Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on December 18, 2019

In the past two weeks, the FBM KLCI has been trading sideways after pulling since last month. The index seemed to have found support at 1,550 points, which was also the support level in October. The number of white candles outpaced the number of black candles in the candlesticks chart, indicating good support. The market was also supported by higher commodities prices, a stronger ringgit and bullish global market performances.

The benchmark KLCI increased to 1,571.16 points last Friday, the second consecutive weekly increase. The index has rebounded this week and closed at 1,576.95 points yesterday.

Trading volume increased. The average daily trading volume last week was 2.9 billion shares, compared with 2.5 billion shares in the previous week. The average daily trading value increased to RM3.3 billion from RM1.7 billion in the previous week, showing higher institutions’ participation as they favoured higher market-capped counters.

For the KLCI, gainers outpaced decliners four to three. The top three gainers were Petronas Dagangan Bhd (+5.4% in a week to RM23.54), Petronas Gas Bhd (+3.8% to RM16.40) and IHH Healthcare Bhd (+2.5% to RM5.40). The top three decliners were Malaysia Airports Holdings Bhd (-7.4% to RM7.55), Sime Darby Bhd (-3% to RM2.30) and AMMB Holdings Bhd (-2.3% to RM3.79).

Global market index performances were bullish last week. Hong Kong’s Hang Seng Index led the Asian market with a 4.5% increase in a week. US and European markets closed higher as well.

The US dollar continued to weaken against major currencies. The US Dollar Index declined to its lowest level in nearly five months at 97.1 points last Friday, from 97.7 points two weeks ago. The ringgit strengthened to 4.13 against the greenback last Friday, compared with 4.16 in the previous week.

In the commodity markets, oil and gold closed higher. Commodity Exchange gold futures increased 1% in a week to US$1,481.20 (RM6,132.17) an ounce last Friday, while Brent crude oil increased 0.8% to US$65.22 per barrel, a fresh three-month high. In the local market, crude palm oil (BMD) fell to 0.1% in a week to RM2,853 per tonne last Friday for a correction.

After rebounding from 1,550 points two weeks ago, the KLCI remained above this level and closed higher. However, it was still below the immediate resistance level of 1,585 points.

Technically, the KLCI remained bearish below the short-term 30-day moving average despite staging a rebound. The index was also below the Ichimoku Cloud indicator, indicating that the trend was bearish.

However, momentum indicators like the Relative Strength Index and Momentum Oscillators increased and showed a positive divergence, indicating that the support level was gaining traction on the downtrend. The Moving Average Convergence Divergence indicator was about to cross above its moving average.

The market has begun to gain some confidence in the past two weeks despite the index trading sideways. The positive divergence of the technical indicators, coupled with positive catalysts like higher commodities prices, a stronger ringgit and bullish global market performances, may trigger a rebound.

The KLCI may test the 1,585-point resistance level if it is able to stay above 1,550 points. There is also a high chance that the index may test the resistance level of 1,610 points again. However, the index was still far from the level of 1,692.07 points at the end of last year. The index may close lower for the second year this year.


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.

      Print
      Text Size
      Share