KLCI expected to trend higher on improved buying sentiment

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KUALA LUMPUR (July 22): The FBM KLCI is expected to trend higher today and hover around the 1,730-level, lifted by improved buying power at the local bourse on select blue chips.

Weak earnings dragged stocks lower on Tuesday and Apple's results weighed U.S. futures further, while a slip in the dollar helped oil and gold cap a string of losing sessions, according to Reuters.

Stocks on Wall Street fell, with results from bellwethers IBM and United Technologies weighing the most on the S&P 500, while Apple slumped 7 percent late after posting earnings. U.S. equity futures extended losses, pointing to a weaker open on Wednesday, it said.

AllianceDBS Research in its evening edition Tuesday said despite the weak down close in the preceding day, the FBM KLCI had on July 21 traded only to a low of 1,722.61 after opening on a positive note as market participants chose not to stage an immediate follow through selling pressure.

The research house said that in the absence of stronger selling interest, the benchmark index was in the green throughout most of the trading sessions before settling at the day’s high of 1,736.19 in the last few minutes buying of selective blue chips (+12.06 , +0.70%).

“In the broader market, gainers outnumbered losers with 555 stocks ending higher and 261 stocks finishing lower. That gave a market breadth of 2.12 indicating the bulls were in control,” it said.

AllianceDBS Research said given the market actions in the last 5 days, the benchmark index was seen building a small consolidation base above the 1,720 level.

“The non-follow through selling pressure on July 21 suggested that market participants were expecting a range bound trading environment between 1,720 and 1,739 in the coming few days. “Following the strong up close, the benchmark index is likely to test higher level again with immediate hurdle at 1,739. A crossover of 1,739 should lift the market towards the next resistance at 1,760.

“However, a fall below 1,720 could send the market down to the subsequent support at 1,706,” said the research house.

It said that indicator wise, the MACD was above the 9-day moving average line.

“The analysis of overall market action on July 21 revealed that buying power was stronger than selling pressure.

“As such, the FBM KLCI would likely trade above the 1,736.19 level on July 22,” said AllianceDBS Research.