Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on June 13, 2018

The benchmark index for Bursa Malaysia, the FBM KLCI, rose 1.2% in a week to 1,778.32 points last Friday. Generally bullish global markets performances have lifted market confidence to bargain hunt after two weeks of declines. However, the market was supported by local participants while foreign participants continued to sell. Foreign institutions have been selling since the general election a month ago.

The market pulled back this week for a correction and yesterday, the index closed at 1,764.16 points.

Trading volume continued to rise last week. The average daily trading volume rose to 4.3 billion shares from 3.4 billion two weeks ago. However, the average daily trading value fell to RM3.5 billion from RM4.7 billion. This indicates more lower-capped stocks, which are normally traded by local retail participants, were being traded.

In the market volume mix, foreign institutions remained as net sellers. Net selling from foreign institutions was RM903 million while net buying from local institutions and local retailers were RM784 million and RM119 million respectively.

For the FBM KLCI, gainers trashed decliners four to one. Top gainers for the week were Astro Malaysia Holdings Bhd (+19.9% to RM1.69), RHB Bank Bhd (+5.7% to RM8.10) and AMMB Holdings Bhd (+3.8% to RM3.61). Top decliners were Malayan Banking Bhd (-2.4% to RM9.80), Press Metal Bhd (-2.2% to RM4.47) and Genting Bhd (1.4% to RM8.78).

Globally, market performances were mixed. Markets in Asia closed mostly higher except for China. In Europe, only Germany’s DAX Index closed higher while other European markets including London fell. The US Dow Jones Industrial Average climbed to its highest level in three months.

The US dollar weakened against major currencies after weeks of strength. The US dollar index closed at 93.5 points last Friday, compared with 94.0 points the week before. The ringgit was firm against the US dollar at RM3.99 per US dollar last Friday, compared with the previous week.

Commodities were directionless last week. Crude oil (Brent) declined 0.5% in a week to US$76.34 (RM304.60) a barrel while the Commodity Exchange gold price rose 0.4% to US$1,303.50 an ounce. In the local market, crude palm oil futures fell 3.0% to RM2,365 per tonne on weak demand.

Last week, the FBM KLCI covered the gap made two weeks ago. It managed to climb above the immediate resistance level at 1,775 points but failed to stay above it. Furthermore, an “engulfing bear” Japanese candlesticks chart pattern was formed last Friday and this indicates resistance.

Technically, the trend remained bearish despite the rebound last week. The FBM KLCI is below both the short- and long-term 30- and 200- day moving averages. Furthermore, the index is below the Ichimoku Cloud and the Cloud is also bearish.

Momentum indicators like the Relative Strength Index, moving average convergence divergence and oscillator are below their mid-levels and these indicate that the trend is bearish. However, these  indicators increased because of the rebound last week and this indicates a weak bearish momentum.

The FBM KLCI faces resistance at 1,800 points (which is the 200-day moving average) and the index is technically still in a bearish trend if it stays below this level. Therefore, the trend can only turn bullish if the index breaks above 1,800 points. If it fails to do so, the market may continue to move into a correction with support at 1,710 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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