Bullish bias intact BY: K.M LEE

by **Cals** Sun 12 Apr 2015, 02:25

Bullish bias intact

Saturday, 11 April 2015
BY: K.M LEE

REVIEW: There were no leads coming from the US at the start of the week, as markets there were shut the previous Friday for a holiday.
In spite of that, Bursa Malaysia started out on a solid platform, with the FBM Kuala Lumpur Composite Index chalking up a significant 3.78 points to 1,838.30 at the opening bell, extending the previous two-day climb following the recent major breakout.
Blue chips topped the winners board on foreign funds support but the cheaper issues were mostly flat to lower while financial markets in Hong Kong, China, Thailand, Australia and New Zealand remained closed for public holidays.
Riding on the gains in the quality issues, the key index surged 8.42 points to 1,842.94, but the scoreboard painted a rather mixed pictogram, with 393 advancers narrowly beating 379 decliners on Monday.
Nevertheless, the local bourse strenghtened the next day, as an overwhelming bullish Wall Street helped boost investor appetite for risky assets.
Meanwhile, Asian stocks drifted higher, led by Shanghai Composite Index rallying more than 2% to a fresh seven-year high on aggressive buying ahead of the quarterly earnings season, underpinned further by hopes for more monetary easing by the Chinese autorities.
Against the positive overseas backdrop, the key index climbed an extra 13.57 points to 1,856.51 in robust volumes on Tuesday, also its fourth straight gain in a row.
Global markets continued to rally on Wednesday, with Hong Kong’s Hang Seng Index posting its biggest daily rise in more than three years, hitting a near seven-year high in the first full day of business since the Easter weekend on expectations of more economic stimulus from countries like China and Japan, as well as a delayed to any tightening by the US Federal Reserve.
In addition, crude oil prices also traded higher, but it was not helping the local bourse in this round, as investors fretted the greenback’s strength against the ringgit to book profits, thus dragging the market into correction mode.
In lacklustre trade, the FBM KLCI flirted between an intra-day high and low of 1,853.21 and 1,848 respectively, a pretty tight 5.21 points throughout before finishing down 6.2 points to 1,850.31 in mid-week.
In another sliggish session, Bursa shed a further 0.92 of a point to 1,849.39 due to lack of fresh leads after regional market turned mixed, exacerbated by a steep fall in crude oil prices on Thursday.
Thereafter, the local bourse eased an additional 5.08 points to 1,844.31 on extended correction process, as investors sold ahead of the weekend, ignoring a generally firmer regional performance yesterday.
Statistics: On a weekly basis, the major index added 9.79 points, or 0.5% to 1,844.31 yesterday, against 1,834.52 on April 3.
Weekly turnover amounted to 9.419 billion units worth RM9.266bil, versus 10.944 billion shares valued at RM9.061bil transcated a week ago.
Technical indicators: The oscillator per cent K and the oscillator per cent D had moved out of the bullish territory after flashing a short-term sell at the top in mid-week.
Likewise, the 14-day relative strength index hit a high of 81 on Tuesday before weakening to settle at the 66-point level yesterday.
Although the daily moving average convergence/divergence (MACD) histogram retained the posture above the daily signal line to keep the buy call, it had indicated a mild topping out sign.
In stark contrast, weekly indicators still were looking good, with the slow-stochastic momentum index and the MACD continuing to strengthen.
Outlook: The past week witnessed Bursa’s benchmark FBM KLCI scaling a five-month high of 1,856.51 on Tuesday before retreating slightly, absorbing profit-taking activity.
In spite of the pullback, the prevailing trend is bullish, with the key index trending above all the moving averages on our radar screen, and as long as the rising 14-day simple moving average (SMA) and the 21-day SMA lines continue to support the FBM KLCI, there is more upside in the pipeline.
Based on the daily chart, the bulls had paused for air, apparently. Going forward, investors can expect the key index to retreat slightly on extended correction, probably returning to the recent breakout level of 1,831.41 before resuming the uptrend later.
This is not something unusual but a typical behaviour of the bulls on the domestic market.
Technically, the falling daily slow-stochastic momentum index and the weakening 14-day relative strength index suggest Bursa may trade range-bound to marginally lower on correction this week.
Initial support is envisaged at the 1,820 points, followed by the 1,800-point psychological level.
To the upside, the near-term aim would be to challenge the historical peak of 1,896.23 and the next, to explore the unknown territory.