This article first appeared in The Edge Financial Daily, on October 16, 2015.

US equity markets fell on Wednesday as investors sold off shares on concerns about corporate profits as Wal-Mart Stores Inc predicted earnings will decline next year and quarterly results from JPMorgan Chase & Co disappointed investors. The S&P 500 Index lost 9.45 points to 1,994.24 points while the Dow declined 157.14 points end at 16,924.75. 

The FBM KLCI moved in a narrow range of 20.69 points for the week with high volumes of 2.09 billion to 2.47 billion shares traded. The index closed at 1,713.25 yesterday, up 2.11 points from the previous day as blue-chip stocks like British American Tobacco (M) Bhd, Hong Leong Bank Bhd, Hong Leong Financial Group Bhd, IHH Healthcare Bhd and RHB Capital Bhd caused the index to rise on buying activities ahead of Budget 2016 next Friday. The ringgit was marginally weaker against the US dollar at 4.1210 as Brent crude oil remained steady at US$48.10 (RM198.58) per barrel. 

The index rose on a rally from the 801.27 low (October 2008) to its 1,896.23 all-time high (July 2014), and it represents an extended Elliott Wave “flat” rebound in a “Pseudo-Bull” rise completed. The next few months’ index price movements since July 2014 comprise key swings of 1,837.28 (low), 1,879.62 (high), 1,766.22 (low), 1,858.09 (high), 1,671.82 (low), 1,810.21 (high), 1,706.18 (low), 1,831.41 (high), 1,774.30 (low), 1,867.53 (high), 1,685.03 (low), 1,744.19 (high), 1,503.68 (low), 1,691.93 (high) and 1,595.22 (low).

The index’s daily signals have all turned positive, with its CCI, DMI, MACD, Oscillator and Stochastic indicators showing emerging “buy” signals. As such, the index’s support levels are seen at 1,635, 1,690 and 1,713, while profit-taking at the resistance areas of 1,721, 1,744 and 1,795 may cap the index’s advances. 

The KLCI’s 18-day and 40-day simple moving averages (SMAs) depict a fledgling uptrend for its short-term daily chart. The index’s price bars are now between the 50-day and 200-day SMAs and this depicts a neutral phase for the KLCI in the medium term.

Due to the firmer tone for the KLCI, we are recommending a chart “buy” on IOI Properties Group Bhd (IOIPG). A check on the Bloomberg consensus reveals that nine research houses cover the stock fundamentally, with seven “buy” calls and two “hold” calls. 

IOIPG currently trades at a low historical price-earning ratio of 8.44 times. Its price-to-book value (P/BV) ratio of 0.61 times indicates that its share price is trading at a large discount to its BV. Recently, there was no news on the stock that caused its stock price rise since late August 2015. 

IOIPG’ chart trend on the daily and weekly time frames is very firmly up. Its share price made an obvious surge since its major daily Wave-2 low of RM1.74 on Aug 25, 2015. Since that RM1.74 low, IOIPG rose to its October 2015 recent high of RM2.34.

As prices broke above their recent key critical resistance levels of RM1.98 and RM2.07, look to buy IOIPG on any dips to its support areas as the moving averages depict a very firm short- to medium-term uptrend for this stock. 

The daily and weekly indicators (like the CCI, DMI, MACD and Oscillator) have issued clear “buy” signals and now depict firm indications of IOIPG’s eventual surge towards higher levels. It would attract firm buying activities at the support levels of RM1.98, RM2.07 and RM2.17. We expect IOIPG to witness some profit-taking at its resistance areas of RM2.34, RM2.47 and RM2.66. Its upside targets are located at RM2.52, RM2.72, RM2.98 and RM3.09.

Lee Cheng Hooi is the regional chartist at Maybank Kim Eng. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgment or seek professional advice for your investment decisions. Technical report appears every Wednesday and Friday.