Stocks on Bursa Malaysia ended last week in positive territory on continued bargain hunting of penny stocks. The positive sentiment was in tandem with regional bourses, backed by sustained inflows, the US Fed's stance and reduced worries over the Euro-zone crisis. The FBM KLCI ended 1.68 points or 0.11% higher at 1,538.77 after fluctuating between 1,526.03 and 1,541.31 throughout the day. Week-on-week, the key index made a gain of 17.87 points, or 1.17% from previous Friday’s close of 1,520.90. Gainers beat losers by 461 to 399 while 352 counters were flat. Turnover improved to 2.84 billion shares worth RM2.32 billion from 2.58 billion shares valued at RM2.87 billion on Thursday. Weekly turnover for the four-day holiday-shortened week amounted to 9.516 billion shares valued at RM9.206 billion, compared with 5.580 billion shares worth RM5.080 billion during the three-day in the previous week.

The FBM KLCI started last week on an easier note with the key index losing 7.35 points to 1,513.55 on Monday, after the US reported less-than-favourable economic growth data, which hurt investors’ sentiment. The benchmark index hit the intra-week low of 1,509.49 before rebounding strongly to close Tuesday 7.74 points higher at its intra-day high of 1,521.29. Bursa Malaysia was closed for the Federal Territory Day holiday on Wednesday. Following the progress of the European debt crisis and positive economic data coming out of the US and China, the FBM KLCI rose 15.80 points, or 1.04%, to 1,537.09 after opening 5.32 points higher at 1,526.61 on Thursday, and the key index continued its up move to touch the intra-week high of 1,541.31 on Friday before settling the week at 1,538.77. 

On the weekly chart, the FBM KLCI formed a bullish engulfing candlestick pattern over the previous week’s Doji candlestick, which indicated the bulls were in control last week, and it also broke above the immediate resistance at 1,530.73 registered on 30th December 2011. With this bullish breakout, the FBM KLCI is likely to continue its uptrend to test the next target level of 1,558. 

On the daily chart, the FBM KLCI formed a white hangman-like candlestick, which is a top reversal candlestick pattern, it indicated heavy profit-taking activity during the day as the bears managed to push the key index to the intra-day low of 1,526.03 before the bulls made a last minute buying effort which lifted the benchmark to close in the positive territory. Hence, the FBM KLCI may pause to take a breather before continuing its uptrend. Immediate overhead resistance zone lies at 1,541 to 1,545, while the immediate downside support zone is at 1,530 to 1,526. 

Both weekly and daily MACD continued to climb higher and so is their histogram, indicating a continued improvement of the weekly and daily momentum. The daily MACD, nonetheless, is still marginally below the daily signal-line, and a crossover of the daily signal-line would generate a bullish buy signal. Weekly RSI (14) was higher at 59.1, while the daily RSI (14) was higher at 64.9, indicating the weekly and daily relative strength of the key index are bullish. Weekly Stochastic was higher at 94.7, and daily stochastic too was higher at 84.7, indicating strong market strength and continuation of the up cycle. Readings from both the weekly and daily indicators showed that the FBM KLCI had turned bullish for the short and medium term, and the upward momentum is likely to carry the key index to a higher level.

The FBM KLCI is now in a bullish uptrend as it is now closing above all the short, medium and long term moving averages. The key index is likely to continue its uptrend to test the next target level at 1,553, followed by 1,566, and possibly a re-test of the all time high level of 1,597.08 in the first half of this year. The broad market is likely to continue with its present trend of rotational play on the second, third liners and penny stocks while the index-link heavyweights may climb gradually.

Overnight, the Dow rose +33.07 points or +0.26% to close at 12,878.20. This week, the FBM KLCI is likely to trade within a range of 1,498 to 1,562, and for today, it is likely to trade within a range of 1,514 to 1,557.

This week's expected range: 1498 – 1562

Today’s expected range: 1514 – 1557

Resistance: 1545, 1551, 1557

Support: 1514, 1520, 1529

Stocks to watch: 3A, ZELAN, ALAM, WCT, HAIO, SILKHLD