by hope that German authorities would approve an increase in Euro zone rescue funds. Profit-taking kept gains in check on Friday as the FBM KLCI retraced from an intra-week high of 1,403.01 to close mixed ahead of the weekend.

On the weekly chart, the FBM KLCI formed a piercing-line candlestick which is a bottom reversal candle pattern. However, as the present week candlestick could not close above the mid-point of the previous week’s candle at 1,396.14, the strength of the reversal is on the weak side. On the daily chart, the key index formed a black spinning-top candlestick with long upper and lower shadow, indicating a very volatile trading day on Friday. The appearance of a spinning-top candlestick after three consecutive days of up move indicates the market was taking a pause, and may turn southward on continue profit-taking correction. Signals from both the weekly and daily candlesticks indicate that the FBM KLCI might move range-bound this week. Immediate overhead resistance zone is envisaged at 1,400 to 1,420, while the downside support zone is at 1,350 to 1,310. 

Weekly MACD continued to slide lower, indicating continued loss in the weekly momentum. On the other hand, daily MACD continued to move higher, indicating an improvement in the daily upward momentum. However, as the daily MACD is still below the zero-line as well as the signal-line, the present up move is considered a technical rebound. Weekly RSI (14) has hooked up to 31.4 from 26.3 the previous week, reflecting the rebound, and the weekly relative strength is still bearish. Daily RSI (14) was almost flat at 38.61, reflecting the mild pullback in the key index, and the daily relative strength remained in the bearish zone, but has made great improvement from the deeply oversold (extremely bearish) value of 17.9 registered on September 26th. Weekly Stochastic has hooked up slightly to 13.1 from 10.3 the previous week, indicating the weekly market strength is still very weak and the weekly down cycle is still intact. Daily Stochastic, however, had continued to climb higher to 43.4, indicating the daily up cycle is in continuation. Readings from the weekly and daily indicators showed that the FBM KLCI is currently undergoing a rebound in the daily scenario, while in the weekly scenario, the key index is still very weak, and the bearish down cycle is far from over.

The main trend of the FBM KLCI remained down. However, the very short term trend has turned upward as the key index had closed above the 10-day moving average (MA) for the first time in three weeks. Nonetheless, as the key index is still below the 20 and 30-day MA, the present up swing may encounter resistance from the 20-day MA presently at 1,420. In order to reverse its short term down trend, the FBM KLCI will have to close above the 30-day MA currently located at 1,438. For the coming week, the FBM KLCI is likely to be range-bound in choppy trade, as external factors continue to influence its performance. At the mean time, the up coming budget to be tabled by PM Najib this coming Friday, 7th October may help to keep the index afloat.

Last Friday, the Dow fell -240.60 points or -2.16% to close at 10,913.38. This week, the FBM KLCI is likely to trade within a range of 1,274 to 1,460, and for today, it is likely to trade within a range of 1,346 to 1,431. 

This week's expected range: 1274 – 1460

Today’s expected range: 1346 – 1431

Resistance: 1402, 1416, 1431

Support: 1346, 1361, 1374