Constructive uptrend

REVIEW: Bursa Malaysia kicked off the week on a soft
platform, with the FBM Kuala Lumpur Composite Index (FBM KLCI)
declining 3.02 points to 1,703.26.
Business done was slow in
early deals and the local bourse appeared in danger of retracing
further into the red on follow-through profit-taking activity.
Fortunately, slightly firmer US markets overnight, lifted by better corporate earnings reports from Google Inc and Microsoft Corp, managed to help soothed investors' nerves.
A
steadier performance in the Asia-Pacific region on short-covering also
aided the local sentiment and encouraged investors to indulge in
bargain hunting.
However, investors were not chasing stocks but
merely keeping them staying afloat while the key index consolidated
after the recent rally.
In range-bound session, the local market
flirted between an intra-day high and low of 1,709.49 and 1,702.47, a
moderate 7.02 points band throughout before ending at 1,706.68, up 0.4
of a point on Monday.
Overnight Wall Street logged another small
advance, up 19.66 points to 14,567.17 on lower volumes the next day,
boosted largely by cyclical sectors closely tied to the pace of
economic growth.
In stark contrast, Asian equities fell, as the
latest data out from China, showing manufacturing weakened further
stoked renewed concerns about global growth prospects and triggered a
fresh bout of liquidation pressure.
Given the dearth of fresh
market-stimulating leads on the horizon to boost buying, Bursa
continued to correct on lack of support while investors stayed on the
sidelines adopting a cautious stance, awaiting a clearer picture to
emerge.
Tracking the regional losses, the FBM KLCI shed 6.29 points to 1,700.39 in dull trading on Tuesday.
Market
sentiment on Wall Street turned more bullish the following day, with
overnight Dow jumping a hefty 152.29 points to 14,719.46 on broad-based
rally amid growing optimism of further easing in monetary policy due to
economic weakness in Europe.
As expected, stocks in the region
reacted according, rising between 1.2% and 2.32%, led by Japan's Nikkei
225-share on fresh buying momentum.
Riding on the offshore
strength, the local bourse recovered some 6.96 points to 1,707.35 on
foreign buying in the blue chips, but the overall market remained in
consolidation mode, with only 734..410 million shares changed hands in
mid-week.
Thereafter, Bursa turned sideways on mild profit-taking selling alternated with light bargain hunting interest.
In
sluggish session, the key index eased 1.01 points to 1,706.34 on
Thursday before recouping 4.95 points to 1,711.29, boosted by a steady
offshore showing yesterday.
Statistics: Week-on-week, the
major index chalked up 5.01 points, or 0.3% to 1,711.29, against
1,706.28 at the close on April 19. Total turnover for the week amounted
to 3.8 billion units worth RM8.225bil, compared with 4.188 billion
shares valued at RM8.265bil done the prior week.
Technical indicators:
The oscillator per cent K and the oscillator per cent D of the daily
slow-stochastic momentum index were on the upward trend after
triggering a short-term buy at the mid-range yesterday.
Mirroring
the trend, the 14-day relative strength index improved further to
settle at the 68 points level yesterday, up from a reading of 56 on
Tuesday.
Elsewhere, the daily moving average
convergence/divergence (MACD) histogram had displayed a convergence
pictogram despite retaining the sell signal issued on Tuesday. Weekly
indicators were very much unchanged, with the weekly slow-stochastic
momentum index keeping the posture above the 80% bullish line and the
weekly MACD retaining the buy signal.
Outlook: Bursa's
leading indicator, the FBM KLCI recorded gains for the fifth
consecutive week on sustained bargain hunting interest in the blue
chips by foreign funds. Despite setting a new all-time high during
intra-day session yesterday, the pace of ascent on a weekly basis has
decelerated somewhat and trading volumes remained conspicuously on the
low side.
But it is not surprising of the market behaving in
such a way, with many people taking a cautious approach ahead of the
general election on May 5.
No matter what, based on the daily
chart, the prevailing upward momentum still is constructive, at least
for now and barring any rude shock to the system, the local bourse is
anticipated to climb, but on a gradual basis due to limited
participation from the local boys.
On the technical perspective,
most indicators on our radar screen are positive, suggesting the local
market is likely to stay above water this week. Stiff resistance is
seen at every 20 points or 30 points interval above the 1,700 points
psychological mark. Initial support is pegged at the 14-day simple
moving average (SMA) of 1,703 points, followed closely by the 21-day
SMA of 1,696 points, of which a crack would see the lower 50-day SMA,
100-day SMA and the 200-day SMA, resting at 1,662 points, 1,656 points
and 1,648 points respectively, becoming vulnerable.