Consolidation likely BY K.M LEE

by **Cals** Mon 14 Jul 2014, 03:01

Published: Saturday July 12, 2014 MYT 12:00:00 AM
Updated: Saturday July 12, 2014 MYT 9:13:17 AM
[size=40]Consolidation likely
BY K.M LEE[/size]
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REVIEW: Shares on Bursa Malaysia kicked off the week slightly steadier, with the FBM Kuala Lumpur Composite Index (FBM KLCI) rising 0.49 of a point to 1,885.40, rebounding from the previous session’s declines on renewed bargain hunting activity.
Blue chips led the way amid support from big funds. Elsewhere, certain second and lower liners also attracted significant interest on short-term plays despite Asian equities traded mixed in cautious mood due to economic and political uncertainties in Thailand and Indonesia respectively, as a bullish Wall Street the previous Thursday provided confidence for the local players to enter the market.
Against the positive backdrop, the local bourse inched higher during the day to eclipsed the intra-day high of 1,892.33 set on June 24 and charged forward to set a new record of 1,894.72 in the afternoon before trimming gains marginally in late hour to settle at 1,892.50, up 7.59 points on Monday.
The local bourse established another new high of 1,896.23 in early trading the next day amid spilt over buying interest, but the momentum lost steam shortly, as a pullback in overnight Wall Street prompted the bulls to abandon the idea of staging a rally. A mixed performance in the Asia-Pacific region also was not supportive of the bulls.

In the absence of compelling leads on the horizon, the key index retreated from an early high to finish almost flat, up 0.15 point to 1,892.65 on Tuesday.
Then, global equities sank deeper into the red, with overnight Dow slumping 117.59 points to 16,906.62, as investors turned cautious ahead of the Federal Reserve meeting and economic data from China.
But unlike the great volatility in overseas markets, the local bourse was pretty calm although the FBM KLCI was flirting in the red zones.
In sluggish trade, Bursa Malaysia shed 1.49 points to 1,891.16 in band trading in mid-week.
Most major overseas markets subsequently rebounded on Thursday, boosted by upbeat outlook on the US economy by the Federal Reserve and a picked up in Chinese trade figures.
Surprisingly, the local bourse was muted, with the FBM KLCI criss-crossing the flat line in a narrow range before ending up 1.46 points to 1,892.62, undergoing consolidation after the recent spike.
And yesterday, the key index reversed down 9.47 points to 1,883.15 owing to profit-taking activity, depressed by the weak offshore tone due to worries about the financial health of Portugal’s top listed bank.
Statistics: On a weekly basis, the principal index dropped 1.76 points, or 0.1% to 1,883.15, against 1,884.91 at the close on July 4.
Total turnover for the week amounted increased to 9.037 billion units worth RM10.879bil, compared with 8.98 billion shares valued at RM9.97bil changed hands the prior week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index ended at the 48% and 63% respectively yesterday. It had issued a short-term sell at the 75% level in mid-week.
Likewise, the 14-day relative strength index weakened slightly from a reading of 64 to close at the 49 points level yesterday.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram fell below the daily signal line to trigger a sell yesterday.
Weekly indicators were also deteriorating rapidly, with the weekly slow-stochastic momentum index flashing a tentative sell near the overbought area and the weekly MACD in great danger of going under the weekly trigger line.
Outlook: Bursa established a new apex on Tuesday before retreating to finish the week marginally lower on consolidation.
For now, some investors are cashing out on fear problems at Portugal’s largest listed bank, Banco Espirito Santo may drag stocks worldwide but we think otherwise for a simple reason.
If investors in the eurozone were to exit from the system, certainly the money will have to go somewhere to seek better returns.
From past experience, emerging markets were the favourite place and if that happens, Bursa is likely to benefit from the inflow of foreign funds, which probably will move the local bourse deeper into the unknown territory going forward.
In stark contrast, most of the indicators are frail, implying that Bursa may slip into range-bound consolidation mode but with a mild negative bias rather than a steep downward spiral correction phase this week.
The immediate upside objective is to beat the 1,900-point mark, of which a decisive penetration may see the market testing the magic 2,000 points eventually. Prior to that, significant resistance can be expected at the 1,950 points.
Support is pegged at the 50-day simple moving average (SMA) of 1,877, 100-day SMA of 1,859, 200-day SMA of 1,835, followed closely by 1,828 points, also an important floor.