Bulls carve out upward channel

by **Cals** Mon 07 Apr 2014, 01:33

Published: Saturday April 5, 2014 MYT 12:00:00 AM
Updated: Saturday April 5, 2014 MYT 8:35:14 AM
[size=40]Bulls carve out upward channel
BY K.M. LEE[/size]
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REVIEW: Shares on Bursa Malaysia kicked off the new week on a steadier note, with the FBM Kuala Lumpur Composite Index (FBM KLCI) rising 0.94 of a point to 1,851.67, extending the previous week’s gains, aided by a firmer US equities overnight.
But sadly, the positive momentum could not be sustained for long, as the local boys opted to book profits after the recent advance despite Asian equities doing fairly well amid follow-through buying momentum.
Select blue chips in the plantation sector led declines, dragging the key index to a low of 1,839.03 in the afternoon before a late bout of buying by foreign funds helped the market pared losses.
At the final bell, the local bourse shed only a minor 1.52 points to 1,849.21 in lacklustre trade on Monday.

US stocks extended the upward thrust in a broad-based rally the next day, jumping a hefty 134.60 points to 16.457.66 after Federal Reserve chair Janet Yellen reaffirmed the need for “extraordinary” commitment to support the world’s largest economy.
Riding on the US strength, Asian markets traded mostly higher on persistent buying, boosted further by a slight pick-up in China’s manufacturing data last month.
At home, Bursa was evidently underperformed, as select heavyweights continued to stay in correction mode, but generally, within a narrow range throughout.
Unlike the blue chips, most second and lower liners drifted higher amid speculative plays.
Apparently, the two-tier market condition was clearly displayed on the scorecard.
Though the FBM KLCI eased 1.45 points to 1,847.76 and spent the entire day in the red territory, advancers beat decliners by 446 to 348 on Tuesday.
Thereafter, the local bourse was generally in range-bound consolidation, as most local players adopted the “wait-and-see” attitude while most overseas markets, led by Wall Street, continued to enjoy a healthy rally after China unveiled a mini-stimulus plan to prop up its sagging economy.
In cautious trade, the key index finished up 4.24 points to 1,852.00 in mid-week and eked out an extra 3.63 points to 1,855.63 on Thursday. And yesterday, Bursa spiked to a high of 1,869.09 in early business but finished almost flat; up 0.98 of a point to 1,856.61, as the dearth of fresh leads from abroad ahead of the release of US jobs data was not supportive of a rally.
Statistics: On a weekly basis, the principal index tacked on a small 5.88 points, or 0.3% to 1,856.61, against 1,850.73 at the close on March 28. Weekly turnover stood at 10.445 billion units worth RM12.706bil, compared with 9.920 billion shares valued at RM10.070bil previously.
Technical indicators: The oscillator per cent K had fallen below the oscillator per cent D of the daily slow-stochastic momentum index at the top late last month, but the short-term sell signal could not be confirmed yet, simply because both the oscillators still were keeping the posture above the 80% bullish territory. Elsewhere, the 14-day relative strength index continued to climb from the 31-point level on March 14 to close at the 79-point level yesterday.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram sustained the upward expandison against the daily trigger line to stay bullish. It had issued a buy call on March 24.
Weekly indicators were looking good, with the slow-stochastic momentum index and the MACD calling a buy.
Outlook: Bursa was generally in consolidation mode, but with a mild upward bias, with continuous bargain hunting interest offsetting profit-taking activity dominating the floor the past week.
Based on the daily chart, the key index had improved significantly over the past three weeks, rebounding from a false breakdown to stage a positive breakout and move forward to within striking distance of the all-time peak level, largely boosted by better overseas sentiment.
Nevertheless, the recent gains had helped the bulls to carve out a short-term ascending channel. With trading volumes staying at a healthy level and stocks holding up, implying more investors are focusing on the rewards in the pipeline and not the downside risks, we can expect the local bourse to strengthen towards the historical high in the short term.
A breach of the 1,882.20 barrier would open the gate for the bulls to explore the unknown area.
Technically, most of the short-term indicators are looking good, but slightly overbought, suggesting that any pullback is viewed as an opportunity for investors to accumulate more.
Support is expected at the 14-day simple moving average of 1,839 points, followed by the 1,822 points and the next, at the 1,800-point psychological level. The five-year-old ascending trend line, resting at the 1,777 points, remains an important floor.