Stocks on Bursa Malaysia ended lower yesterday as foreign funds selling across the region in response to news of weak global development weighed down the local bourse. The unexpected higher unemployment data in the US and worries that the Euro debt crisis was spreading to Italy, on top of Greece’s debt, kept investors away from the market. The FBM KLCI fell 6.16 points or 0.39% to 1,588.58, as most of the 30 counters of the key benchmark index traded lower on selling pressure. Market breadth was negative with losers outnumbering gainers by 460 to 237 while 304 counters were unchanged. A total of 712.48 million shares valued at RM1.293 billion were traded yesterday against 810.53 million shares worth RM1.57 billion last Friday. 

The FBM KLCI opened 0.4 point higher at 1,595.14 and surged to another new record intra-day high of 1,597.08 within the first five minutes. Heavy selling pressure due to profit-taking immediately took over and pushed the benchmark index to the intra-day low of 1,584.20, losing 10.54 points at its worst before late bargain hunting lifted the key index to close off low at 1,588.58. Chart-wise, the FBM KLCI formed a bearish engulfing candlestick pattern which indicates sellers were dominant for the day, and is a top reversal pattern. The price action of the FBM KLCI yesterday merely confirmed the reversal signal issued by the hangman candlestick pattern formed on last Friday. With two consecutive days of top reversal pattern appearing, the FBM KLCI is thus expected to further correct itself. Immediate support zone is at 1,584 to 1,577-point level. 

MACD has turned downward, but is still above the signal line, confirming the divergence signal mentioned yesterday. However, this merely indicates a short term pullback correction. RSI (14) dropped drastically to 66.6 from 74.1 the day before, indicating a big loss in the relative strength of the FBM KLCI, and nonetheless, it is still in the bullish zone. Stochastic has re-hooked downward to 86.6 from 93.9, and is below the slow stochastic line, reflecting the correction in the key index yesterday. Signals from the indicators showed that the upward momentum and market strength is taking a pause at the moment, but whether this is the beginning of a major downtrend will need more data to confirm.

The underlying short, medium and long term uptrend is still intact. However, the FBM KLCI has closed below the 5-day moving average (MA), and the 10-day MA is currently at 1,583.61. A close below the 10-day MA will confirm the short term downtrend, and will see the FBM KLCI correcting downward to the 1,566-point level. Immediate overhead resistance zone is at 1,597 to 1,600, while the immediate downside support zone is at 1,584 to 1,577. 

Overnight, the Dow fell -151.44 points or -1.20% to close at 12,505.76. Today, the FBM KLCI is likely to trade within a range of 1,569 to 1,610.

This week's expected range: 1565 – 1614

Today’s expected range: 1569 – 1610

Resistance: 1596, 1603, 1610

Support: 1569, 1577, 1582