Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on November 28, 2018

The FBM KLCI was directionless last week. The market started on a bullish note last Monday but went downhill after the holiday last Tuesday on weak global market performances. However, the “doji” Japanese candlestick chart pattern was formed on the FBM KLCI daily charts last week, and this indicates uncertainty.

Market sentiment was also weak on falling crude oil and crude palm oil prices. Hence, the market was cautious and trading volume shrank. The benchmark KLCI fell 0.6% in a week to 1,695.88 points last Friday.

The average daily trading volume has declined to 1.8 billion from two billion shares in the previous week, and the average daily trading value has fallen to RM1.5 billion from RM1.8 billion. This indicates that more low-market capped stocks were being traded and lower capped stocks were normally traded more by retail participants.

Local institutions and retailers were net buyers last week as foreign institutions continued their selling momentum. Net buying from local institutions and local retailers were RM45.3 million and RM41 million, while net selling from foreign institutions was RM86.3 million.

For the KLCI, decliners beat gainers two to one. Top gainers were Sime Darby Bhd (+2.9% in a week to RM2.47), IHH Healthcare Bhd (+1.3% in a week to RM4.80) and KLCC Property Holdings Bhd (+0.8% to RM7.70). The top three decliners were Malaysia Airports Holdings Bhd (-4.8% to RM7.77), Dialog Group Bhd (-2.7% to RM3.20) and Axiata Group Bhd (-2.6% to RM3.41).

Global markets were in a sea of red yesterday. Leading the pack in Asia was China. The Shanghai Stock Exchange Composite Index fell 3.7% in a week, the lowest in three weeks. Markets in Europe and the UK fall between 1% and 2% generally. The US Dow Jones Industrial Average fell 4.4% in a week to its lowest level in four months.

The US dollar was slightly stronger than major currencies. The US dollar index rose to 96.9 points last Friday from 96.4 points the week before. However, the ringgit held firm against the greenback at RM4.19 compared with the previous week.

Major commodities prices for Malaysia were mixed. Brent Crude oil fell 11.8% in a week to US$59.20 (RM248.05) per barrel last Friday, the lowest in a year. Commodity Exchange gold closed almost unchanged, rising only 0.1% from the previous week at US$1,223.40 an ounce. Crude palm oil rebounded from a three-year low to close 3.5% higher at RM2,045 last Friday.

The KLCI found support two weeks ago but failed to rally last week. The index was directionless and continued to stay between the immediate support level at 1,679 points and resistance at 1,720 points.

Technically, the FBM KLCI trend remained bearish below the short-term 30-day moving average and the long-term 200-day moving average. Furthermore, the index stayed below the Ichimoku Cloud indicator. However, the Cloud is thin and this normally indicates that the market is in a consolidation phase.

Momentum indicators have pulled back from their bullish momentum in the past two weeks. The Relative Strength Index and Momentum Oscillator have failed to climb above their mid-levels, and this indicates that the market is still facing resistance. However, the moving average convergence divergence indicator has remained above its trigger line, and this indicates that the bearish momentum is still weak.

In the previous week, we have seen a “inverted head and shoulders” chart pattern which indicates that the KLCI has found support and may stage a rebound. However, the index failed to break above the pattern’s neckline or confirmation at 1,720 points. This indicates that market confidence is still weak. After a week, a “triangle” chart pattern was formed, and this indicates that the market is in a correction phase.

Therefore, the market is expected to remain directionless as long as the KLCI stays between the support and resistance levels at 1,679 and 1,720 points respectively. The clue to which direction the market is heading lies in these levels. A breakout above the resistance level indicates that the market is ready for a technical rebound but a violation below the support level could mean continuation of the bearish trend.


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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