This article first appeared in The Edge Financial Daily on October 23, 2019
The market staged a technical rebound as expected last week on bullish global market trends and a stronger ringgit. However, the market lost its momentum towards the end of the week after China reported that gross domestic product rose 6% in the July to September period from a year ago, its slowest pace since the early 1990s.
The benchmark FBM KLCI rose 0.9% in a week to 1,571.15 points. The index has increased slightly this week and closed at 1,574.09 points yesterday.
Trading volume continued to increase as the market started to bargain-hunt. The average daily trading volume last week was 2.9 billion shares, compared with 2.4 billion in the previous week. The average daily trading value stayed firm at RM2 billion from RM1.7 billion, indicating that more lower-capped stocks were traded.
For the KLCI, gainers beat decliners eight to one. The top three gainers were Hong Leong Bank Bhd (+4.8% in a week to RM17), AMMB Holdings Bhd (+4.4% to RM4.02) and Westports Holdings Bhd (+4.1% to RM4.35). The top three decliners were Malaysia Airports Holdings Bhd (-7% to RM8.13), Axiata Group Bhd (-1.6% to RM4.22) and Tenaga Nasional Bhd (-0.6% to RM4.11).
Global market performances were mixed. In Asia, markets were generally bullish except for China. European and US markets closed lower, except for Germany.
The US dollar was slightly weaker against major currencies last week. The US Dollar Index declined to 97.3 points last Friday from 98.3 points two weeks ago. The ringgit was firm at 4.19 against the greenback last Friday.
In the commodity market, Commodity Exchange gold futures increased 0.4% in a week to US$1,494.10 (RM6,245.34) an ounce last Friday. Brent crude, however, fell 1.8% to US$59.42 per barrel. In the local market, crude palm oil (BMD) rose 2.3% to RM2,185 per tonne last Friday.
The KLCI remained below the broken support level of 1,585 points, showing a weak market. The next support level is at 1,500 points, while the broken support level of 1,585 points has now turned into the immediate resistance level.
Trend-wise, the KLCI was bearish, below both the short- and long-term 30- and 200-day moving averages. However, the index was near the 30-day moving average. It was below the Ichimoku Cloud indicator and the Cloud was falling downwards but narrower.
Momentum indicators like the Relative Strength Index and Momentum Oscillator started to test their mid-levels. Furthermore, the Moving Average Convergence/Divergence indicator climbed above its moving average, indicating that the bearish trend momentum was weakening.
The KLCI was near the immediate resistance level of 1,585 points. We expect the index to pull back if it fails to climb above 1,585 points. Furthermore, the index was below the short-term moving average. The immediate support level is at 1,550 points. Henceforth, the market is expected to consolidate sideways if it stays between the immediate support and resistance levels.
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 investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment adviser.