Bulls in full control

MARKET TREND By K.M. LEE
REVIEW: Strong spilt-over buying momentum drove Bursa
Malaysia sharply higher at the start of the new week, with the FBM
Kuala Lumpur Composite Index (FBM KLCI) jumping 10.51 points, or 0.59%
to 1,782.89.
Interest was broad-based, led by the blue chips on
foreign funds support. Elsewhere, second and lower liners enjoyed brisk
business amid greater retail participation due to easing political
risks after the 13th general elections, as the incumbent government was
voted back into power.
A steadier Wall Street overnight, which
saw the Dow Jones Industrial Average setting a new record, riding on
the Federal Reserve's accommodative monetary stance and
better-than-expected corporate earnings, added to the upbeat note.
On
the back of the bullish sentiment, the bourse sustained the upward
thrust amid follow-through interest to settle up 15.52 points to
1,787.90, also a new closing high.
A total of 2.863 billion shares changed hands on Monday, the biggest in more than a year.
US
equities finished little changed below the flat line the following day,
as investors opted to book profit after the Dow scaled to a new apex.
Meanwhile,
stocks in the Asia-Pacific region traded mixed on bargain hunting
interest alternated with light selling, undergoing consolidation.
In
spite of that, buyers continued to dominate the floor on Bursa in early
deals. The underlying tone was solid but just when the energetic bulls
appeared having the strength and courage to challenge the upper 1,800
points psychological barrier, an unexpected bout of selling emerged.
Consequently,
the market tripped into consolidation mode, but within a moderate band
with the FBM KLCI criss-crossing the rest of the day.
In
range-bound trade, the local bourse nevertheless eked out a small
positive note at the closing bell, up 0.53 of a point to 1,788.43 on
Tuesday, a fresh high on closing basis.
Thereafter, shares on
Bursa stayed in correction mode, ignoring the resumption of a rally in
overseas markets, especially Wall Street on expectations that Federal
Reserve's easy monetary policy, designed to stimulate the world's
largest economy would propel risky assets to a higher ground.
Apparently,
investors on the domestic front trimmed their portfolios ahead of the
announcement of a new cabinet, with sentiment dampened further by a
lower-than-expected gross domestic product figures.
In
lacklustre session, the key index shed 5.40 points to 1,783.03 in
mid-week and an additional 16.31 points to 1.766.72 on extended
liquidation pressure on Thursday.
Yesterday, the local bourse
recovered slightly, up 2.44 points to 1,769.16, as declines in the past
two days enticed investors to seek value buys.
Statistics: Week-on-week basis, the principal index eased 3.22 points, or 0.2% to 1,769.16, against 1,772.38 on May 10.
Weekly
turnover stood at 12.677 billion shares worth RM12.9bil, compared with
11.548 billion shares valued at RM17.242bil done a week ago.
Technical indicators: The
daily slow-stochastic momentum index was on the slide, with the
oscillator per cent K and the oscillator per cent D ending at the 44%
and 68% respectively. It had issued a short-term sell signal at the 85%
level on Thursday.
Meanwhile, the daily moving average
convergence/divergence (MACD) had peaked temporarily but retained the
posture slightly above the daily signal line to keep the buy signal.
On
the contrary, the 14-day relative strength index retreated from a high
of 77 on Monday to a low of 57 on Thursday before curving up slightly
to end at the 61 points level.
Weekly indicators were tricky,
with the weekly slow-stochastic momentum index moving out of the
bullish territory and the weekly MACD continuing to expand positively
against the weekly trigger line.
Outlook: Bursa was
generally in correction mode the past week, with the FBM KLCI giving up
early big advances to settle little changed in the red owing to an
apparent profit-taking activity.
Despite that, the bulls were
still in complete control, as our analysis on the formation on the
daily chart suggests the huge gap that was created on May 6 after the
13th general elections, was very likely a runaway or measuring gap
rather than an exhaustion gap.
Basically, a runaway gap is a
positive development but on the contrary, an exhaustion gap is
negative, and it usually occurs at the end of a move.
Technically,
indicators are unclear, implying the local bourse may extend the
consolidation phase, probably within a moderate range until a fresh
catalyst emerges.
Current support is pegged at the 14-day simple
moving average, resting at the 1,755 points, of which a breakdown may
see the bulls filling the 1,743.14 -1,712.03 points runaway gap.
To
the upside, initial resistance is expected at the 1,800 points
psychological barrier, followed by the historic high of 1,826.22.