On track to test all-time high by K.M LEE

On track to test all-time high

Saturday, 25 April 2015
By: K.M LEE

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REVIEW: Bursa Malaysia kicked off the week on a soft platform, with the bellwether FBM Kuala Lumpur Composite Index (FBM KLCI) losing 1.61 points to 1,844.25, spooked by a steep fall in US markets overnight.
An uninspiring performance in the Asia-Pacific region, reacting to a negative report about a crackdown on margin lending in China, was not helping local sentiment.
Given the dearth of fresh leads on the horizon, the local bourse flirted between an intra-day high and low of 1,848.97 and 1,841.10 respectively, a modest 7.87-point band throughout on consolidation before a last minute magic push in certain blue chips by the local funds helped lift the market into the positive territory.
At the closing bell, the key index chalked up 2.80 points to 1,848.66 but the overall breadth was negative, with decliners beating winners by 485 to 346 on Monday.
Nevertheless, local sentiment improved significantly the next day, as investors took comfort of sharply steadier overnight Dow and a firmer crude oil prices to come out to nibble.
Elsewhere, regional equities advanced on renewed interest, boosted by economic stimulus news after China’s central bank cut the amount of cash banks must hold as reserves in its latest attempt to prop up its faltering economy.
Riding on the bullish offshore tone, stocks on the domestic front scaled steadily in early business to finish broadly higher, recovering 14.14 points to 1,862.80, also the day’s peak on Tuesday, buoyed by the heavyweights on foreign buying while the ringgit strengthened against the greenback.
Theoretically, the index’s closing at the day’s highest level was interpreted as a bullish signal, which usually would open the windows for more climbing the following day.
Sadly, there was no follow-through buying, but profit-taking selling, as investors took the excuse of a dismal showing in US equities and commodity prices, to liquidate.
Meanwhile, most Asian markets edged down, as earlier optimism over stimulus-fuelled rally fizzled out following China’s rate cut. Tracking overseas losses, the FBM KLCI shed 8.03 points to 1,854.77 on correction in mid-week.
Thereafter, Bursa stayed in consolidation mode as sellers dominated the floor, dropping another 8.69 points to 1,846.08 on Thursday before bouncing back to life, up 16.50 points to 1,862.58, encouraged by a positive offshore trend yesterday.
Statistics: For the week just ended, the principal index rose 16.72 points, or 0.9% to 1,862.58 yesterday, compared with 1,845.86 on April 17. Total turnover stood at 12.991 billion units valued at RM10.420bil, against 12.113 billion shares worth RM11.268bil done a week earlier.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were on the slide after triggering a short-term sell near the overbought area on Thursday.
The past week saw the 14-day relative strength index retracing from a reading of 76 on Tuesday to a low of 51 two days later before curving up to settle at the 62-point level yesterday.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram slipped below the daily signal line to trigger a sell on Thursday, but appeared turning sideways generally rather than expanding negatively.
Weekly indicators were firm, with the slow-stochastic momentum keeping the buy despite reaching the overbought area and the MACD continuing to expand upward, in tandem with the trigger line.
Outlook: Bursa extended the upward momentum, but gains were moderate, as a brief correction owing to an apparent profit-taking selling somewhat trimmed advances.
Nonetheless, it was the sixth straight weekly climb for the FBM KLCI, largely driven by the recent nice rally in crude oil prices, better offshore market tone and the stronger ringgit against the greenback.
With positive sentiment continuing to boost risk appetite and driving global markets higher, investors can expect Bursa to strengthen further on persistent bargain hunting, mirroring the overseas trend.
Based on the daily chart, the bulls on the local bourse appear on track to challenge the historical high of 1,896.23 following a positive breakout recently.
The latest “golden crossings” of the 50-day simple moving average (SMA) against the 100-day SMA further elevates optimism. However, it may not happen this week but later.
Technically, most of the indicators still are bullish, but slightly overbought, suggesting the FBM KLCI will probably drift higher in the short term, but on a slow pace. Initial support is pegged at the 21-day SMA of 1,842 points. An additional floor is resting at 1,820 points.