Bursa Malaysia is catching up with the bullish market performances as the ringgit and crude oil prices, which weigh down the index, are starting to favour the local market. Crude oil continued to increase after a rebound last week and the ringgit got stronger against the US dollar. The FBM KLCI broke above the 1,856-point immediate resistance level and closed at its highest level in seven months. The index increased 1.3% to 1,862.80 points on significantly higher trading volume.

The average daily trading volume in the past week was 2.9 billion shares as compared with two billion shares two weeks ago. The average daily trading value increased to only RM2.5 billion from RM2.1 billion two weeks ago. This indicates that the second-liners or lower capped counters were being traded more in the past week.

Foreign institutions continued to be net buyers last week on a stronger ringgit. Net buying from foreign institutions last week (Monday to Friday) was RM307.3 million while net selling from local institutions and local retail were RM159.6 million and RM147.7 million respectively. For the KLCI, gainers trounced decliners five to two. The top three gainers were SapuraKencana Petroleum Bhd (+13.8% from last week), IHH Healthcare Bhd (+6.6%) and Petronas Chemicals Group Bhd (+6.0%). The top three decliners were IOI Corp Bhd (-3.7%), British American Tobacco (M) Bhd (-3.2%) and Genting Malaysia Bhd (-2.4%).

Markets in the region continued their bullish rally. China’s Shanghai Stock Exchange Composite Index continued to climb to its seven-year high and increased 3.8% in a week to 4,294.31 points yesterday. Japan’s Nikkei 225 closed marginally higher at 19,909.09 points. Hong Kong’s Hang Seng increased 1% in a week to 27,850.49 points. However, Singapore’s Straits Times Index pulled back from its seven-year high last week and declined 0.3% in a week to 3,508.61 points.

Markets in the United States and Europe took a breather last week after climbing to record highs two weeks ago as the US dollar weakened. On Monday, the US Dow Jones Industrial Average rose 0.3% in a week to 18,034.93 points. Germany’s DAX Index declined 3.6% in a week to 11,891.11 points after climbing to record highs last week. London’s FTSE100 index declined 0.2% to 7,052.47 points.

The US Dollar Index declined from 99.77 points a week ago to 98.16 points. Hence, the ringgit strengthened against the greenback from 3.70 last week to 3.63. Gold was directionless and declined marginally to US$1,192.90 (RM4,354) an ounce. Crude oil (Brent Crude) increased 6.5% in a week to US$63.45 per barrel. Crude palm oil futures on Bursa Malaysia rebounded and increased 1.1% in a week to RM2,173 per tonne.

The market is now expected to trend higher after breaking the immediate resistance level. The KLCI remained above the short-term 30-day moving average and the 30-day moving average has crossed above the long-term 200-day moving average. This indicates a strong bullish trend. Furthermore, the index is also above the rising Ichimoku Cloud indicator.

Momentum indicators like the RSI and Momentum Oscillators have started to increase after staying flat for a week. The MACD indicator climbed above its moving average and the KLCI climbed to the top band of the Bollinger Bands indicator. These indicators show that the bullish momentum is starting to strengthen.

After a two-week correction, the KLCI is set to trend higher and an all-time high is in sight. The chances are higher if the index can stay above the broken immediate resistance level at 1,856 points as this indicates that the market sentiment is very bullish. Nevertheless, the market is still bullish if it can stay above the support level at 1,830 points.

Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia. He can be contacted at [email protected]. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgement or seek professional advice for your investment decisions.

This article first appeared in The Edge Financial Daily, on April 22, 2015.