KUALA LUMPUR (Oct 9): The FBM KLCI is expected to test the psychological level of 1,700 points today in line with the overnight gains at most global markets.
World stock indexes climbed and the dollar dipped on Thursday as minutes from the latest Federal Reserve meeting showed policymakers view low inflation as a hurdle to raising rates, according to Reuters.
U.S. crude oil prices briefly traded above $50 for the first time since July and added to gains late after a closely watched oil forecaster predicted prices would climb to $75 over the next two years, it said.
AllianceDBS Research in its evening edition Thursday said that led by the strong up close in the preceding day, the FBM KLCI had on Oct 8 crossed into the 1,700 zone to reach a high of 1,701.21 as market participants continued to play on the buying side in anticipation of a higher market.
However, the research house said weak follow through buying support at 1,701.21 prompted profit booking activity to kick in.
It said this pulled the benchmark index back down below the 1,700 level before settling at 1,692.20 (up 2.95 points or 0.17%).
“In the broader market, losers outnumbered gainers with 520 stocks ending lower and 339 stocks finishing higher. That gave a market breadth of 0.65 indicating the bears were in control,” it said.
AllianceDBS Research said the benchmark index crossed over the 1,700 psychological level to a high of 1,701.21 on Oct 8 after spending 42 days below 1,700.
“However, the market did not get to stay above the 1,700 level for long as market participants with winning trades took advantage of the breakout to lock in a portion of their profit.
“The rationale behind the bouts of profit taking activity was not beyond comprehension because the benchmark index has already chalked up 106 points or 6.64% in 7 days measuring from the low of 1,595 (29 Sep 2015) to the high of 1,701 (8 Oct 2015).
“There is an imbalance demand and supply forces in the game play now, the market is likely to realign its position to find an equilibrium point,” it said.
AllianceDBS Research said following the up close on Oct 8, the market is expected to trade between 1,670 and 1,701 in the coming few days.
It said a decisive upside breakout of 1,701 could see the market gearing towards the next resistance at 1,710.
Conversely, it said a downside violation of 1,670 would put pressure on the market down to the subsequent support zone, 1620 – 1,630, adding that indicator wise, the MACD was above the 9-day moving average line.
“The analysis of overall market action on Oct 8 revealed that buying power was stronger than selling pressure.
“As such, the FBM KLCI would likely trade above the 1,701.21 level on Oct 9,” said AllianceDBS Research.