This article first appeared in The Edge Financial Daily on January 22, 2020
The market started on a bearish note last week but rebounded to close marginally higher. A stronger ringgit helped boost market confidence and more foreign buying. For the FBM KLCI, telecommunications companies helped to support the index with fifth-generation (5G) opportunities.
The KLCI increased 0.3% in a week to 1,595.81 points. The index has continued to decline slightly this week and closed at 1,587.33 points yesterday.
Trading volume increased last week, compared to the previous week, as the market looked for opportunities before the Chinese New Year at the end of this week. The average daily trading volume declined to 2.8 billion shares last week, compared with 3.3 billion two weeks ago. However, the average daily trading value remained firm at RM1.9 billion. This once again showed that the market was dominated by lower-capped counters.
For the KLCI, gainers outpaced decliners 17 to 13. The top three gainers were Axiata Group Bhd (+10.3% in a week to RM4.60), Petronas Dagangan Bhd (+5.9% to RM23.80) and Press Metal Aluminium Holdings Bhd (+4.7% to RM5.17). The top three decliners were Hong Leong Bank Bhd (-3.4% to RM16.96), Petronas Chemicals Group Bhd (-2.9% to RM7.03) and Hong Leong Financial Group Bhd (-2.4% to RM16.86).
Global markets were generally bullish except for China. US and German indices continued to record historical highs.
The US dollar continued to strengthen slightly against major currencies. The US Dollar Index increased to 97.6 points last Friday from 97.4 points two weeks ago. The ringgit was stronger against the greenback at 4.05 last Friday, compared with 4.08 on the previous Friday. It was at its strongest since July 2018.
Gold continued to weaken as equity markets soared. Commodity Exchange gold declined 0.2% a week to US$1,557.35 (RM6,338.41) an ounce. Crude oil (Brent) increased only 0.2% to US$65.10 per barrel. In the local market, crude palm oil (BMD) plunged 8.6% in a week to RM2,843 per tonne for a correction after climbing to a three-year high.
The KLCI rebounded last week and formed immediate support at 1,572 points. The next support level is at 1,550 points. The immediate resistance remains at 1,615 points. Therefore, the index is in the middle of the immediate technical support and resistance levels.
Chart-wise, the KLCI remains bullish for the short term above the short-term 30-day moving average. The index tested the 30-day moving average last week. It also rebounded and stayed above the Ichimoku Cloud indicator. However, the index remains bearish for the long term below the 200-day moving average at 1,613 points.
Market sentiment was initially weak but the rebound towards the end of last week showed support. The Relative Strength Index and Momentum Oscillators fell below their mid-level but rebounded back above it. This indicated that market sentiment turned slightly bullish last week.
The KLCI did not fall below the support level at 1,550 points and rebounded to form a new immediate support level at 1,572 points. This showed that the market was still being supported. A “hammer” Japanese candlesticks chart pattern was formed on the weekly chart of the index. Hence, a technical rebound is expected.
Therefore, the index is expected to test the resistance level at 1,615 points if it can stay above 1,572 points.
I would like to take this opportunity to wish all of you a happy, prosperous and healthy Chinese New 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.