This article first appeared in The Edge Financial Daily on March 11, 2020
The Malaysian market found support last week but the selldown in crude oil prices, coupled with growing cases of Covid-19 outside of China, on Monday brought global markets down to their knees. The FBM KLCI rebounded yesterday after falling to its lowest level since October 2011 on Monday.
The KLCI closed slightly higher in a week at 1,483.1 points last Friday. However, the index fell to 1,430.47 points yesterday.
Trading volume on Bursa Malaysia fell last week as markets started to find support after a selldown two weeks ago. The average daily trading volume declined to 3.2 billion shares last week, compared with 4.2 billion shares two weeks ago. The average daily trading value fell to RM2.5 billion, compared with RM3.5 billion.
For the KLCI, gainers pared decliners. The top three gainers were Top Glove Corp Bhd (+6.4% in a week to RM6), Petronas Chemicals Group Bhd (+4.6% to RM5.65) and Tenaga Nasional Bhd (+4.1% to RM12.60). The top three decliners were Malaysia Airports Holdings Bhd (-8.8% to RM6.01), CIMB Group Holdings Bhd (-7.9% to RM4.44) and Genting Malaysia Bhd (-5.9% to RM2.72).
Global market performances were mixed last week. The Shanghai Stock Exchange Composite Index rose last week amid declining Covid-19 cases, while Japan and Singapore fell following European markets. The US Dow Jones Industrial Average, however, closed higher.
The US dollar continued to weaken against major currencies. The US Dollar Index fell to 96 points last Friday from 98.1 points two weeks ago. The ringgit strengthened to 4.17 against the greenback last Friday, compared with 4.22 the previous week.
Even before the selldown on Monday, crude oil prices had been declining in the past two weeks. Brent crude futures fell 10.4% in a week to US$45.27 (RM191.49) per barrel last Friday after falling 14% two weeks ago. Crude palm oil rebounded from a four-month low and closed 5.4% higher at RM2,450 per tonne. Gold pulled back from a seven-year high and declined 3.4% to US$1,587.15 an ounce.
The KLCI remained below the immediate resistance level at 1,500 points. The index has found support at 1,415 points this week. The next support level is at 1,350 points.
Technically, the trend remained bearish below the short- and long-term 30-day and 200-day moving averages. The short-term trend has been technically bearish since early this year, while the long-term trend has been bearish since November 2018. Furthermore, the KLCI was below the Ichimoku Cloud indicator and the Cloud continued to decline, indicating a strong downtrend.
Momentum indicators indicated a strong bearish trend. Indicators like the Relative Strength Index and Momentum Oscillator continued to fall and were near their oversold levels. Furthermore, the Moving Average Convergence Divergence indicator was below its moving average.
The KLCI has fallen below the immediate support level at 1,470 points. Unless the index can climb back above 1,470 points, the trend would still be bearish. The short-term 30-day moving average was at 1,515 points. With this bearish market sentiment, the index may fall to the next support level at 1,350 points if it fails to rebound significantly.
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.