Stocks on Bursa Malaysia ended higher last Friday as the market reacted positively to the government's 2012 Budget. The market was bolstered by the government's move to liberalize 17 services sub-sectors in phases next year, which include private hospital services, medical and dental specialist services, engineering, accounting and taxation, and legal services. The Prime Minister also forecast Malaysia's GDP is to grow 5 to 6 per cent next year. Overall market sentiment was positive. The FBM KLCI rose 6.36 points to 1,400.05, and week-on-week, it gained 12.19 points or 0.93% from 1,387.13 the previous Friday. Gainers beat losers by 373 to 341 while 271 counters were unchanged. Turnover declined to 964.61 million shares worth RM1.31 billion from 994.17 million shares valued at RM1.39 billion on Thursday. Weekly volume decreased to 4.08 billion shares valued at RM6.17 billion from previous week’s 4.82 billion shares worth RM8.11 billion. 

Following the slump on Wall Street the previous Friday, the FBM KLCI kicked off the month of October with a down gap of 5.32 points at 1,381.81 and slid to the intra-week low of 1,353.45 before recovering to close 19.61 points lower at 1,367.52 on Monday. The benchmark index continued with its downtrend on Tuesday to close another 6.14 points lower at 1,361.38 after hitting the intra-day low of 1,356.77. On Wednesday, the FBM KLCI took the cue from the overnight gain on Wall Street to close 14.29 points higher at 1,375.67. The rebound continued into Thursday, ahead of the 2012 Budget announcement on Friday, which saw the FBM KLCI ended 18.02 points steadier at 1,393.69. The up move continued into Friday with the benchmark index hitting the intra-week high of 1,402.58 before closing off high at 1,400.05, making another 6.36 points gain.

On the weekly chart, the FBM KLCI formed a white hangman-like candlestick which indicates the bears were initially strong in pushing the key index down, but later the bulls lifted the index to close near the high. The key index may continue its upward momentum to move higher this week, but it is likely to meet with strong resistance at the 1,410 to 1,423 zone. On the daily chart, the FBM KLCI formed a white hanging-man candlestick, which is a top reversal candles pattern, and it indicates heavy profit-taking activity after rising strongly for two consecutive days, but the bulls managed to give support to the key index to close at the critical psychological resistance level of 1,400-point. Judging from the candlestick formed, the upward momentum is reducing, and the FBM KLCI may goes into consolidation.

Weekly MACD continued to slide lower, but the histogram was turning shorter upward, indicating a reduction in the weekly bearish momentum. Daily MACD, on the other hand, continued to move higher after making a golden-cross, indicating a continued increase in the daily upward momentum. However, as both weekly and daily MACD are still below the zero-line, the present upswing is considered just a technical rally in a bear market. Weekly RSI (14) continued to move higher to 34.4 from 31.4 the previous week, indicating an improvement in the weekly relative strength even though it is still in the bearish zone. Daily RSI (14) also continued to climb higher to 46.3, and has moved from the bearish zone into the mildly bearish zone after more than two months of being bearish to very bearish. Weekly Stochastic was higher at 21.4, and has crossed above the slow stochastic line, indicating a possible beginning of an up cycle. Daily Stochastic continued to climb higher to 64.6, indicating the short term market strength is beginning to turn strong. Readings from the indicators showed that the FBM KLCI is gradually moving out of its bearish state to turn strong for the short term, and this may offer some short term trading opportunity. 

The medium to long term trend of the FBM KLCI is still down. However, the short term trend has turned upward as the key index is now closing above the 5, 10 and 20-day moving average (MA). If it is able to move above the 30-day MA at 1,420-point, then the short term trend is confirmed to be up, and the benchmark index may rally towards the psychological resistance level of 1,450. Meanwhile, as the Budget 2012 was announced without much goodies to the business sectors, the pre-budget rally may fizzles off; however, with debt crisis in the West showing signs of stabilising, the market may move range-bound with an upward bias this week. Immediate overhead resistance zone is at 1,410 to 1,423, while the downside support zone is at 1,391 to 1,380. 

Last Friday, the Dow fell -20.21 points or -0.18% to close at 11,103.12. This week, the FBM KLCI is likely to trade within a range of 1,336 to 1,452, and for today, it is likely to trade within a range of 1,382 to 1,414. 

This week's expected range: 1336 – 1452

Today’s expected range: 1382 – 1414

Resistance: 1405, 1410, 1414

Support: 1382, 1386, 1393