Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on June 6, 2018

The FBM KLCI plunged to its lowest level this year in the first two trading days last week. However, it rebounded towards the weekend and hence staged a volatile week. Market sentiment was bearish as foreign institutions continued their selling spree.

The FBM KLCI declined 2.3% in a week to 1,756.38 last Friday after rebounding from a low of 1,709.51 points. There have not been many changes this week as the index closed at 1,755.14 points yesterday.

Trading volume increased significantly last week. The average daily trading volume rose to 3.4 billion shares from 2.6 billion two weeks ago and the average daily trading value increased to RM4.7 billion from RM3.2 billion. This indicated selling pressure on higher-market-cap counters.

Foreign institutions continued to be the net sellers and the sales were higher than the previous week. Net sales from foreign institutions were RM1,269 million while net buys from local institutions and local retail were RM817 million and RM452 million respectively.

For the FBM KLCI, decliners beat gainers six to one. Top gainers for the week were MISC Bhd (+3.9% to RM6.19), Genting Bhd (+2.3% to RM8.10), and AMMB Holdings Bhd (+0.8% to RM3.61). Top decliners were Astro Malaysia Holdings Bhd (-11.9% to RM1.41), Sime Darby Bhd (-11.2% to RM2.45), and Telekom Malaysia Bhd (-8.0% to RM3.69).

The Malaysian market was not the only bearish market. Generally, markets globally closed lower. Singapore’s Straits Times Index fell 2.4%. The US Dow Jones Industrial Average and London’s FTSE100 index fell marginally lower while most European markets fell about 1.5%.

The US dollar was firm against major currencies last week after weeks of gains. The US dollar index closed at 94.2 points last Friday compared with 94.3 points the week before. The ringgit slightly weakened against the US dollar and was at RM3.99 last Friday compared with RM3.98 against a US dollar the week before.

Crude oil rebounded and closed higher last week. Crude oil (Brent) increased 0.5% in a week to US$76.70 (RM304.50) a barrel. The Commodity Exchange gold price was marginally lower at US$1,297.90 compared with the previous week. In the local market, crude palm oil futures declined 0.7% to RM2,439 per tonne.

The FBM KLCI found support at 1,710 points in the bearish market. This has also been the support level for the past two years. The immediate resistance level is at 1,775 points, which is last Monday’s low as there was a gap between last Monday and last Wednesday.

Technically, the trend is strongly bearish in both the short and long term. The FBM KLCI continued to decline below the short-term 30- and 200-day moving averages last week. Furthermore, the index was below the Ichimoku Cloud and the Cloud was also bearish.

Momentum indicators like the Relative Strength Index (RSI), moving average convergence divergence, and oscillator continued to indicate a strong bearish sentiment. Also, the Bollinger Bands indicator was expanding and the FBM KLCI continued to trade near the bottom band. However, the RSI indicator indicated that the index was oversold.

The index rebounded last Friday but was not able to rally and declined further. It was not able to climb above the immediate resistance level of 1,800 points.

This week could be the same if the index is not able to overcome the immediate resistance now at 1,775 points. If it fails to break this immediate resistance, then expect further declines towards the psychological support level at 1,700 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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