This article first appeared in The Edge Financial Daily on December 11, 2019
The market slightly rebounded last week after a steep decline two weeks ago. The rebound was supported by plantation stocks. Plantation counters were boosted by palm oil prices, which had risen 32% in a month. However, finance stocks continued to weigh the FBM KLCI down. Furthermore, rebounds in the regional markets provided some boost to confidence.
The benchmark KLCI increased only 0.4% in a week to 1,568.44 points last Friday. The index has continued to decline this week and closed at 1,561.79 points yesterday.
Trading volume fell last week. The average daily trading volume was 2.5 billion shares, compared with 2.8 billion shares in the previous week. The average daily trading value, however, fell to RM1.7 billion from RM2.3 billion in the previous week. Lower-capped counters, normally traded by retail participants rather than institutions, continued to be the focus.
For the KLCI, gainers slightly outpaced decliners 15 to 14. The top three gainers were Sime Darby Bhd (+5.3% in a week to RM2.37), Kuala Lumpur Kepong Bhd (+3.5% to RM24.16) and IOI Corp Bhd (+3% to RM4.48). The top three decliners were AMMB Holdings Bhd (-2.8% to RM3.88), Petronas Dagangan Bhd (-2.5% to RM22.34) and Public Bank Bhd (-2.3% to RM19.16).
Global market performances were mixed last week. Most of the Asian market indices closed slightly higher. The US and European markets closed mostly lower. The performance of the KLCI was in line with that of the Asian markets.
The US dollar weakened against other major currencies. The US Dollar Index declined to 97.7 points last Friday from 98.3 points two weeks ago. The ringgit strengthened to 4.16 against the greenback last Friday, compared with 4.18 the previous week.
In the commodity market, gold remained directionless. Commodity Exchange gold futures fell 0.6% in a week to US$1,464.55 (RM6,092.53) an ounce last Friday. However, Brent crude increased 3.1% to US$64.39 per barrel, the highest in nearly three months. In the local market, crude palm oil (BMD) rose to a fresh two-year high, increasing 4% in a week to RM2,855 per tonne last Friday.
The KLCI rebounded after testing the 1,550-point immediate support level last week. The previous support level of 1,585 points has now turned into the immediate resistance level.
Technically, the KLCI remains bearish below the short-term 30-day moving average despite staging a rebound. The index is also below the Ichimoku Cloud indicator, also indicating that the trend is bearish.
Momentum indicators like the Relative Strength Index and Momentum Oscillator rebounded below their mid-levels, indicating a weak bearish trend momentum. However, the Moving Average Convergence Divergence indicator remained below its moving average, indicating that the market is in a bearish trend correction.
The KLCI is expected to stage a technical rebound if it can stay above the immediate support level of 1,550 points. The index may test the resistance level of 1,585 points and if it fails to break above this level, the bearish trend may continue and the index can fall to lower than 1,550 points.
The above commentary is solely used for educational purposes and is the writer’s point of view using technical analysis. The commentary should not be construed as investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment adviser.