Correction time Saturday, 7 March 2015 BY: K. M. LEE
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Correction time Saturday, 7 March 2015 BY: K. M. LEE
Correction time
Saturday, 7 March 2015BY: K. M. LEE
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REVIEW: Bursa Malaysia’s leading indicator, the FBM Kuala Lumpur Composite Index (FBM KLCI) soon retreated into negative territory in the wake of profit-taking activity, despite opening up 1.70 points to 1,822.91 at the start of the week.
Surprisingly, a sharp rebound in crude oil prices the previous Friday, spiking a hefty US$1.59 a barrel to US$49.76, was not helping.
Though regional markets were putting up a fairly good show, encouraged by news that The People’s Bank of China had cut interest rates over the weekend, trading on the domestic front was simply lethargic on lack of support from institutional players, tracking the lower Wall Street overnight, depressed further by ringgit falling against the greenback.
In an underperformed market like this, the key index dropped gradually during the day to settle down 4.08 points to 1,817.13 on Monday.
Nevertheless, the bulls on Wall Street resumed the rally the next day, sending the Nasdaq Index above the 5,000 points psychological barrier, the best in 15 years, while the S&P 500-share Index and the Dow hit new records.
In an unprecedented move, stocks in the Asia-Pacific region turned mixed on continuous bargain hunting interest offsetting profit-taking activity after the recent climb.
Mirroring the regional trend, the local bourse traded within a moderate range on consolidation, before ending up 4.12 points to 1,821.25, largely attributed to buying in certain blue chips, as the overall market breadth was slightly negative, with losers beating winners by 461 to 420 on Tuesday.
Come Wednesday, major US indices retreated, as soft auto sales numbers prompted investors to take profit and traders turned cautious pending a slew of economic data.
Meanwhile, Asian equities were mostly lower, following Wall Street’s declines, with many market makers moving to the sidelines, adopting the “wait-and-see” attitute.
Given the dearth of compelling leads on the horizon, Bursa Malaysia drifted sideways once again on extended consolidation and although the local market managed to churn out a small plus note, rising 4.29 points to 1,825.54, the scoreboard showed decliners trumped advancers by 473 to 345 in mid-week.
After two days of directionless sessions, the local bourse finally succumbed to a bout of selling due to lack of fresh stimulus, with further pullback in Wall Street and sluggish regional bourses weighing on the local sentiment.
In line with overseas losses, spooked by news that China has adjusted downward its 2015 economic growth target to “approximately seven per cent”, the lowest in 25 years, the FBM KLCI fell a hefty 19.45 points to 1,806.09 on Thursday before recouping a minor 0.87 point to 1,806.96 on selective bargain hunting yesterday.
Statistics: For the week, the major index shed 14.25 points, or 0.8% to 1,806.96 yesterday, against 1,821.21 on Feb 27.
Weekly turno0ver stood at 11.344 billion shares worth RM11.004bil, versus 10.447 billion units valued at RM10.626bil done the prior week.
Technical indicators: After flashing a short-term sell at the top the previous Friday, the oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index weakened further to settle at the 37% and 56% respectively.
Also on the downtrend, the 14-day relative strength fell from a reading of 70 in mid-week to close at the 40-point level.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram expanded negatively against the daily signal line to stay bearish.
Weekly indicators were tricky, with the weekly slow-stochastic momentum index declining but the weekly MACD rising.
Outlook: Bursa Malaysia snapped the two-week winning streak, as a futile attempt to penetrate the important 200-day simple moving average (SMA) prompted investors to lock in profits.
Based on the daily chart, the local bourse is now in correction, with the key index flirting below the immediate 14-day SMA and the 21-day SMA in the wake of fresh liquidation pressure.
Going forward, there is a high possibility the FBM KLCI would retrace further to the 100-day SMA of 1,788 points or the lower 50-day SMA of 1,779 points before we see a rebound.
And should the key index tested these two lines and there is still no sign of a reversal but a breakdown that comes about, then, investors be prepared for a rude ride to the downside on bearish sentiment.
If that happens, the next support floor of 1,706.18 and the recent lows of 1,671.82, acting as the tentative base for recovery, would be vulnerable.
For now, indicators are frail, suggesting the local bourse will most likely remain in correction mode, with a mild negative bias this week.
To the upside, a breach of the 1,828-point barrier, followed by a successful breakout of the recent highs of 1,831.41 would signal a bullish turnaround.
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