KLCI could defend 1,740 level, but stiff challenge seen on profit taking

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KUALA LUMPUR (Aug 4): The FBM KLCI could defend its 1,740-point level today, against the backdrop of some stiff challenge from possible profit taking.

Stocks fell and oil futures prices sank to a six-month low on Monday on demand concerns after factory data from China and the United States disappointed, according to Reuters.

Brent slumped to its lowest since late January as factory activity in China, the world's second-biggest economy, shrank more than initially estimated last month. The pace of growth in the US manufacturing sector slowed in July and missed expectations, it said.

AllianceDBS Research in its evening edition Monday said despite last Friday’s up close, the FBM KLCI had on August 3 opened the day on a weaker note as market participants chose not to stage immediate follow through buying activity.

However, it said non-follow through selling pressure on the area of 1,714.82 saw some supportive buying interest emerge.

“This subsequently led the benchmark index to settle at day’s high of 1,744.19 (+21.05, +1.22%) in the last few minutes buying of selective blue chips.

“In the broader market, losers outnumbered gainers with 465 stocks ending lower and 324 stocks finishing higher. That gave a market breadth of 0.69 indicating the bears were in control,” it said.

AllianceDBS Research said the higher high on August 3 was not much of a surprise as market actions during the period of July 28 to July 31 had suggested that certain market participants do not wish to see the benchmark index falling below the 1,700 level.

The research house said following the last few minutes buying of selective blue chips to place the benchmark at the highest level of the day on August 3, the market is likely to test a higher level again with an immediate hurdle at 1,760. The immediate support is pegged at 1,739.

It said a fall below 1,739 would put pressure on the market down to the next support at 1,714, adding that indicator wise, the MACD was above the 9-day moving average line.

“The analysis of overall market action on August 3 revealed that buying power was stronger than selling pressure.

“As such, the FBM KLCI would likely trade above the 1,744.19 level on August 4,” said AllianceDBS Research.