Technical rebound likely Saturday, 20 June 2015 By: K.M. LEE

Technical rebound likely

[size=11]Saturday, 20 June 2015
By: K.M. LEE

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REVIEW: Sellers were apparent at the start of the week, with Bursa Malaysia’s bellwether FBM Kuala Lumpur Composite Index (FBM KLCI) dropping 1.09 points to 1,733.28 amid dearth of fresh catalysts on the horizon.
Overnight Wall Street shed 140.53 points to 17,898.84 the previous Friday on growing uncertainty in the euro zone after Greece’s talk collapsed and crude oil prices dropped 81 cents to US$59.96 per barrel on worries that higher output from Saudi Arabia would feed the global supply glut.
In the Asia-Pacific region, equities swooned, tracking a negative lead from the US while a stronger greenback against the ringgit also was not helping but putting more pressure on the local funds.
Against the bearish backdrop, the local bourse retreated and losses in the core heavyweights dragged the key index down 12.21 points to close at the day’s low of 1,722.16 on Monday.
Then, overnight Dow took another dive, losing 107.67 points to 17,791.17, as investors fretted about the consequences of a possible debt default between Athens and its creditors and Greece exiting the European Union.
With most markets in the region drifting lower and the FBM KLCI closing at the day’s ebb on Monday, interpreted as a negative sign, it really did not bode well for the local bourse.
In line with expectations, Bursa Malaysia sustained the downtrend, sending the key index down to a new five-month low of 1,718.44 in early business.
However, just when it looked defenceless, the local boys emerged from the sidelines, taking comfort from a stronger ringgit on short-covering to indulge in light bottom fishing in the blue chips.
Though there was a degree of buying and mid-year “window dressing” activity, traders stayed wary ahead of the Federal policy meeting.
In mixed note, the key index recouped early losses to finish almost flat, up 0.08 of a point to 1,722.24 on Tuesday.
Thereafter, Bursa Malaysia see-sawed in an attempt to stabilise on the back of improving global sentiment
In volatile session, the FBM KLCI added 4.62 points to 1,726.86 in mid-week but lost 8.74 points to 1,718.12, largely due to a selloff in Tenaga Nasional Bhd on Thursday before recouping 3.65 points to close at 1,721.77 yesterday.
Statistics: On a weekly basis, the principal index declined 12.60 points, or 0.7% to 1,721.77 yesterday, against 1,734.37 on June 12.
Total turnover for the week amounted to 7.716 billion units worth RM9.179bil, compared with 6.355 billion shares valued at RM7.291bil changing hands the prior week.
Technical indicators: After flashing a short-term buy at the oversold area on Thursday, the oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index improved gradually to settle at the 32% and 23% levels respectively yesterday.
The past week saw the 14-day relative strength index inching up from a reading of 21 on Monday to close the week at the 35 points level.
Also on the mend, the daily moving average convergence/divergence (MACD) histogram expanded positively against the daily signal line after calling for a buy in mid-week.
Weekly indicators was a tad better compared with the previous week, with the weekly slow-stochastic momentum index giving an unconfirmed buy at the very oversold area but the weekly MACD sustained the downward expansion against the weekly trigger line.
Outlook: The local bourse remained in correction mode, with the FBM KLCI falling for the fifth consecutive week.
However, losses were moderate, as some investors took advantage of the recent market rout to indulge in accumulation.
In the week ahead, we can expect bargain hunting interest and “window dressing” activity to dominate the floor and provide cushion, as global markets’ sentiment improves, soothed that the US Federal Reserve will not raise interest rates so soon.
But, trade is expected to be cautious, with anxiety on how Greece’s debt crisis will unfold, the performance of crude oil prices, the movement of the ringgit and lingering domestic issues capping the upside.
This may mean that Bursa Malaysia will most probably fluctuate within a band with an upward bias on technical rebound this week, unless fresh catalysts emerges.
Elsewhere, the ticking up sign on the daily slow-stochastic momentum index, the 14-day relative strength index and the daily MACD added to optimism.
Initial resistance is seen at the 14-day simple moving average (SMA) of 1,733 points. A decisive penetration of the upper 21-day SMA of 1,742 points would signal the end of the current correction mode,
The immediate support is maintained at the 1,718 points, followed closely by the 1,700 points psychological level, and a crack of the latter floor may see the FBM KLCI making a full retracement back to the base of the last leg of the previous rally, at 1,671.92 points on renewed selling pressure.[/size]