Sideways to Neutralize Overbought Condition

Bursa Malaysia shares ended softer on Monday as profit-taking consolidation persisted while investors await the release of inflation prints from key global economies for leads. The FBM KLCI slipped 1.51 points to close at 1,547.60, off an early high of 1,553.90 and low of 1,544.47, as losers beat gainers 633 to 443 on total turnover of 3.74bn shares worth RM3.12bn.

Supports at 1,540/1,518; Resistance at 1,580/1,600

Stocks should trade sideways to neutralize overbought conditions from recent gains, and pending emergence of positive domestic catalysts to lift the market from consolidation. Key index supports cushioning downside on profit-taking pullbacks will be at 1,540, 1,518 and 1,503, the respective rising 10-day, 30-day and 50-day moving averages. Immediate resistance remains at 1,580, with stronger upside hurdles coming at 1,600 and 1,620.

Bargain Bumi Armada & Velesto

Bumi Armada need to climb above the 76.4%FR (63sen) to fuel further upside towards the 7/3/23 high (73sen), with next hurdle from the 123.6%FP (82sen), while downside risk should be capped by the 50%FR (52sen). Velesto will need confirmed breakout above the 27/2/23 high (28.5sen) to enhance upside momentum towards 32sen, the 123.6%FP (34sen) and 138.2%FP (36sen) ahead, while the 200-day ma (24sen) cushions downside.

Asian Markets Mixed Ahead of Inflation Data

Stocks in Asia traded mixed on Monday, as traders remain cautious ahead the release of inflation data from the US, Japan and Europe, which could provide more clarity on the outlook for global interest rate moves. Traders will focus on a slew of economic data expected this week including U.S. personal consumption expenditures price index data, which is the Federal Reserve’s preferred inflation gauge and China’s manufacturing purchasing managers’ index. Figures on Japanese consumer prices are also due Tuesday and are forecast to show core inflation slowed to 1.8% in January, the lowest since March 2022.

Meanwhile, there are at least 10 Fed speakers on the docket this week, and are likely to repeat their mantra of staying cautious on rates. Separately, the head of the ECB Christine Lagarde speaks later on Monday, as does the chief economist of the Bank of England. The Nikkei 225 rose 0.35% to 39,233.71, while Australia’s S&P/ASX 200 added 0.12% to 7,652.80. In Korea’s, the Kospi fell 0.77% to 2,647.08, and the Shanghai composite index dropped 0.93% to 2,977.02.

Wall Street Ends Lower Ahead of Inflation Data

Stocks on Wall Street closed lower overnight as traders braced for a barrage of economic data and remarks from Federal Reserve speakers that will help shape the outlook for interest rates. The Dow Jones Industrial Average fell 0.16% to 39,069.23. The S&P lost 0.38% to 5,069.53, while the Nasdaq Composite fell 0.13% to 15,976.25. The weakness on Wall Street comes as traders seem reluctant to make significant moves ahead of the inflation data later this week. There’s a raft of economic releases on deck, including January durable orders data on late Tuesday and January wholesale inventories on Wednesday. Consumer spending and PCE numbers will come out on Thursday. Given the PCE index is the Federal Reserve's preferred inflation gauge, the reading will factor into the ongoing debate on the timing of a rate cut, already pushed back.

Traders were also watching the risk that U.S. government agencies could be shut down if Congress cannot agree on a borrowing extension by Friday. On economic news, sales of new U.S. single-family homes rose less than expected in January amid a sharp decline in the South region, but demand for new construction remained underpinned by a persistent shortage of previously owned homes. Amazon joined the 30-stock Dow, replacing Walgreens Boots Alliance. The Dow’s holdings are weighted according to stock price, not market cap. The addition of the e-commerce giant will increase the index’s exposure to tech and consumer retail.

Source: TA Research - 27 Feb 2024