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HLBank Research Highlights

Author: HLInvest   |   Latest post: Wed, 23 Oct 2019, 5:21 PM

 

Traders Brief - Focus is on US-China trade front

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MARKET REVIEW

Key Regional Benchmark Indices Ended on a Mixed Note as Investors Digested a Series of Developments Overnight on the US-China Trade Front. According to One of the Key White House Advisers, the US Could Ramp Up Pressure on China If a Trade Deal Is Not Agreed in the Near Term, Which Translated to the Subdued Trading Tone. Nikkei 225 and Shanghai Composite Index Rose 0.16% and 0.24%, Respectively, But Hang Seng Index Slid 0.13%.

Meanwhile, the FBM KLCI Managed to Close Higher on Friday by 0.07% to 1,597.41 Pts on a Last Minute Buying Support on Selected Heavyweights Such as AMBANK and MAYBANK. Market Breadth Was However Negative (394 Decliners Vs 380 Gainers), While Market Traded Volume Was Above the 3.0bn Mark at 3.10bn, Valued at RM3.29bn, We Notice Most of the Technology Stocks Such as PRESBHD, SCICOM, OPCOM, EFORCE Were Traded Actively Higher.

Wall Street ended lower on Friday amid news that Chinese officials were cutting short their visit in the US, where China delegation had cancelled a visit to US farms in Montana, which has dampened hopes around the trade negotiations between the US and China. The Dow and S&P 500 declined 0.59% and 0.49%, while Nasdaq lost 0.80%.

TECHNICAL OUTLOOK: KLCI

After declining for the previous two days, the FBM KLCI managed to recover marginally on Friday. The MACD Indicator remained below zero, while the RSI (above 50) and Stochastic (below 50) are still indicating mixed signals at this juncture. Hence, we believe the KLCI could remain in the rangebound phase between the 1,580-1,620 levels over the near term. Do note that uptrend on the FBM KLCI could only happen when it breaches above the 1,620 level.

With the negative performance on Wall Street last Friday, we expect trading tone on the market to remain tepid and the FBM KLCI may trend sideways. In the meantime, we expect traders to focus on selected few key themes in the market, namely (i) immigration-related, (ii) National Fiberisation and Connectivity Plan. The FBM KLCI trading range likely to be seen around 1,580-1,620.

TECHNICAL OUTLOOK: DOW JONES

After retesting the resistance zone around the 27,200-27,400 level, the Dow has reversed and the MACD Histogram is narrowing; suggesting that the positive momentum is declining. Meanwhile, both the RSI and Stochastic oscillators are trending lower after falling out of the overbought region. Hence, we believe the Dow may revisit support around 26,800 and stiff resistance is pegged at 27,400.

In the US, we believe the traders will focus a lot on the trade developments between the US and China, especially in the upcoming scheduled meeting in October. Should there be any negative surprises before the scheduled US-China meeting, we expect Wall Street to trade lower. However, the recent monetary easing moves done by the US and Federal Reserve and ECB could provide mild support towards the market over the near term. Also, attention will be on the upcoming US 3Q19 reporting season in mid Oct. The Dow’s support is set around 26,800.

TECHNICAL TRACKER: CLOSED POSITIONS

Last Friday, we squared off LIIHEN (7.9% return after hitting R2 upside target) and TUNEPRO (3.3% loss at S1 amid weakening technicals)

Source: Hong Leong Investment Bank Research - 23 Sept 2019

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