KUALA LUMPUR (Nov 5): The FBM KLCI is expected to trade range-bound today and test the 1,690-point level after the weaker overnight close at Wall Street as crude oil prices dipped.
Wall Street stocks ended down on Wednesday as energy stocks turned lower on a drop in oil prices and two Federal Reserve officials said U.S. economic strength could justify a December interest rate hike, according to Reuters.
The U.S. dollar hit an almost three-month high and U.S. Treasury yields soared after the Fed comments, building on a rise from unexpectedly strong private-sector U.S. job growth and other data that reflected well on the world's largest economy, it said.
AllianceDBS Research in its evening edition Wednesday said that supported by the up close in the preceding day, the FBM KLCI had on Nov 4 gapped up to reach a high of 1,687.95 as market participants rushed in to acquire stocks in anticipation of a higher market.
The research house said that under the persistent supportive buying interest, the benchmark index was in the green throughout the trading sessions before settling near the day’s high at 1,685.62 (up 8.06 points or 0.48%).
“In the broader market, gainers outnumbered losers with 558 stocks ending higher and 333 stocks finishing lower. That gave a market breadth of 1.67 indicating the bulls were in control,” it said.
AllianceDBS Reseaerch said that having settled at the highest level in the previous day, the benchmark index went on to register another day of higher high on Nov 4 with an upside gap.
“An upside gap indicated the urgency of traders to establish stock positions.
“The minority well-informed knowledgeable traders apparently focused on the trading opportunity presented in term of risk reward after the recent decline of 69 points measuring from the high of 1,727 (Oct 19) to the low of 1,658 (Nov 2), which represented a retracement of 52% of the market rise from the low of 1,595 (Sept 29) to the high of 1,727 (Oct 19).
“Given the up close on Nov 4, the market is expected to trade higher again with next hurdle at 1,695,” it said.
The research house said the support zone is pegged between 1,667 and 1,673, adding that indicator wise, the MACD was still below the 9-day moving average line.
“The analysis of overall market action on Nov 4 revealed that buying power was stronger than selling pressure.
“As such, the FBM KLCI would likely trade above the 1,687.95 level on Nov 5,” said AllianceDBS Research.