TREND ANALYSIS
By K.M. LEE
REVIEW: Bursa Malaysia kicked off the week on a dull note, with the benchmark FBM KL Composite Index (FBM KLCI) losing 0.75 point at 1,067.01 on extended consolidation amid dearth of fresh market-stimulating leads.
Overnight Wall Street eased 36.65 points to 8.146.52 the previous Friday while world crude oil prices sustained downward pressure to below US$60 a barrel. Besides that, the poor showing in Asian equities also was not helping the local sentiment.
Hence, the local bourse drifted sideways to marginally easier in thin volume, touching an intra-day of 1,060.96 on lack of support before bouncing off slightly to end at 1,063.66, down 4.10 points in lacklustre mode on Monday.
Then, overnight Dow staged an unexpected steep rebound, rising 185.16-point to 8,331.68, as bullish analyst comments on the financial sector revived investors’ appetite for stocks.
Apparently, the wake of fresh hopes that US corporate earnings may not be as weak as initially feared, sparked a stock rally in the region and against the bullish backdrop, Bursa Malaysia was not left out this time, which saw the FBM KLCI gaping up a commendable 7.43-point to 1,071.09 in initial deals on renewed buying interest.
Business was robust, with the core blue chips topping the most up list. Elsewhere, other quality issues outside the FBM KLCI radar, also posted decent gains on greater retail participation. At the end of Tuesday’s trading, the key index rebounded some 15.97 points to 1,079.63.
Thereafter, the local sentiment continued to improve, tracking the bullish momentum in offshore stock exchanges on optimism about the global economic recovery story after a couple of giant corporations in the US churned out a better-than-expected earnings result.
Goldman Sachs reported a 33% rise in quarterly earnings, while Intel Corp’s results soared past street’s expectations.
In another hectic day, big advances, led by the banking issues helped push the FBM KLCI up 17.61 points to 1,097.24 in mid-week.
It tacked on an extra 11.64 points to 1,108.88 on Thursday and 12.02 points to 1,120.90 yesterday on follow-through interest, also the best closing level since August last year, spurred by a steadier offshore equities.
Statistics: On a weekly basis, the FBM KLCI advanced 53.14 points, or 5% to settle at 1,120.90 yesterday, against 1,067.076 on July 10.
Weekly turnover ballooned to 5.310 billion units worth RM7.326bil, versus 3.401 billion shares valued at RM5.023bil done a week ago.
Technical indicators: The daily slow-stochastic momentum index had indicated a mild topping out pictogram at the overbought territory. It flashed a short-term buy at the neutral zone on July 9.
Similarly, the 14-day relative strength index climbed steadily from the 44 points level on Monday to the 84 points mark on Thursday before pausing.
In stark contrast, the daily moving average convergence/divergence histogram continued to expand upward against the daily signal line to stay bullish. It triggered a buy in mid-week.
Elsewhere, weekly indicators were notably positive, with the weekly slow-stochastic momentum index calling for a buy and the weekly MACD resuming the upward expansion against the weekly trigger line.
Outlook: Bursa Malaysia bounced back to life after spending slightly more than a month adjusting and consolidating the recent huge market rally, boosted by a fine rally in overseas markets, brought about by the better-than-expected corporate earnings report in the US, thus fuelling optimism of a global economic recovery.
Apparently, the key index had penetrated the upper horizontal line of the 13-day rectangular box and thereafter, charging ahead to erase the June 12’s rally peak of 1,095.91 to achieve a near 12-month high of 1,121.66 yesterday.
The convincing breakthrough signals the birth of a new bullish wave. With trading volume on the rise and investors confidence continuing to creep back into the market place, they are likely to give the FBM KLCI a further boost going forward.
However, investors should take note that, unlike an initial phase of the bulls rally, which was steep and massive, the second wave of the primary market’s upward thrust could be a different ball game altogether, where one may see greater profit-taking activities along the way, meaning, the journey ahead may be more volatile and the speed of ascend much slower compared to the previous round.
Technically, the daily and weekly MACDs are painting a promising landscape, suggesting a firmer trend ahead. Therefore, investors can consider accumulating more, especially near the support level should there be any profit taking retracement.
Resistance can be expected at 1,140-1,142 points band, at 1,150 points, 1,165-1,170 points range and the next, at 1,200 points psychological level.
Initial support is seen at 1,100 points, followed by the 1,083 points. The lower floors are resting at 1,058-1,060 points, at 1,040 points and 1,028.14 points.