This article first appeared in The Edge Financial Daily on February 27, 2019
After weeks of a directionless market, the FBM KLCI finally broke above the immediate resistance level of the sideways trend at 1,702 points and closed 1.9% higher in a week at 1,721.42 points last Friday. Trading volume increased as the Chinese New Year holiday season ended. Last Thursday, the index closed at its highest in four months. The bullish performance was in line with global market performances. Yesterday, the index closed at 1,719 points.
The average daily trading volume last week was 3.2 billion shares compared with three billion in the previous week. The average daily trading value increased to RM2.7 billion from RM2 billion. This showed a shift from lower-capped stocks to higher-capped ones.
The market trend continued to be domestically supported. Net buy from local institutions was RM356.7 million. Net sells from foreign institutions and local retail investors were RM271.3 million and RM85.4 million respectively.
For the KLCI, gainers beat decliners five to one. The top three gainers were Axiata Group Bhd (+7.9% in a week to RM4.25), Petronas Chemicals Group Bhd (+6.1% to RM9.03) and Genting Bhd (+5.8% to RM7.51). The top three decliners were Hartalega Holdings Bhd (-3.3% to RM5.25), Maxis Bhd (-2.1% to RM5.51) and Top Glove Corp Bhd (-2% to RM4.83).
Global market performances were bullish. Asian market indices were led by Chinese markets including Hong Kong. European and US market indices closed higher as well but the UK’s FTSE100 index fell 1% in a week.
The US dollar was weaker against major currencies last week. The US Dollar Index declined to 96.5 points from 96.9 points. The ringgit held firm against the US dollar. The ringgit closed at RM4.08 per US dollar last Friday.
Prices of major commodities closed marginally higher last week. Price of gold (Comex) increased 0.4% in a week to US$1,330.70 (RM5,415.95) an ounce last Friday. Crude oil (Brent) rose 0.8% to US$66.91 per barrel. Crude palm oil closed almost unchanged at RM2,252 per tonne.
The KLCI broke above the immediate resistance level of 1,702 points and managed to stay above it. The next resistance level is at 1,740 points based on the long-term 200-day moving average. The immediate support level remains at 1,680 points.
Technically, the KLCI is bullish as it climbs higher away from the short-term 30-day moving average after staying around this level for the past few weeks. The index remains above the Ichimoku Cloud indicator. The expanding cloud indicator indicates stronger support in the uptrend.
Momentum indicators are starting to increase. The Relative Strength Index and Momentum Oscillator are climbing higher after being directionless for weeks. This shows that the bullish sentiment is gaining traction. The Moving Average Convergence Divergence indicator has also risen above its moving average.
As we mentioned in the previous article, the bullish trend is set to continue if the resistance level of 1,702 points is broken. Henceforth, we expect the KLCI to trend higher towards the next resistance level of 1,740 points if it can stay above the immediate support level of 1,680 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.