Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on June 26, 2019

The market pulled back for a bullish trend correction two weeks ago and started to turn bullish last week. The bullish sentiment was supported by the US Federal Reserve’s (Fed) decision to maintain its key interest rate and the resultant weaker US dollar. The weaker greenback has helped boost prices of commodities, including crude oil and gold.

The bullish market performance was in line with the performances of global markets. The FBM KLCI increased 2.7% in a week to 1,682.23 points, the highest in three months. The market pulled back for some correction this week and closed at 1,676.61 points yesterday.

Trading volume was lower last week but trading value was higher, especially towards the end of the week, indicating more institutional market participation. The average daily trading volume declined to 2.2 billion shares last week from 2.4 billion shares the week before. However, the average daily trading value increased to RM2.5 billion from RM1.9 billion.

The stronger ringgit has attracted both local and foreign institutions. Net buys from local and foreign institutions were RM40.2 million and RM28.2 million respectively. Net sell from local retail was RM68.4 million.

For the FBM KLCI, decliners beat gainers 17 to 10. The top three gainers were Tenaga Nasional Bhd (+14.1% in a week to RM13.90), Genting Malaysia Bhd (+8.2% to RM7.01) and Axiata Group Bhd (+6.8% to RM5.05). The top three decliners were RHB Bank Bhd (-1.4% to RM5.62), CIMB Group Holdings Bhd (-1.0% to RM5.23) and Petronas Dagangan Bhd (-0.6% to RM25.46).

Performances of global markets were bullish last week, with the Hong Kong Hang Seng index rising 5% in a week despite mass protest over a controversial extradition Bill. Other global markets ended higher.

The US Dollar Index fell to 96.1 points last Friday from 97.5 points as compared to the previous week as the Fed maintained its overnight policy rate. The ringgit strengthened against the US dollar at RM4.15 per US dollar from RM4.17 the week before.

The weaker US dollar pushed prices of commodities higher. Crude oil (Brent) rose 5.3% in a week to US$65.35 a barrel last Friday, while Comex gold futures increased 4.3% to US$1,403.00 an ounce. Crude palm oil (BMD) increased 0.6% in a week to RM2,021 per metric ton.

The FBM KLCI rose above the sideways consolidation resistance level at 1,657 points, with the next resistance levels at the psychological levels of 1,700 and 1,730 points. Immediate support level is at 1,636 points.

The FBM KLCI trend remained bullish in the short term above the short-term 30-day moving average and the short-term downtrend line. Furthermore, the index rose above the Ichimoku Cloud indicator. However, the index is still bearish in the longer term as it is still below the 200-day moving average, which is currently at 1,690 points.

Momentum indicators are increasing, indicating a strong bullish momentum. The Relative Strength Index and Momentum Oscillator are above their mid-levels and increasing. Furthermore, the Moving Average Convergence Divergence continued to rise above its moving average.

The bullish trend correction is over and the FBM KLCI is set to continue its bullish trend. The index is expected to test the next resistance levels at 1,700 and 1,730 points as long as it can stay above the broken resistance now turned support level at 1,657 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 investment advice or any form of recommendation. Should you need investment advice, please consult a licenced investment adviser.

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