Breakout! BY: K.M LEE
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Breakout! BY: K.M LEE
Breakout!
Saturday, 4 April 2015BY: K.M LEE
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REVIEW: Taking the cue from a firmer US equities overnight, Bursa Malaysia began the week on a stronger footing, with the FBM Kuala Lumpur Composite Index (FBM KLCI rising 2.15 points to 1,815.52, rebounding from the previous session’s fall amid fresh bargain hunting interest.
Wall Street’s leading indicator, the Dow Jones Industrial Average climbed 34.43 points to 17,712.66 the previous Friday, snapping a four-day declines in a late rally, as talks about chipmaker Intel Corp buying rival Altera Corp lifted the semiconductor sector.
Meanwhile, stocks in the Asia-Pacific region were mostly higher amid better risks appetite, boosted by hopes for more economic stimulus after the head of China’s central bank hinted at more easing measures to boost the world’s second largest economy.
Against the positive overseas backdrop, the key index rose steadily and penetrated the uppermost 200-day simple moving average (SMA) line during the day to achieve a high of 1,825.76 on persistent buying in the blue chips before trimming gains slightly in late hour to settle up 8.46 points to 1,821.83 on Monday.
The Dow powered up a hefty 263.65 points to 17,976.31 in a broad-based rally the next day, the biggest jump since February, spurred by merger and acquisition activity in the healthcare sector.
As usual, regional equities steadied on extended buying momentum, with the Shanghai Composite Index hitting a fresh seven-year high, after Beijing eased monetary lending policy to bolster the struggling real estate market, underpinned further by hopes for more infrastructure spending.
Riding on the bullish offshore tone, the local bourse gapped up a significant 7.05 points to 1,828.88 and moved forward to eclipse the recent high of 1,831.41 to achieve an intra-day high of 1,832.85 in early session before retreating slightly to trade range-bound, absorbing profit-taking selling.
At the final bell, the FBM KLCI added an extra 8.95 points to 1,830.78 on Tuesday, also the last day of the first quarter.
After the strong rally, global equties, with the exception of Hong Kong and Chinese stocks, drifted lower owing to an apparent profit-taking activity, undermined by poor leads from Wall Street, exacerbated by weak commodity prices.
With no clear breakout insight in the previous session, the local bourse then took the excuse of the uninspiring overseas performance to book profit.
In lacklustre trade, the key index eased 4.47 points to 1,826.31 in mid-week.
Thereafter, Bursa was generally range-bound, with a mild upward bias on bargain hunting buying offsetting profit-taking selling, which witnessed the FBM KLCI firming 5.66 points to 1,831.97 on Thursday and an additional 2.55 points to 1,834.52 amid follow-through interest yesterday.
Statistics: For the week, the principal index surged 21.15 points, or 1.2% to 1,834.52 yesterday, versus 1,813.37 on March 27.
Total turnover for the week stood at 10.944 billion shares valued at RM9.061bil, compared with 10.206 billion units worth RM9.505bil changed hands in the previous week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index retained the posture at the bullish territory despite showing a mild topping out sign.
In stark contrast, the 14-day relative strength index scaled higher to settle at the 70-point level yesterday, up from a reading of 60 a week ago.
In addition, the daily moving average convergence/divergence (MACD) histogram continued to expand positively against the daily signal line to stay bullish. It had issued a buy on March 24.
Weekly indicators were looking good, with the slow-stochastic momentum index strenghtening and the MACD rising.
Outlook: The FBM KLCI finally had on earlier of the week penetrated the uppermost 200-day SMA and moved forward to eclipsed the recent peak of 1,831.41 to reach a high of 1,836.82 during intra-day session yesterday, the best since November last year.
Unlike the past major bullish breakout, there was no signs of frenzy buying momentum this round, with lower commodity prices and frail local currency weighing on the local sentiment.
Nevertheless, a breakout is a breakout. Although investors were not ecstatic about the positive development, we reckon it would clear the way for more advances going forward, but on a slow pace, riding on the bullishness of overseas markets.
Initial resistance is expected at the 1,848-1,850 points range. A decisive breach of the next upper hurdle of 1,866-1,870 points band is likely to set the stage for a re-test of the historical peak of 1,896.23 or the bulls exploring the uncharted territory.
Technically, most of the indicators are positive, implying a steadier trend ahead this week.
Current support is pegged at the 200-day SMA of 1,822 points, followed closely by the 14-day SMA of 1,815 points.
A slip below the short-term ascending line of 1,800 points will signal the start of another round of correction.
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