Bursa Malaysia started the New Year on a weak note yesterday, bucking the regional trend, as investors locked in profits from a rally on the last trading day of 2011. It was the only market in the Asia Pacific that slumped yesterday, with profit-taking in banking stocks steering the key FBM KLCI index 17.19 points, or 1.12%, lower to 1,513.14. The overall market was mixed, with many second and third liners making gains. Gainers led losers by 446 to 325 while 278 counters were flat. Turnover surged to 1.604 billion shares worth RM1.406 billion compared with last Friday’s 1.329 billion shares worth RM1.527 billion.

The FBM KLCI opened 7.13 points lower at 1,523.60 and slid lower for the rest of the day with intermittent weak rebounds. It touched the intra-day low of 1,512.08 before rebounding slightly to end the day at 1,513.14. Chart wise, the FBM KLCI formed a bearish black candlestick in Harami position which indicates heavy profit-taking activity throughout the day, and the bearish Harami pattern is also a top reversal candle pattern when it occurs after an up move. The key index may continue to consolidate today but with an upward bias as the underlying trend is still up. Immediate support zone is at 1,511 to 1,500.

MACD continued to move higher but at a slower pace, as shown by the shorter histogram, indicating a reduction in the upward momentum. RSI (14) fell to 62.3 from 71.7 on last Friday, reflecting the correction, and nonetheless, the short term relative strength is still in the bullish zone. Stochastic fell lower to 90.4 and has crossed below the slow stochastic line, indicating a pullback correction in the key index and the possible beginning of a short term down cycle which needs more data to confirm. Readings from the indicators showed that the FBM KLCI is undergoing a pullback correction after the strong up move on last Friday, which is in line with yesterday’s forecast. 

The trend of the FBM KLCI is up. While the correction may continue to push the key index lower, strong support is expected at the 1,506 to 1,500 zone provided by the cluster of the long term moving averages which now turn support, and immediate support is at 1,511 provided by the 5-day SMA. The overall market is expected to be still dominated by active trading in second and third liners while the index-link counters may continue to consolidate. 

Overnight, the Dow rose +179.82 points or +1.47% to close at 12,397.38. Today, the FBM KLCI is likely to trade within a range of 1,497 to 1,536.

This week's expected range: 1463 – 1571

Today’s expected range: 1497 – 1536

Resistance: 1521, 1528, 1536

Support: 1497, 1504, 1509