Pullback on the cards BY K.M. LEE

by **Cals** Mon 04 Apr 2016, 02:27

Saturday, 2 April 2016

Pullback on the cards

BY K.M. LEE

[You must be registered and logged in to see this image.]
Click on image to view actual size.

REVIEW: Bursa Malaysia started out the week on a weak note, with the FBM Kuala Lumpur Composite Index (FBM KLCI) dropping 2.07 points to 1,701.72 owing to an apparent profit-taking following recent gains and the lack of new leads on the horizon.
Overnight US markets were shut due to Good Friday and in the Asia-Pacific region, stocks outside Japan were mostly traded lower while financial markets in Hong Kong, Australia and New Zealand were closed for public holiday.

Given the limited support from the local players, the key index flirted between an intra-day high and low of 1,702.81 and 1,698.26 respectively, a very tight 4.55 points range throughout on consolidation.
While the bulls paused for air after the recent rally, Bursa closed down 1.38 points to 1,702.41 on Monday.
Wall Street chalked up a minor gain on resumption of business after the long weekend, but crude oil prices fell marginally, as traders were reluctant to bet big on the back of rising crude stockpiles.
As usual, Asian shares were mixed in subdued session ahead of of the US Federal Reserve chair’s impending speech.
In the absence of buying incentives, many people had expected the local bourse to stay in consolidation mode the next day, but surprisingly, equties on the domestic front bounced back to life on renewed buying momentum after a short breather, riding on the strength of the ringgit.
Blue chips led the way on foreign nibbling, boosted by first quarter “window dressing” activity.
Elsewhere, most second and lower liners also drifted higher on greater retail participation.
In active session, the FBM KLCI rose 12.63 points to settle at 1,715.04 on Tuesday.
After a short respite, global sentiment turned better, with Wall Street finishing at the highest level for this year after Federal Reserve chair Janet Yellen said the Fed would proceed cautiously in deciding when to raise interest rates.
Adding to the upbeat mood, stocks in the region firmed on growing optimism US interest rates would remain unchanged into the second half of the year following a dovish speech from the Fed.
Against the bullish overseas backdrop, shares on Bursa sustained rally on extended buying, propelling the FBM KLCI to as high as 1,724.13 in the morning but they pared gains later to close slightly steadier, up 2.78 points to 1,717.82, simply because a drop in the black commodity prompted institutional players to sell into strength in mid-week.
Though Wall Street posted another good gains the following day, thus setting the stage for more scaling in the short term, the upbeat mood was cut short by a bout of profit-taking selling.
In sluggish session, the key index reversed from intra-day high of 1,719.74 in the morning to end 0.24 point lower at 1,717.58 on Thursday.
And yesterday, the local bourse lost an extra 7.03 points to 1,710.55 amid follow-through selling due to lack of compelling leads, with most overseas markets struggling at the start of the new quarter.
Statistics: For the week, the principal index rebounded 6.76 points, or 0.4% to 1,710.55 yesterday, against 1,703.79 on March 25.
Weekly turnover shrunk at 8.326 billion shares amounted to RM10.073bil, compared with 9.480 billion units worth RM10.403 changed hands the prior week.
Outlook: Bursa avoided a breakdown, with the FBM KLCI rebounding amid fresh bargain hunting interest.
Despite the key index posting gains week-on-week basis riding on the strength of the ringgit against the greenback, a dovish speech from the Fed and a bout of “window dressing” activity, the underlying tone of the broad market was generally caution, as declining crude oil prices somewhat dampened investors’ enthusiasm.
Further supporting the fact of the overall market sentiment waning, the key index had carved out a lower weekly high compared with the previous week’s peak.
Also, the latest downgrade on China’s credit outlook to negative by Standard & Poor’s is not going to help risky assets.
In the wake of renewed uncertainty clouding equities, the risks of the local bourse breaking down from the existing uptrend channel in the near term is growing, unless fresh catalyst emerges.
Technically, besides the weekly moving average convergence/divergence or MACD that is still keeping the bullish pictogram, other indicators are deteriorating, suggesting correction is on the cards.
A crack of the lower trend line of the prevailing uptrend channel, resting approximately at at 1,702, followed by a close below the 1,700-point psychological level will signal the start of a downward adjustment towards the 1,670-1,675-point area.
Lower support is envisaged at the 1,650-point mark.
To the upside, initial resistance is maintained at the 1,727-1,730-point band, followed by the 1,750 points.
The “returning line” of the uptrend channel, lying at the 1,760-point level, is seen as a heavy barrier.