KLCI to trend higher on follow through buying

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KUALA LUMPUR (Nov 26): The FBM KLCI is expected to trend higher today on follow through buying for heavyweights.

At the global markets, Wall Street stocks closed mixed on Tuesday with early gains pared after the lowest U.S. consumer confidence data since June took the wind out of a rally spurred by upwardly revised U.S. economic growth, dragging down the U.S. dollar in the process, according to Reuters.

The U.S. data took some of the momentum away from Wall Street, while European share prices managed to hold onto the plus column. Asian shares were mixed, it said.

After a promising start, U.S. shares ended mostly lower. Apple Inc. was the biggest single drag on the benchmark S&P 500 stock index, closing down 0.9 percent at $117.60, while as a group, energy shares were the weakest sector, said Reuters.

AllianceDBS Research in its evening edition Tuesday said that led by the strong up close above the 1,830 level in the preceding day, the FBM KLCI had on Nov 25 traded firmer to reach a high of 1,843.55 as market participants continued to play on the buying side in anticipation of a higher market.

The research house said that under the supportive buying interest, the benchmark index held its position near the high end throughout most of the trading sessions before settling at 1,838.56 (+4.79, +0.26%).

It said that in the broader market, losers outnumbered gainers with 308 stocks ending lower and 476 stocks finishing higher, explaining that that gave a market breadth of 0.64 indicating the bears were in control.

AllianceDBS Research said the ability of the benchmark index to stay above the 1,830 level again was encouraging because this indicated a follow through buying for the heavyweights with buyers in better control over the sellers.

“However it is still premature to confirm a market reversal at this juncture as a minimum of 3 consecutive days of settlement above the 1,830 level is required,” it said.  

The research house said the market run up in the last 2 days had helped to recover about 71% of the lost ground over a period of 11 days [1,858 (3 Nov 2014) minus 1,806 (17 Nov 2014)].

It said a preliminary analysis of the trading patterns from Nov 3 to Nov 25 suggested that a change of game play from selling to buying was shaping up.

“Given the up close on 25 Nov 2014, the market is in position to trade higher again with next hurdle seen at 1,860. Indicator wise, the MACD is above the 9-day moving average line.

“The analysis of overall market action on Nov 25 revealed that buying power was stronger than selling pressure.

“As such, the FBM KLCI would likely trade above the 1,843.55 level on Nov 26,” it said.