This article first appeared in The Edge Financial Daily on October 30, 2019
The market took a breather last week after a rally two weeks ago as the FBM KLCI approached the immediate resistance level. The index bucked the bullish global market performances. Banking stocks weighed down the index.
The KLCI declined 0.1% in a week to 1,570 points last Friday. The index closed higher at 1,577.79 points yesterday after a holiday break on Monday.
The average daily trading volume last week was 2.7 billion shares, compared with 2.9 billion for the previous week. The average daily trading value fell to RM1.7 billion from RM2 billion, indicating that the focus was on lower-capped stocks.
Market participants’ trend changed. Foreign institutions turned into net buyers last week after weeks of selling. Net buying by foreign institutions was at RM302.7 million. Local retailers were also net buyers at RM17.8 million. Net selling by local institutions was at RM320.5 million.
For the KLCI, gainers beat decliners 15 to 13 despite the index closing lower. The top three gainers were Genting Malaysia Bhd (+1.6% in a week to RM3.10), IHH Healthcare Bhd (+0.9% to RM5.72) and Petronas Chemicals Group Bhd (+0.8% to RM7.44). The top three decliners were AMMB Holdings Bhd (-2.2% to RM3.93), Westports Holdings Bhd (-1.8% to RM4.27) and Hong Leong Bank Bhd (-1.8% to RM16.70).
Major global markets rebounded last week except for Hong Kong and Malaysia. Markets in Europe were bullish but the US market closed firm.
The US dollar was slightly stronger against major currencies last week. The US Dollar Index declined to 97.8 points last Friday from 97.3 points two weeks ago. The ringgit was slightly weaker at 4.19 against the greenback last Friday, compared with 4.18 in the previous week.
In the commodity market, Commodity Exchange gold futures increased 0.9% in a week to US$1,507.10 (RM6,299.68) an ounce last Friday. Brent crude rose 4.3% to US$61.98 per barrel. In the local market, crude palm oil (BMD) rose for the third week, increasing 4.9% to RM2,398 per tonne last Friday.
The index was trading sideways last week and remained below the broken support level of 1,585 points. The immediate resistance level was at 1,565 points, the current short-term trading range.
Trend-wise, the KLCI was bearish below both the short- and long-term 30- and 200-day moving averages. However, the index was trading near the 30-day moving average. It remained below the Ichimoku Cloud indicator and the Cloud was falling downwards but narrower.
Momentum indicators like the Relative Strength Index and Momentum Oscillator were below their mid-levels but flat last week. The Moving Average Convergence Divergence indicator remained above its moving average, indicating that the bearish trend momentum was weak.
The market stayed sideways after the KLCI failed to rise above the immediate resistance level of 1,585 points. The fact that the immediate support level had increased from 1,500 points to 1,565 points indicated that the market was well supported.
Henceforth, there is a high chance that the current sideways trend may turn bullish, especially if the index can break above 1,585 points. If it continues to stay below this level, expect further sideways correction.
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.