Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on November 14, 2018

Two weeks ago, Bursa Malaysia rebounded from a bearish downtrend but started to fall last week despite a bullish start. This indicates that the market sentiment is still bearish. The local market performance was in line with the global market performance. Falling commodities prices, especially crude oil and crude palm oil, have dampened market confidence.

The FBM KLCI fell 0.3% in a week to close at 1,708.09 points last Friday. The index fell below the 1,700-point mark this week and closed at 1,687.57 points.

Trading volume declined and this indicates that the market is being cautious. The average daily trading volume has declined to 2.2 billion from 2.4 billion shares in the previous week, but the average daily trading value has risen to RM2.5 billion from RM2 billion. This indicates that more higher-capped stocks, which are normally traded by institutions, were being targeted.

Last week, institutions were selling to retailers. Net selling from local institutions and foreign institutions were RM189 million and RM183 million respectively. Net buying from local retailers was RM372 million.

For the KLCI, gainers outpaced decliners three to two. Top gainers were Westports Holdings Bhd (+6.2% in a week to RM3.77), Axiata Group Bhd (+4.4% in a week to RM3.58) and KLCC Property Holdings Bhd (+4.2% to RM4.45). The top three decliners were Genting Bhd (-5.8% to RM6.78), MISC Bhd (-3.7% to RM6.45) and Malaysia Airports Holdings Bhd (-2.7% to RM8.03).

Markets were generally bearish last week. In Asia, China markets including Hong Kong took the lead in the declines. However, the Japanese market was almost unchanged. Markets in Europe and the UK also closed lower. However, the US market rebounded and closed higher.

The US dollar was firm against major currencies. The US Dollar Index (which measures the US dollar against major currencies) increased to 96.9 points last Friday from 96.5 points the week before. The ringgit also stayed firm against the US dollar at RM4.17.

In the commodity market, prices of gold and crude oil fell. The Commodity Exchange gold price fell 2% in a week to US$1,210.30 (RM5,071.16) an ounce and Brent crude oil fell 3.8% to US$69.88 a barrel. Palm oil on Bursa fell 5.1% to RM2,042 per tonne on demand worries.

The KLCI faced resistance at 1,726 points after rebounding in the past two weeks. The previous resistance level was at 1,742 points. The lower resistance levels indicate that the market trend is bearish. The immediate support level is at 1,670 points, which was the support level three weeks ago.

Technically, the market is on a bearish trend. The KLCI failed to climb above the short-term 30-day moving average after the rebound. Also, the index has stayed below the Ichimoku Cloud indicator and is now at the transition point of the Cloud. This indicates that the trend is set to continue its bearish trend.

Momentum indicators have increased in the past two weeks, indicating a weak bearish trend. The Relative Strength Index (RSI) and oscillator indicators have rebounded to near their mid-levels, and this indicates that the index is now at the resistance level based on the RSI indicator. However, the moving average convergence divergence indicator has remained above its moving average and is increasing, indicating that the momentum is still good.

The failure to overcome resistance levels in the two-week rally indicates that the market is not out of the bearish trend yet. With the technical indicators showing that the market is still bearish, the KLCI is expected to continue its bearish trend towards 1,670 points if it fails to climb above 1,742 points.


The above commentary is solely used for educational purposes and is the writer’s point of view using technical analysis. The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment adviser.

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