KLCI’s bullish momentum gaining strength

by **Cals** Wed 23 Apr 2014, 22:26

Business & Markets 2014

Written by Benny Lee

Wednesday, 23 April 2014 11:03

THE market finally rebounded over the past week, in line with the bullish performance in global markets, especially in Western countries.

Second liners continued to be the focus over the past week. The FBM KLCI rose 0.5% in a week to its highest level year-to-date at 1,866.42 points. After staying on the sidelines two weeks ago, investor sentiment significantly improved over the past week.

Trading volume increased marginally and the focus was more on lower priced stocks. The average daily trading volume was 2.5 billion shares compared with 2.4 billion shares two weeks ago. The average trading value was RM2 billion lower at RM1.9 billion compared with the previous week.

Foreign institutions were net sellers last week after being net buyers for a few weeks. Local retail investors and institutions were net sellers, selling RM11.5 million and RM18.7 million respectively, while local institutions were net buyers.

On the KLCI, gainers beat losers 9 to 5 and were led by Public Bank Bhd (+3.0%), Malayan Banking Bhd (+2.0%) and YTL Corp Bhd (+2.0%) while decliners were led by MISC Bhd (-2.5%), PPB Group Bhd (-2.2%) and Astro Malaysia Holdings Bhd (-2.1%).

Markets in the US rebounded but China markets pulled back. Asian markets were mixed. Singapore’s Straits Times Index gained 0.8% in a week to 3,273 points, Hong Kong’s Hang Seng Index rose 0.3% to 22,730.68 points, but China’s Shanghai Stock Exchange Composite Index declined 1.4% to 2,072.83 points.

On Monday, the Dow Jones Industrial Average increased 1.7% in a week to 16,449.25 points, while London’s FTSE100 index rose 1.6% to 6,686.80 points and Germany’s DAX increased 1.8% to 9,509.10 points at the time of writing.

London, Germany and Hong Kong’s markets were closed last Friday and on Monday for Good Friday and Easter.

The US dollar rebounded against a basket of major currencies and this caused gold prices to pull back from its bullish rally in the past two weeks. The US dollar index rebounded from 79.45 points a week ago to 79.81 points. Commodity Exchange Gold fell 2.7% in a week to US$1,290.30 (RM4,206) an ounce.

However, crude oil remained bullish and rose 2.9% in a week to US$103.59 per barrel. The ringgit continued to weaken against the US dollar from 3.25 a week ago to 3.27. Crude palm oil declined 0.8% to RM2,682 per tonne.

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The KLCI continued to stay above the short term 30-day moving average, which is currently at 1,840 points and above the Ichimoku Cloud indicator. The support level is at 1,840 points and as long as the index stays above this level, the trend remains bullish. The immediate resistance remains at 1,880 points and with the current momentum, the index may test this level soon.

Momentum indicators such as RSI, MACD and Momentum Oscillator have started to increase in the past week. In addition, the KLCI has gone above the top band of the Bollinger Bands, indicating strong bullish momentum in the short term. This indicates that the market is directionless and therefore in a correction.

These indicators show that the market is willing to take higher risks with the overall bullish sentiment.

Regional markets may be mixed but the local market is certainly in a bullish mode. The only resistance to beat now is the 1,880-point level and the current momentum shows that this is highly possible.

Local institutional funds are beginning to buy again and this will provide the support needed for the KLCI to remain bullish. Furthermore, the close near the high of the trading range in the past week shows strong bullish sentiment.

While blue chips may start to rally, penny stocks may take a rest this week.

Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia committed to offering the best services to a wide range of customers. He can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgement or seek professional advice for your investment decisions.

This article first appeared in The Edge Financial Daily, on April 23, 2014.