A newborn bull? Bursa Malaysia expected to strengthen in cautious trade

by **Cals** Mon 31 Aug 2015, 21:14

A newborn bull? Bursa Malaysia expected to strengthen in cautious trade

Saturday, 29 August 2015
By: K.M.LEE

REVIEW: The latest economic data filtered out from China, showing weak manufacturing figures and the big drop in Chinese stocks, drove overnight Wall Street down a hefty 530.94 points to 16,459.75 the previous Friday, its sharpest one-day fall in almost four years in a broad-based sell-off.
Over on the New York Mercantile Exchange, crude oil prices lost 87 cents to US$40.45 per barrel amid worries that a slower demand growth would prolong a global glut.
Apparently, the stunning bearish mood in the United States sent jitters across the globe, which saw Asian equities drowning at the start of the week, as investors dumped anything deemed as risky in the wake of uncertainty.
As expected, the already fragile Bursa Malaysia was not spared, with the FBM Kuala Lumpur Composite Index (FBM KLCI) shedding a huge 21.42 points to 1,553.25 at the opening bell.

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Blue chips were hammered. Elsewhere, second and lower liners also drifted lower, as players scrambled to the sidelines looking for shelter.
Given the dearth of support, the local bourse eased steadily to finish at the day’s low of 1,532.14, slumping a hefty 42.53 points on Monday.
Technically, Bursa is envisaged to extend the downward momentum the next day, as the index’s closing at the day’s bottom on Monday was viewed as a bearish signal.
Combined with Wall Street tumbling an additional 588.40 points to 15,871.35 and crude oil slidding US$2.21 a barrel to US$38.24 on extended dramatic liquidation in overnight trade, there were simply no incentives for the investors nibble.
Taking the cue from a dismal performance in the United States, shares on the domestic front opened sharply lower at 1,515,73 and dipped further into the red on follow-through selling.
But, just when it appeared defenceless and in great danger of violating the important 1,500-point psychological floor, an unexpected bout of fresh bargain hunting interest emerged from the sidelines to offer a helping hand.
Though sentiment had reversed, interest was very much confined in the blue chips and it was clearly dislayed on the scoreboard.
Despite the FBM KLCI rebounding from an early losses to close up 31.80 points to 1,563.94, decliners beat advancers by 487 to 381 on Tuesday.
Overnight Wall Street continued to bleed due to worries that a slowdown in China would hobbled global growth but crude oil prices staged a relief rebound on short-covering.
Riding on a firmer crude oil prices, local investors extended their bargain hunting activity, boosted by news that China’s central bank had slashed interest rates to shore up the world’s second largest economy while the turbulent regional markets showed signs of stabilising.
On the back of an improving global market sentiment, Bursa climbed 16.43 points to 1,580.37 in mid-week, added an extra 21.33 points to 1,601.70 on Thursday and up a further 11.04 points to 1,612.74 yesterday.
Statistics: For the week, the principal index perked up 38.07 points, or 2.4% to 1,612.74 yesterday, compared with 1,574.67 on Aug 21.
Weekly turnover stood at 11.741 billion units valued at RM12.172bil, against 9.786 billion shares worth RM9.736bil traded a week ago.
Outlook: Bursa staged a handsome recovery in the wake of renewed bargain hunting buying momentum after the key index had fallen to a low of 1,503.68 earlier of the week, the worst level since January 2012, underpinned by China’s moves in reducing interest rates.
But what is more interesting we wish to tell is Bursa has carved out a “key reversal” bar on the daily chart on Tuesday and many people would want to know what exactly it means.
Here it goes. A “key reversal” is a one-day trading pattern that can occur at the peak of an uptrend or the ebb of a downtrend.
The formation does not happen very regularly but when it does, it usually can be trusted.
In this case, it was sighted in a downtrend on Tuesday, a phenomena signal an immediate reversal of a trend, indicating the underlying sentiment has apparently changed for the better and the market may have finally found a floor after the recent rout.
Going forward, the local bourse is expected to strengthen, at least this week amid follow-through support from institutional players.
However, investors are advise to trade cautiously, as technical analysis is all about possibility and not certainty.
Elsewhere, the buy signal on the daily moving average convergence/divergence histogram and the rapid improvement in other indicators suggest Bursa will be good in the short term.
Initial resistance is expected at the 21-day simple moving average (SMA) of 1,628 points, followed by the 50-day SMA of 1,580 points.
As for the downside, support is resting at the 14-day SMA of 1,589 points, followed by the 1,560 points.
The recent lows of 1,503 points and the 1,500-point psychological level will now act as an important floor.