This article first appeared in The Edge Financial Daily on April 18, 2018
The equities market rebounded last week on bullish market performances in the region and the US-China trade war tension eased. The US-China saga two weeks ago caused markets to fall. The FBM KLCI increased 1.7% to 1,868.47 points last Friday. The bullish momentum continued to this week as the index closed at 1,880.49 points yesterday.
Market activity rose significantly last week on bargain hunting after a steep fall two weeks ago. The average daily trading volume rose to 3.5 billion shares compared with 2.5 billion two weeks ago. The average daily trading value increased to RM2.6 billion from RM2.3 billion. This indicated more retail participation in the market as the retail market normally trades lower-capped stocks.
For the FBM KLCI, gainers outpaced gainers 23 to five last week. Top gainers for the week were Press Metal Aluminium Holdings Bhd (+23.4% to RM4.75), Astro Malaysia Holdings Bhd (+9.4% to RM1.98), and AMMB Holdings Bhd (+8.4% to RM4.00). Top decliners were Westport Holdings Bhd (-4.6% to RM3.34), PPB Group Bhd (-1.4% to RM18.50), and MISC Bhd (-1.1% to RM7.00).
Global markets rebounded and closed mostly higher last week. Hong Kong’s Hang Seng Index led the Asian market with a 3.2% increase in a week. In the West, the US Dow Jones Industrial Average led with a 1.8% increase.
The US dollar has weakened on Syria war threat and the China trade feud. The US dollar index fell to 89.8 points last Friday from 90.1 points the week before. The ringgit has weakened against the US dollar despite the weaker US dollar index. The ringgit stood at RM3.88 to a US dollar last Friday against RM3.87 the week before.
For commodities, crude oil (Brent) jumped 8.5% in a week to US$72.62 (RM282.49) a barrel, the highest level since December 2014 on US war threat to Syria. The Commodity Exchange gold price increased only 0.8% in a week to US$1,348.60 an ounce. On the local market, crude palm oil futures fell 4.1% to RM2,400 per tonne on higher production.
The FBM KLCI broke above the immediate resistance level of the sideways trend at 1,875 points and managed to stay above this level. This primarily indicated that the trend was turning strongly bullish.
Chart-wise, the FBM KLCI turned bullish as it climbed above the short-term 30-day moving average. Furthermore, the index rebounded off the Ichimoku Cloud indicator. However, the FBM KLCI has been whipsawing against the short-term 30-day moving average in the past two months and this indicates a directionless trend.
Momentum indicators have started to show that the sentiment had turned bullish. The Relative Strength Index and oscillator indicators rose above the mid-level and the moving average convergence divergence indicator crossed above its trigger line or moving average. Also, the FBM KLCI is now trading near the top band of the Bollinger Bands indicator.
The FBM KLCI stayed above the 1,875 points and broken resistance level and this indicated that the bullish trend was being supported well. With this breakout and bullish technical indications, the bullish trend that started in December is set to continue.
However, the market may be cautious ahead of the general election and also the FBM KLCI’s all-time high near 1,900 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.