Range-bound trading Saturday, 21 March 2015 BY: K.M.LEE

by **Cals** Mon 23 Mar 2015, 00:22

Range-bound trading

Saturday, 21 March 2015
BY: K.M.LEE

REVIEW: In a knee-jerk reaction to Wall Street’s slump the previous Friday, spooked by a spike in the greenback and excerbated by a sharp fall in crude oil prices, Asian equities kicked off the week on a soft platform in the wake of fresh liquidation pressure.
Bursa Malaysia was not spared, with the benchmark FBM Kuala Lumpur Composite Index opening down a significant 4.47 points to 1,777.28, extending the previous session’s declines amid follow-through selling.
Sentiment was frail while blue chips led the losers board.
The key index dropped very quickly to a low of 1.774.30 and it looked set to suffer another round of beating.
However, that was not the case, as a positive comment from Chinese Premier Li Keqing, saying China would provide support if the world’s second biggest economy continues to underperform, sent Shanghai Composite Index sharply higher on hopes of more stimulus measures, thus helping most Asian equities to stage a positive reversal.
The local bourse followed suit, recouping early losses to trade firmer in mid-morning, but it was not good enough to keep the key index in the positive territory until the end.
At the final bell on Monday, the FBM KLCI eased 1.21 points to 1,780.54.
Nevertheless, the local market made another attempt to recover the next day and succeeded this time, drawing strength from Wall Street’s steep rebound overnight on optimism that a weaker-than-expected US factory data will prompt the Federal Reserve to take a cautious stance about the timing of raising interest rates.
The pullback in the greenback and a steadier regional performance added to the positive tone.
In a good day like this, the key index rose 7.33 points to 1,787.87, largely largely attributed to gains in the blue chips, as the overall market breadth was negative, with decliners beating advancers by 490 to 347 on Tuesday.
In another similar fashion, the local bourse added an extra 9.70 points to 1,797.50 amid follow-through nibbling in the quality issues but the scoreboard was again negative as most second and lower liners drifted lower in mid-week.
The local market sentiment nonetheless continued to improve after the Fed indicated it preffered a more gradual path to normalising US interest rates even as it moved towards its first rate hike in almost a decade.
Tracking global advances, Bursa Malaysia rose 11.56 points to 1,809.13, but off an intra-day’s high of 1,815.71 on Thursday before snapping the three-day winning streak, losing 5.48 points to 1,803.65 due to lack of compelling leads on the horizon yesterday.
Statistics: For the week, the major index added 21.90 points, or 1.2% to 1,803.65 yesterday, against 1,781.75 on March 13.
Weekly turnover stood at 11.417 billion shares valued at RM10.588bil, versus 13.092 billion units worth RM10.438bil done the prior week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index had topped out at the 85% level and appeared in great danger of triggering a short-term sell signal soon.
The past week saw the 14-day relative strength index hitting a high of 63 on Thursday before curving down to settle at the 51 points level.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram retained the sell signal, but it had indicated a fairly promising convergence pictogram.
Weekly indicators mixed, with the weekly slow-stochastic momentum index sustaining the downtrend and the weekly MACD keeping the buy signal.
Outlook: Bursa Malaysia snapped the two-week losing streak on bargain hunting interest, but the upside potential was capped, as the Federal Reserve-inspired rally appeared to have fizzle out somewhat.
Despite the gains, nothing has changed. The FBM KLCI still is fliring below the uppermost 200-day simple moving average (SMA) of 1,824 points and the most recent highs of 1,831.41 points set on Feb 4.
Going forward, the bulls surely need a strong catalyst to push them through. Besides the bullishness of the Chinese equities, there is none, at least for now.
With Wall Street turning volatile, the local currency remaining fragile against the greenback and crude oil prices resuming the downward spiral following a negative breakdown recently, there is a high possibility the local bourse may fluctuate within a modest range until a clearer picture emerges.
A slip below the 1,700 points will signal an extended correction process and in this case, the lower floors of 1,750 points, 1,706.18 points and the 1,671.82 points will be vulnerable.
Technically, indicators are mixed, suggesting range-bounc consolidation, but with a mild downward bias this week.
To the upside, a successful penetration of the stiff resistance of 1,831.41 points would see the market turning decisively bullish, enroute to challenge the historical peak of 1,896.23.