Sideways consolidation BY K.M.LEE . . . MARKET TREND

by **Cals** Mon 25 Aug 2014, 04:50

Published: Saturday August 23, 2014 MYT 12:00:00 AM
Updated: Saturday August 23, 2014 MYT 10:53:46 AM
[size=40]Sideways consolidation
BY K.M.LEE . . . MARKET TREND

REVIEW: Taking the cue from lower US peers, Bursa Malaysia kicked off the week on an easier note, with the FBM Kuala Lumpur Composite Index (FBM KLCI) declining a significant 3.11 points to 1,861.20, owing to an apparent profit-taking liquidation.
Sentiment was weak in early deals due to rising geopolitical tension but the mixed-to-marginally steadier showing of stocks in the Asia-Pacific region somewhat helped soothe the local boys.
In the absence of clear direction abroad, shares on the local bourse subsequently traded within a band throughout before ending down 2.56 points to 1,861.75 on Monday, snapping a five-day winning streak.
After a short breather, US stocks bounced back to life, which saw the Dow spiking a hefty 175.83 points to 16.838.74 on better-than-expected home builder confidence data and easing tensions in Russia.

Elsewhere, major markets in the region advanced, rising as much as 1% on renewed bargain hunting interest, tracking overnight Wall Street.

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Against the positive backdrop, bulls on the domestic front struck back with vengeance while institutional funds bidding up the quality issues.
The other basket of cheaper stocks also jumped on the bandwagon on greater retail participation, thus pumping the daily turnover to a record 5.113 billion shares.
In active trade, the FBM KLCI rose steadily from the opening bell to settle up 10.41 points to 1,872.16 on Tuesday.
In another robust session, the local bourse tacked on an additional 6.73 points to close at the day’s peak of 1,878.89, tracking solid overseas gains, spurred by strong corporate earnings and encouraging economic data while tensions in the Ukraine continued to ebb.
Meanwhile, trading volumes set another new record, hitting 7.67 billion shares but unlike the previous day, where the market ended broadly higher, most penny stocks fell, as an unusual liquidation pressure in Sumatec Resources Bhd and PDZ Holdings Bhd shares soured the overall sentiment in mid-week. Blue chips led declines, dragging the key index down 4.08 points to 1,874.81 on Thursday. Yesterday, the FBM KLCI shed 3.82 points to 1,870.99 on follow-through selling, ignoring a firmer overseas trend.
Statistics: Week-on-week, the principal index chalked up 6.68 points, or 0.4% to 1,870.99, compared with 1,864.31 at the close on Aug 15. Total turnover for the week ballooned to 22.665 billion shares valued at RM13.397bil, against 17.144 billion units worth RM11.928bil done a week ago.
Technical indicators: The daily slow-stochastic momentum index triggered a sell signal at the top, but it could not be confirmed just yet, simply because both the oscillators still were trending above the 80% bullish line.
The past week witnessed the 14-day relative strength index retracing slightly from a reading of 65 in mid-week to the 59-point level on Thursday before ticking up slightly to settle at the 62 points.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram strengthened towards the zero thresholds, in tandem with the daily signal line. It had issued a buy on Tuesday.
Weekly indicators also were on the mend, with the weekly slow-stochastic momentum index improving further after flashing a buy a week ago and the downward pressure on the weekly MACD halting despite keeping the sell signal.
Outlook: Bursa extended the recovery for the second straight week, encouraged by a rally in overseas markets, especially from Wall Street where the Dow reclaimed the position above the 1,700-point psychological level once again. It was a nice rebound, which saw the FBM KLCI mending from the critical moment to a safer ground.
Going forward, the bulls must maintain the posture at current levels for at least another two weeks in order to unknot the recent multiple death crosses and at the same time convince investors that this rally still has legs for more upside potential. Otherwise, more negative crossings will come about and complicate the bulls.
Technically, most of the indicators are improving, suggesting the key index may rise on sustained buying. However, with the market showing signs of turning sideways on news that some brokerage firms had imposed restrictions on financing of certain stocks, range-bound consolidation will probably be the trend this week.
Initial resistance is seen at 1,886 points, of which a convincing breach would lead to a re-test of the historical peak of 1,896.23 or the bulls challenging the 1,900-point mark. Support is seen at the 14-day simple moving average (SMA) of 1,864 points and the next, at the 200-day SMA of 1,845 points. A crack of the recent lows of 1,837.28 will have a negative impact on the market.[/size]