Stocks on Bursa Malaysia closed sharply lower last Friday ahead of the long weekend break and bearish regional Asian markets. Bursa Malaysia was closed yesterday for the Awal Muharram holiday. With no progress seen in the resolution of the Euro-zone debt crisis, Asian shares sank as deepening sovereign debt in the Euro-zone threatened economic growth globally. Selling pressure emerged in key heavyweights such as MISC and Telekom Malaysia, pushing the FBM KLCI 16.44 points or 1.13% lower to close at 1,431.55, its lowest level since October 13, and week-to-week, the key index declined 22.85 points from 1,454.40 on previous Friday. Decliners led advancers by 463 to 298 while 256 counters were unchanged. Total weekly volume declined to 7.27 billion shares worth RM5.51 billion from 10.92 billion shares worth RM7.29 billion the previous week. 

On the weekly chart, the FBM KLCI fell for the fourth consecutive weeks since the key index hit the high of 1,493.28 on October 31st. It formed a bearish black candlestick with a down gap from previous week’s candle, indicating the index was driven down on fear and the pullback correction from previous week has continued. On the daily chart, the key index formed a bearish black Marubozu candlestick in Harami position which indicates the bear were selling down the index-link counters ahead of the long weekend. Judging from the candle formation on both the weekly and daily charts, the FBM KLCI is likely to continue to consolidate in the coming week.

Weekly MACD as well as the weekly histogram has turned downward, reflecting the pullback correction in the FBM KLCI. Daily MACD has crossed below the zero-line, indicating the key index has again turned bearish, flashing a sell signal. Weekly RSI (14) continued to slide lower to 41.9 and daily RSI (14) has hooked down to 42.1, indicating both the weekly and daily relative strength has continued to weaken and is approaching the bearish zone. Weekly Stochastic was at 72 and has tapered off, indicating a loss in the upward momentum, and was in consolidation. Daily Stochastic has hooked downward to 20.1, reflecting the pulled back in the key index. Readings from the weekly and daily indicators showed that the FBM KLCI is currently in consolidation state and is relatively weak, technically. Hence, the consolidation process might prolong.

The main trend of the FBM KLCI remained down and bearish. The key index has now pulled back about 38.2% of the range from the pivot low of 1,310.53 formed on September 26th to the pivot high of 1,493.28 on October 31st. If the support at the 38.2% Fibonacci retracement level of 1,423 could not hold, then it is highly likely that the FBM KLCI would slide further to the 50% retracement level at 1,401.

Overnight, the Dow rose +291.23 points or +2.59% to close at 11,523.01. This week, the FBM KLCI is likely to trade within a range of 1,392 to 1,480, and for today, it is likely to trade within a range of 1,409 to 1,464

This week's expected range: 1392 – 1480

Today’s expected range: 1409 – 1464

Resistance: 1443, 1453, 1464

Support: 1409, 1419, 1425