Market expected to rebound

by **Cals** Wed 02 Mar 2016, 23:55

Market expected to rebound

By Benny Lee / The Edge Financial Daily | March 2, 2016 : 10:30 AM MYT

This article first appeared in The Edge Financial Daily, on March 2, 2016.

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Mixed and uncertain global market performances caused sentiment to be bearish on Bursa Malaysia in the past one week, just as we had expected. However, a stronger ringgit and rebound in crude oil prices helped markets to rebound strongly yesterday to cover earlier losses. The FBM KLCI declined only 0.4% in a week to 1,670.82 points yesterday after a rebto 98.2 points on Monday. Bullish gold prices were stunted by the stronger US dollar and equity market. Comex gold also increased despite the stronger US dollar. The price increased 2.5% to US$1,239.30 (RM5,155.49) an ounce in a week. West Texas Intermediate crude increased 7.6% in a week to US$33.90 per barrel. Crude palm oil on Bursa Malaysia was directionless and closed 0.6% lower from last week at RM2,536 per tonne yesterday.

The FBM KLCI managed to stay above the short-term 30-day moving average despite the pullback in the past one week. This indicates support, and the bullish reversal candlestick pattern called the “upstart” is the evidence of support. The index also managed to stay above the Ichimoku Cloud indicator, but on a thin cloud. This indicates that the bullish trend is still in an early stage and may still be fragile.

The FBM KLCI seemed to be struggling to climb above the long-term 200-day moving average. This average, together with the downtrend line (Line R1 on the chart), is currently the technical resistance level, and ranges between 1,680 and 1,690 points.

Momentum indicators indicate that the bullish trend is weakening. The relative strength index indicator is declining towards its mid-level and the moving average convergence divergence indicator fell below its moving average. Furthermore, the FBM KLCI is pulled back to slightly above the middle band after pulling back from its top band, and the bands are now squeezing, an indication of a trend correction.

The reversal pattern yesterday indicates that the FBM KLCI is set to rebound. A stronger ringgit and increasing crude oil prices may be positive catalysts for the market. However, if the index can’t break above resistance levels between 1,680 and 1,690 points, we may continue to see a directionless and uncertain market. The immediate support level is at 1,650 points and if this level is broken, we expect the index to fall to the next support level at 1,630 points.

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Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia. He can be contacted at[email=bennylee.kl@gmail.com][size=15][You must be registered and logged in to see this link.][/email]. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgement or seek professional advice for your investment decisions.[/size]
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