Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on July 4, 2018

The FBM KLCI almost snapped a two-week decline last week after it rebounded last Friday from a mostly bearish week. The market went on bargain hunting on global markets’ cue. However, the market was still cautious as the ringgit continued to weaken and hence foreign institutions remained as net sellers. The FBM KLCI declined only 0.2% for the week to 1,691.5 points last Friday after rebounding from a low of 1,657.8 points. Yesterday, the index closed at 1,680.37 points.

Trading volume significantly declined last week as the market was cautious. The average daily trading volume fell to two billion shares from 2.6 billion shares two weeks ago while the average daily trading value fell to RM2.3 billion from RM3.3 billion.

Foreign institutions continued to remain as net sellers last week but with less pressure. Nevertheless, the selling pressure was still relatively high. Net sell from foreign institutions was RM705 million while net buys from local institutions and retail investors were RM614 million and RM91 million respectively.

For the FBM KLCI, gainers edged decliners eight to seven. The top three gainers were Tenaga Nasional Bhd (+6.1% to RM14.64), KLCC Stapled Group (+6% to RM8.00), and Hartalega Holdings Bhd (+4.0% to RM5.99). Top decliners were Axiata Group Bhd (-10.8% to RM3.80), CIMB Group Holdings Bhd (-6.2% to RM5.45), and DiGi.Com Bhd (-5% to RM4.15).

Global markets rebounded sharply last Friday but failed to close higher on a week-to-week basis. In Asia, the fall was led by Shanghai with a 1.5% decline. Germany continued to lead the decline while US markets, including Nasdaq Composite Index, fell as well.

The US dollar ended unchanged against major currencies from the previous week. The US Dollar Index closed at 94.5 points last Friday. However, the ringgit weakened against the US dollar from RM4.00 two weeks ago to RM4.04 to a US dollar last Friday.

As for commodities, gold failed to shine despite uncertainties in the equity markets. Gold (COMEX) fell 1.3% in a week to US$1,254.20 (RM5,079.51) an ounce, the lowest in six months. On the other hand, crude oil surged 5.2% in a week to US$79.42 a barrel, shying away from the highest level since November 2014. In the local market, crude palm oil futures snapped a four-week decline and increased 1.8% for the week to RM2,223 per tonne last Friday.

Two weeks ago, the index fell below the support level at 1,705 points and continued to stay below this level. This support level has now turned immediate resistance level and hence the trend should remain strongly bearish if the FBM KLCI stays below this level. Nevertheless, the trend is still technically bearish if the index stays below 1,746 points based on the 61,8% Fibonacci retracement level of the current bearish trend.

Trend-wise, the FBM KLCI is bearish below both the short- and long-term 30- and 200-day moving averages and these averages are declining. The 30-day moving average is currently at 1,754 points. Furthermore, the index is below the Ichimoku Cloud and the expanding Cloud indicates a strong bearish trend.

Momentum indicators like the Relative Strength Index, moving average convergence divergence, and Momentum Oscillator started to rebound last week. This showed that the bearish momentum was weakening. These indicators were at oversold levels and we mentioned last week that this might attract buyers who were hunting for bargains.

We expected the market to rebound last week as the market was somewhat oversold based on the technical indicators. However, the expected rebound came late last week. The bullish rebound last Friday is expected to continue this week and like we mentioned in the previous article, the index may test the immediate resistance level at 1,705 points. If the index fails to overcome this level, further downside is seen. The next support level the index is going to test if it fails to overcome the 1,705-point level is at 1,620 points.


The above commentary is solely used for educational purposes and is the contributor’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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