This article first appeared in The Edge Financial Daily on November 13, 2019

The FBM KLCI rose for the second week and to its highest level in two months last week. The bullish sentiment was supported by a stronger ringgit and rising commodity prices. A rebound in banking stocks also helped the increase. Furthermore, continuous bullish performances of global markets helped boost market confidence.

The benchmark KLCI increased 1% in a week to 1,609.73 points last Friday. The market has been directionless this week and closed also at 1,609.73 points yesterday.

Trading volume continued to increase, indicating that the market was becoming more confident. The average daily trading volume last week was 2.9 billion shares, compared with 2.8 billion in the previous week. The average daily trading value increased to RM2.2 billion from RM2.1 billion. Still, more lower-capped stocks favoured by the retail market were traded.

For the KLCI, gainers beat decliners 18 to 11. The top three gainers were Malaysia Airports Holdings Bhd (+5.9% in a week to RM8.49), Genting Bhd (+5.8% to RM6.21) and AMMB Holdings Bhd (+4% to RM4.14). The top three decliners were IHH Healthcare Bhd (-2% to RM5.51), Hong Leong Bank Bhd (-1.4% to RM17.06) and Top Glove Corp Bhd (-1.1% to RM4.35).

Global market indices closed higher last week. The US Dow Jones Industrial Average was at historical highs, while most European market indices were at two-year highs. With only two months left for the year, the KLCI is still in the red. The index is 4.9% lower since the beginning of this year, while other markets are positive. The US, German and French market indices are currently up 20% year to date. China’s market index is almost up 20%.

The greenback strengthened against other major currencies, with the US Dollar Index increasing to 98.4 points last Friday from 97.2 points two weeks ago. Even so, the ringgit strengthened to 4.13 against the US dollar last Friday, compared with 4.16 in the previous week, showing that the local currency strengthened against other currencies too.

Gold prices fell as strong rallies in the equity market got investors to turn their attention to the latter. Commodity Exchange gold futures fell 3.8% in a week to US$1,459.80 (RM6,043.57) an ounce last Friday. Brent crude increased 1.4% to US$62.51 per barrel. In the local market, crude palm oil (BMD) rose for the fifth week to a 22-month high, increasing 4.8% in a week to RM2,579 per tonne last Friday.

The KLCI stayed above the broken resistance level-now-turned support level of 1,585 points, indicating that the market was well supported. The next support level is at 1,620 points based on the 50% Fibonacci retracement level of the short-term downtrend started in July.

Technically, the KLCI is strongly bullish above the short-term 30-day moving average. Furthermore, the index is currently at the top band of the Ichimoku Cloud indicator. A breakout above the immediate resistance level of 1,620 points would confirm the reversal into a bullish one. However, there is still another resistance level at 1,640 points based on the long-term 200-day moving average.

Momentum indicators like the Relative Strength Index and Momentum Oscillator increased, showing strong bullish momentum. The Oscillators did not go into overbought levels. Furthermore, the Moving Average Convergence Divergence indicator continued to increase above its moving average, showing room for the index to climb higher.

The financial reporting season has come and the market is preparing for a year-end window dressing rally. The index is expected to test the resistance level of 1,620 points. Positive results could spur market confidence, and the index would break above this resistance level and climb to the next level of 1,640 points. This is likely going to happen if the index can stay above the immediate support level of 1,585 points.

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.