Bulls set to rally BY K.M LEE

by **Cals** Sun 23 Feb 2014, 05:40

Published: Saturday February 22, 2014 MYT 12:00:00 AM
Updated: Saturday February 22, 2014 MYT 10:49:32 AM

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REVIEW: The triple-digit surge on Wall Street on Friday, pushed the closely-followed Dow Jones Industrial Average within striking distance of record highs, set the stage for a positive start, which saw Bursa Malaysia’s leading indicator, the FBM Kuala Lumpur Composite Index (FBM KLCI) advance 0.32 of a point to 1,819.69 in initial deals.
As usual, blue chips led the way on institutional support, underpinned by encouraging corporate earnings.
Adding to the upbeat mood, stocks in the Asia-Pacific region rallied on strong buying interest.
Under such a bullish ambience, the key index quickly raced to a high of 1,833.39 in mid-morning, but just when the bulls looked strong enough to advance further, an unexpected bout of selling emerged to spoil the party. Subsequently, the market turned sideways.
Nevertheless, the FBM KLCI still was up a moderate 8.11 points to 1,827.48 in active volumes at the closing bell on Monday.
There was no lead from the United States the next day, as markets there were shut for a public holiday.
Though European shares climbed, most Asian equities took a breather owing to an apparent profit-taking liquidation.
Mirroring the regional markets’ retreat, the FBM KLCI drifted from an early high of 1,828.23 to a low of 1,822.68 in late hour before trimming losses slightly to end 2.24 points lower at 1,825.24.
The easier closing was largely due to light selling of blue chips by foreign funds, as plays in the cheaper stocks helped keep the market busy on Tuesday.
Thereafter, the local bourse tripped into consolidation, with overnight Wall Street dropping on resumption of business after the holidays and regional markets trading mixed, waiting for a clearer picture to emerge.
In the absence of any compelling leads on the horizon, the FBM KLCI drifted within a narrow range in negative territory for most part of the day before bouncing up in late trade to settle 4.21 points higher to 1,829.45, thanks to foreign funds bidding blue chips in mid-week.
Then, in line with the global retreat on Thursday, spooked by news that the US central bank would keep trimming its bond-buying stimulus and the possibility of an upward revision in US interest rates, Bursa succumbed to external pressure to stay in consolidation mode, with the key index flirting between an intra-day high and low of 1,830.18 and 1,822.79 respectively, a moderate 7.39 points throughout before finishing at 1,827.81, down 1.64 points.
And yesterday, the local bourse added 2.93 points to 1,830.74 in a range-bound pattern on extended correction process, ignoring the rally in major overseas markets.
Statistics: For the week, the major index was up 11.37 points, or 0.6% to 1,830.74 yesterday, against 1.627.93 on Feb 15.
Total turnover for the regular week amounted to 15.750 billion units worth RM12.181bil, compared with 2.18 billion shares valued at RM3.73bil changed hands during the three-day holiday-curtailed previous week.
Technical indicators: After pulling back from the top to the mid-range, the oscillator per cent K reversed up and climbed above the oscillator per cent D of the daily slow-stochastic momentum index to trigger a short-term buy in mid-week.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram sustained the uptrend in tandem with the daily signal line to keep the bullish note. It had issued a buy call on Feb 10.
In stark contrast, the 14-day relative strength index was generally locked within a band, slightly above the mid-range.
Weekly indicators continued to mend, albeit on a slow pace, with the weekly slow-stochastic momentum index advancing and the downward momentum of the weekly MACD halting but retaining the sell signal.
Outlook: The local bourse was range-bound to marginally steadier, with the FBM KLCI criss-crossing the 50-day simple moving average (SMA) amid persistent bargain hunting interest offsetting profit-taking activity in the past week.
It is good to see Bursa consolidating amid the recent strong rally.
With global equities getting a lift from a brisk US manufacturing survey and many people believing that the underlying US economic condition would get better going forward, we reckon the bulls in the domestic front are likely to resume their scaling soon. However, the pace of ascend may be gradual, as prevailing pessimism about China’s economic growth may keep some investors in a cautious mood.
Technically, indicators are improving, suggesting the local market will probably firm this week.
A breach of the 1,850-1,852-point band would open the doors for a re-test of the all-time peak of 1,882.20.
As for the downside, support can be expected at the 14-day SMA of 1,815 points, 21-day SMA of 1,809 points, followed by the 1,800-point psychological level.
The lower 200-day SMA is resting at the 1,789 points and the five-year ascending line is lying at 1,754 points.