This article first appeared in The Edge Financial Daily on November 15, 2017
The market started on a bullish note last week but the momentum was not strong. The FBM KLCI closed 0.1% lower to 1,742.28 points after pulling back from a high of 1,750.94. Yesterday, the index closed at 1,733.61 points. This showed that the resistance level at 1,750 points was still strong as this level was also being tested for three times two weeks ago. Also, we mentioned in previous articles that any rally was likely going to be greeted by sellers.
Trading volume was firm last week compared with the previous week’s. The average daily trading volume was 3.1 billion shares. However, the average daily trading value slightly increased from RM2.4 billion to RM2.5 billion.
Foreign institutions turned net buyers last week as the ringgit strengthened. Net buy from foreign institutions was RM23 million. Net sell from local institutions and retail were RM4 million and RM19 million respectively.
For the FBM KLCI, gainers outweighed decliners 15 to 14. Top gainers for the week were Genting Bhd (+5.6% in a week to RM9.41), British American Tobacco (Malaysia) Bhd (+4.3% to RM39.40) and YTL Corp Bhd (+4% to RM1.29). Top decliners were Petronas Dagangan Bhd (-7.9% to RM21.60), IJM Corp Bhd (-3.2% to RM3.07) and DiGi.Com Bhd (-2% to RM4.84).
Global market performances were mixed. Asian markets were bullish while Western markets pulled back after climbing to historical highs two weeks ago. Shanghai Stock Exchange Composite Index climbed to its highest level in nearly two years and Hong Kong’s Hang Seng Index rose to its highest level in nearly 10 years.
The US dollar was slightly weaker against major currencies. The US Dollar Index, which measures the US dollar against major currencies, declined from 94.9 points to 94.4 last Friday. The ringgit strengthened against the US dollar, from RM4.23 to RM4.19 to a US dollar last Friday.
On commodities, crude oil price rose to its highest level since June 2015 last week. Brent crude oil increased 2.4% in a week to US$63.60 (RM266.48) last Friday. Gold (COMEX) was closed marginally higher at US$1,275.60 an ounce. Locally, crude palm oil futures also fell marginally to RM2,797 per tonne last Friday.
The failure to rebound last week indicated a weak market sentiment. The resistance level at 1,750 points has yet to be broken. The index has tested this level for the fourth time in the past two weeks.
The failure to overcome the resistance level indicated that the FBM KLCI was technically bearish. The index was technically bearish below the 30- and 200-day moving averages. Furthermore, the index was below the Ichimoku Cloud indicator.
Momentum indicators like the Relative Strength Index (RSI) and Momentum Oscillator indicated that the bearish trend was gaining some strength. The RSI indicator briefly climbed above its mid-level but failed to stay above it. However, the Bollinger Bands were squeezing and this indicated that the market was in a correction. Furthermore, the moving average convergence divergence remained above its moving average.
The FBM KLCI may decline further if it continues to stay below the immediate resistance level at 1,750 points. The index may test the next support level between 1,700 and 1,710 points if it fails to overcome the resistance level.
Henceforth, we expect the market to remain weak and directionless this week.
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.