This article first appeared in The Edge Financial Daily on March 6, 2019
The FBM KLCI declined last week after it rose to its highest in four months two weeks ago. Market was generally bearish on profit-taking and selling pressure from foreign institutions. Trading volume declined compared with the previous week when the index rose 1.9%. The index fell 1.2% last week to 1,700.76 points last Friday. The index has declined further this week to close at 1,685.62 points.
The average daily trading volume fell to 2.7 billion shares last week compared with 3.2 billion in the previous week. The average daily trading value declined to RM2.5 billion from RM2.7 billion.
Selling pressure came from foreign institutions. Net sell from foreign institutions was RM398.2 million last week. Net buys from local institutions and retail investors were RM259.3 million and RM138.9 million respectively.
In the KLCI, decliners beat gainers 13 to two. The top three gainers were Petronas Chemicals Group Bhd (+2.7% in a week to RM9.27), RHB Bank Bhd (+1.8% to RM5.69) and Hong Leong Bank Bhd (+0.3% to RM21.28). The top three decliners were Westports Holdings Bhd (-5.9% to RM3.64), Sime Darby Bhd (-4.4% to RM2.18) and Top Glove Corp Bhd (-3.9% to RM4.64).
Global market performances were mixed. In Asia, the Shanghai Stock Exchange Composite Index increased for the eighth week to its highest level in nine months. Most of the other Asian markets closed lower except for Japan, which rose marginally higher. Markets in Europe closed higher while UK and US markets slightly declined.
The US Dollar Index, which measures the US dollar against a basket of major currencies, was firm at 96.4 points. The ringgit strengthened marginally against the US dollar from RM4.08 two weeks ago to RM4.07 last Friday.
Prices of major commodities fell last week. Price of gold (Comex) declined 2.7% in a week to US$1,294.50 (RM5,281.56) an ounce last Friday. Crude oil (Brent) fell 2.9% to US$65 per barrel. Crude palm oil declined 2.8% to RM2,189 per tonne.
The KLCI has pulled back to the resistance level that it broke two weeks ago at 1,700 points and is near the 38.2% Fibonacci retracement level from the bullish trend that started in December last year at 1,690 points. Immediate resistance is at 1,732 points, which was the pivot high two weeks ago.
Technically, the KLCI remained bullish as it stayed slightly above the short-term 30-day moving average after the pullback last week. The index is above the Ichimoku Cloud indicator. Next week is the reversal point for the Ichimoku Cloud from a bearish to a bullish trend.
Momentum indicators pulled back last week. However, the Relative Strength Index and Momentum Oscillator remained slightly above their mid levels despite the pullback. The moving average convergence divergence indicator is starting to cross below its moving average and this indicates that the bullish trend has weakened. However, it also indicates that the bullish trend is at the support level.
The KLCI is currently at the short-term bullish trend support level. The index is either going to rebound from this support level or continue to fall to a bearish trend. The index fell below the support level of 1,700 points and hence may find the next support level at 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.