KUALA LUMPUR (Oct 8): The FBM KLCI is in a position to test higher level today in line with the oevrnight gains at most global markets, but gains may be limited by some bouts of profit taking.
World stock indexes rose on Wednesday with a rebound in biotechnology shares boosting U.S. equities, while oil prices snapped a three-day rally after U.S. data showed a large inventory build, according to Reuters.
The S&P 500 hit its highest in three weeks, but concern about corporate earnings just ahead of the U.S. third-quarter reporting season kept trading choppy. Reduced profit forecasts from Adobe Systems and Yum Brands late Tuesday added to gloom about the earnings picture, it said.
AllianceDBS Research in its eveing edition Wednesday said that led by the encouraging up close in the preceding day, the FBM KLCI had on Oct 7 traded higher to reach a high of 1,690.79 as market participants continued to play on the buying side in anticipation of a higher market.
The research house said that under the persistent buying interest, the benchmark index was in the green throughout the trading sessions before settling near the day’s high at 1,689.25 (up 26.74 points or 1.61%).
“In the broader market, gainers outnumbered losers with 699 stocks ending higher and 223 stocks finishing lower. That gave a market breadth of 3.13 indicating the bulls were firmly in control,” it said.
AllianceDBS Research said in view of the positive momentum created on Oct 6, market participants took the chance to buy into the market soon after the opening bell on Oct 7, because sellers were seen unwilling to push the market lower than 1,657.73.
“With the upside gap left behind on Oct 6 expected to be unfilled and the absence of new selling supply in the area of 1,675, a general market perception of a bullish game play was formed. “Retail traders and investors also did not want to miss the buying opportunity after the second crossover of the 50-day MA line on Oct 5, this can be seen from the sustained buying activity of 2.69 billio shares of market volume.
“Following the up close on Oct 7, the market is thus expected to gear upward again with immediate hurdle at 1,690,” it said.
The research house said a crossover of 1,690 could send the benchmark index to the next resistance at 1,710, adding that indicator wise, the MACD was above the 9-day moving average line.
“The analysis of overall market action on Oct 7 revealed that buying power was stronger than selling pressure.
“As such, the FBM KLCI would likely trade above the 1,690.79 level on Oct 8,” said AllianceDBS Research.