Powerful rally seen

REVIEW: Bursa Malaysia kicked off the week on a steadier platform, with the FBM Kuala Lumpur Composite Index (FBM KLCI) advancing 2.87 points to 1,586.65 on follow-through interest following the recent breakout.

However, as the market inched nearer to the historical peak, hitting a high of 1,594.72, profit-taking activity set in.

Apparently, the lower US markets the previous Friday, which saw the Dow shedding 2.73 points to 12,977.57 and crude oil prices sagging more than 2% to US$106.70, provided little incentive for the local investors to push stocks.

A poor showing in the Asia-Pacific region, falling between 0.1% and 1.4%, led by the Hang Seng Index due to overbought condition also unnerved investors.


In spite of that, the local bourse still was an outperformer, rising 5.44 points to 1,589.22 on Monday.

Overnight Wall Street sustained declines the next day, shedding 14.76 points to 12,962.81 on worries about the pace of economic recovery after China trimmed its growth target for 2012.

Tracking the US loses, regional markets swooned on extended selling, exacerbated by growing fears about a recession in Europe.

Consequently, Bursa Malaysia came under pressure to retreat but despite flirting in the negative territory for most part of the day, it managed to recoup earlier losses to close 0.69 of a point higher at 1,589.91 on Tuesday, thanks to late buying in select blue chips by the big boys.

Sadly, after posting gains for five days in a row, the local bourse finally cave in to bearish external sentiment, as a steep drop in Wall Street overnight, plunging 203.66 points to 12,759.15, the biggest this year, drove many investors to the sidelines.

The frail regional performance on fresh concerns over Greece's ability to clear the next hurdle in its debt cut plan, added to the downbeat note.

In the wake of global meltdown, Bursa finally succumbed to a bout of selling pressure, ending down a significant 15.08 points to 1,574.83 in mid-week.

Nevertheless, the local bourse stabilised after the one-day beating, as investors took encouragement of a rebound in overseas markets to seek value buys.

As usual, certain blue chips led the recovery, but there was a sense of caution, with the FBM KLCI climbing a slight 3.53 points to 1,578.36 on Thursday and another small 0.64 point to 1,579.00 yesterday.

Statistics: On a weekly basis, the principal index eased 4.78 points, or 0.3% to 1,579.00 yesterday, compared with 1,583.78 on March 2.

Total turnover for the week amounted to 7.556 billion units worth RM8.714bil, against 8.560 billion shares valued at RM9.875bil traded previously.

Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum were on the slide, ending at the 29% and 47% levels respectively. It had issued a sell at the top in mid-week.

Meanwhile, the daily moving average convergence/divergence (MACD) histogram slipped below the daily signal line to trigger a sell.

On the contrary, the 14-day relative strength index was flat, with a mild upward bias after finding a shelter at the reading of 56 points in mid-week.

Weekly indicators were little changed, with the weekly slow-stochastic momentum index on bullish extended-mode and the weekly MACD keeping the buy call.

Outlook: Bursa scaled to a high of 1,594.72 on Monday before pausing, falling short of investors' expectation of a re-test of the historical peak of 1,597.08, set on July 11, last year before hitting the 1,600-points psychological barrier following the recent positive breakout.

We are only 2.36 points away and yet, so far, with the bulls changing heart half way.

Never mind that the market could not make its way there this round in the wake of uncertainty in the eurozone but once external sentiment stabilises and turns favourable, the bulls would certainly strike back in vengeance, which may lead to a powerful rally next.

Based on the daily bar chart, the prevailing trend still is bullish. Hence, investors can consider accumulating more, especially on profit-taking pullback, if there is any.

Technically, the falling daily slow-stochastic momentum index and the sell signal on the daily MACD suggest the local bourse is likely to undergo a period of consolidation in the immediate term. If that happens, all would be well. Otherwise, the bulls may find Bursa “top heavy” and the path difficult to mount a strong rally going forward.

Resistance is expected at 20 points or 30 points interval above the 1,600-point mark.

Crucial support is pegged at the short-term bullish ascending line, resting approximately at 1,560 points.

By K.M. LEE

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