Stocks on Bursa Malaysia closed lower on selling pressure yesterday, following Wall Street's slump last week. The bourse was dragged down by weak regional market sentiment, as the market is concerned about the global economy as it may be heading for another recession as Europe's debt crisis worsens and US economic growth slows. The FBM KLCI fell 19.61 points, or 1.41%, to close at 1,367.52 after opening 5.32 points lower at 1,381.81. Decliners thumped advancers by 560 to 167 while 201 counters were unchanged. Turnover declined to 631.32 million shares worth RM1.14 billion from 1.1 billion shares worth RM1.85 billion last Friday.
The FBM KLCI opened with a gap down of 5.32 points at 1,381.81 and slid lower to hit the intra-day low of 1,353.45, losing 33.68 points at its worst, before rebounding in the last hour on bargain hunting activity to close off low at 1,367.52. Chart-wise, the FBM KLCI formed a bearish black candlestick which closed at the mid-point of yesterday’s trading range. This showed the bears were initially strong in pushing down the key index, but later the bulls came in to bargain hunt, nonetheless the buying momentum was not strong enough to push the index higher. The price action yesterday confirmed the reversal signal generated by the black spinning-top candlestick formed last Friday, and the FBM KLCI is likely to continue its downtrend today.
MACD was almost flat, indicating a pause in the upward momentum generated by the technical rebound. RSI (14) has turned downward to 34.7, reflecting the weakness, and the key index continued to remain in the bearish zone. Stochastic was marginally higher at 44.9, but is tapering off, indicating a possible end of the technical rebound. Readings from the indicators showed that the FBM KLCI continued to remain bearish and weak, and the correction process may prolong.
The main trend of the FBM KLCI remained down and bearish. With the reversal yesterday, it spelled the end of the short term uptrend, and the key index is likely to further correct itself. Immediate support zone is envisaged at 1,353 to 1,331, with the next critical support level at 1,310. If the 1,310-point support level could not hold, then the key index is likely to move lower to test the 38.2% Fibonacci retracement (FR) level at 1,293, based on the measurement from the 801.27 low on 28/10/2008 to the 1,597.08 high on 11/7/2011, and the possibility of the FBM KLCI correcting further downward to the 50% FR level of 1200-point cannot be ruled out.
Overnight, the Dow fell -258.08 points or -2.36% to close at 10,655.30. Today, the FBM KLCI is likely to trade within a range of 1,324 to 1,410.
This week's expected range: 1274 – 1460
Today’s expected range: 1324 – 1410
Resistance: 1382, 1396, 1410
Support: 1324, 1339, 1353