Stocks on Bursa Malaysia ended broadly lower yesterday as investors reduced their holdings on worries about the Euro-zone debt crisis. The Greek second bailout fund delay, Moody's warning to slash ratings of 17 global and 114 European financial institutions as well as weak leads from New York market rattled dealer confidence. The FBM KLCI fell 10.81 points or 0.69% to close at 1,550.49 after opening 3.03 points lower at 1,558.27. Market breadth was negative with losers overwhelmed gainers by 668 to 239 while 272 counters were unchanged. Turnover slipped lower to 2.185 billion shares worth RM1.972 billion from 2.309 billion shares valued at RM2.145 registered on Wednesday.
Taking cue from the weak performance of Wall Street overnight, the FBM KLCI opened with a downside breakaway gap of 3.03 points at 1,558.27 and slipped lower to the intra-day low of 1,549.34 before rebounding slightly to close off low. Chart-wise, the FBM KLCI formed a bearish black candlestick which indicates sellers were in full control for the day, and the downside breakaway gap also indicated the market was selling out on fear. The key index is now sitting right on the psychological support of 1,550-point. This level also happened to be the uptrend channel’s middle support line, and is a critical level to determine whether the uptrend is still intact. If the FBM KLCI continues to close below the 1,550-point level, then there is a strong likelihood that it may slip lower to test the support level at 1,540.
MACD has turned downward and the histogram was also shorter, indicating a loss in the upward momentum. Nevertheless, as the MACD is still above the signal-line, the current weakness may well be just a pullback correction in an uptrend. RSI (14) has slipped lower to 60.4 from 68.3 previously, indicating a big loss in the short term relative strength, and is moving to the lower borderline of the bullish zone. Stochastic slipped lower to 87.4 and has crossed below the slow stochastic line, giving out a short term sell signal. Readings from the indicators showed that the FBM KLCI is undergoing a short term correction and is likely to further consolidate itself before the next strong up move. .
The immediate short term trend of the FBM KLCI has turned down as the key index is now closing below the 5 and 10-day SMA, while the short term trend represented by the 20 and 30-day SMA is still up. Nonetheless, the medium and long term uptrend is still intact. Immediate downside support zone is at 1,549 to 1,540 while the overhead resistance zone is at 1,559 to 1,567. With the overall volume continued to shrink, the market is likely to go into a consolidation mode. However, the penny stocks may still continue to remain active.
Overnight, the Dow rebounded +123.13 points or +0.96% to close at 12,904.08. Today, the FBM KLCI is likely to trade within a range of 1,537 to 1,569
This week's expected range: 1524 – 1589
Today’s expected range: 1537 – 1569
Resistance: 1557, 1563, 1569
Support: 1537, 1543, 1546
Stocks to watch: HIBISCS, HIBISCS-WA, CYPARK, MUDAJYA