Tentative bottom Saturday, 10 January 2015 By: K.M.LEE

by **Cals** Sun 11 Jan 2015, 11:44

Tentative bottom

Saturday, 10 January 2015
By: K.M.LEE

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REVIEW: In the absence of fresh catalysts on the horizon, shares on Bursa Malaysia quickly slipped into the red zones despite the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) started the week up 5.66 points to 1,758.43.
Sentiment on the broad-front was frail, with blue chips leading the decliners’ board on foreign liquidation pressure ahead of the release of trade data report and further weakness in the ringgit against the greenback.
Elsewhere, most second and lower liners also drifted lower on lack of support, as a poor performance in the Asia-Pacific region kept many retail players on the sidelines.
In lacklustre trade, the key index drifted from a session’s high of 1,759.15 in early business to a low of 1,734.51 in late afternoon before ending at 1,736.62, down 16.15 points on Monday, also its fourth declines in a row.
There was no respite for the local bourse the next day, with overnight Dow plunging 331.34 points to 17,501.65 in the wake of renewed uncertainty in the eurozone, compounded by swooning crude oil prices.
Adding to the downbeat note, the ringgit continued to soften and stock markets in the region sustained their downward spiral on extended selling.
In tandem with the global sell-off, the FBM KLCI eased to a low of 1,708.78 during the day before ending at 1,716.58, shedding 20.04 points on Tuesday.
Then, Bursa turned range-bound on bargain hunting alternating with sporadic selling, undergoing consolidation, as a steadier performance in regional markets offset worries about a lower Wall Street overnight.
Though the key index still lost an extra 7.40 points to 1,709.18, the overall market breadth was actually positive, with advancers beating decliners by 413 to 352 in mid-week.
Thereafter, bargain-hunting activity dominated the floor, as a sharp rebound in US equities and firmer Asian markets encouraged the local boys to come out to seek value buys.
Riding on the better offshore sentiment, the FBM KLCI managed to recoup some 18.88 points to 1,728.06 on Thursday, its first win for the year, also snapping a six-day losing streak.
And yesterday, the key index tacked on a small 4.38 points to 1,732.44 on follow-through buying offsetting profit-taking activity, spurred by overseas markets’ rise.
Statistics: On a weekly basis, the principal index slumped 20.33 points, or 1.2% to 1,732.44 yesterday, against 1,752.77 at the close on Jan 2.
Total turnover for the regular week amounted to 8.034 billion units worth RM8.953bil, compared with 5.31 billion shares valued at RM5.48bil changed hands during the four-day holiday-curtailed previous week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were curving up from the oversold area after triggering a short-term buy on Thursday.
Likewise, the 14-day relative strength index improved moderately from a reading of 30 in mid-week to settle at the 44 points level yesterday.
In addition, the daily moving average convergence/divergence (MACD) histogram resumed the upward expansion against the daily signal line after showing a negative divergence pictogram recently. It had issued a buy on Dec 23, last year.
Weekly indicators were mixed, with the weekly slow-stochastic momentum index rising and the weekly MACD keeping the bearish note.
Outlook: Bursa Malaysia may have ebbed at the 1,671.82-point level on Dec 17, last year after losing a total of 224.41 points, or 11.83% from an all-time peak of 1,896.23, set on July 8, 2014 in a five-month correction.
The “golden crossings” of the 14-day simple moving average (SMA) against the 21-day SMA added to our optimism.
However, we could not confirm yet, simply because sentiment towards crude oil prices still is bearish (the chief reason for the market’s recent downward move) and other “dead crosses” on our radar screen staying intact.
Hence, we viewed the recent lows as a tentative bottom for now, until more concrete evidence emerges.
If the worst is indeed over for Bursa, then investors can expect the bulls and the bears to engage in the tug of war battle, a typical behaviour of the market in an infancy stage of any recovery phase, which will result in great volatility, meaning moderate-to-wide trading band pending a winner to emerge to rule the floor.
Technically, indicators are improving. Barring any nasty moves in crude oil prices, the local bourse is envisaged to firm this week.
Significant resistance can be expected at the 50-day SMA of 1,778, followed by the 100-day SMA of 1,810 and the next, at the 1,835-1,840 points range.
Initial support is resting at the 1,700-1,705-point band. A clear violation of the recent lows of 1,671.82 will signal the resumption of downtrend and if that happens, the lower 1,600-point psychological floor would be vulnerable.