Profit Taking Activities May Continue

Weekly Recap
Wall Street started the week on a mild profit taking spell, continuing the retracement phase in the previous week. The Dow slid 25.24 pts to 16,826.60 pts on Monday after the Institute for Supply Management-Chicago Inc.’s business barometer fell 62.6 (-2.9 M.o.M) in June. However, the Dow rebounded and charged higher towards the 17,000 psychological level as renewed buying interest was noted on small cap stocks. The key index jumped 129.47 pts to 16,956.07 pts on Tuesday. Further follow-through buying interest boosted the Dow higher to 16,976.24 pts (+20.17 pts) and 17,068.26 pts (+92.02 pts) over the next two trading days on the back of the upbeat nonfarm payroll data which increased 288,000 in June, while the unemployment rate declined 0.2% to 6.1% in June. Overall for the week, the Dow soared 216.42 pts.

Meanwhile, stocks prices on Bursa Malaysia ended the last day of 1H2014 on a positive tone – the FBM KLCI gained 1.78 pts to 1,882.71 pts on Monday. The key index, however, closed lower at 1,879.12 pts (-3.98 pts) on Tuesday as the window dressing activities end. With the bullish market sentiments on Wall Street prevailing, renewed buying interest boosted the FBM KLCI higher by 7.72 pts and 1.85 pts to 1,886.84 pts and 1,888.69 pts on Wednesday and Thursday respectively. Nevertheless, after retesting the all-time-high of the 1,892 level, the FBM KLCI succumbed to profit taking activities and fell 3.78 pts to 1,884.91 pts on Friday. On a W.o.W, the FBM KLCI increased 3.98 pts.

FBM KLCI Weekly Technical Readings
The weekly MACD Line is flattish, while the weekly MACD Histogram has extended another red bar. Also, the weekly RSI has crossed below 70.

Once again, the daily MACD indicator has flashed a “Sell” signal. The daily RSI, however, is above 50.

Continued

FBM KLCI Support & Resistance
The FBM KLCI has retested the all-time-high zone, but was unable to surge above the 1,892 level and ended lower amid profit taking activities on banking heavyweights. The weekly MACD indicator has turned negative. Hence, the key index may pullback further towards the support of the 1,850-1,862 levels over the near term. Meanwhile, the key resistance will remain around the 1,890-1,900 levels.

Moving Forward
U.S. stockmarkets has marked a new territory as the Dow and S&P 500 surged to record levels amid the positive economic data. However, as valuations are stretched on Wall Street, investors may look for the opportunity to take profit over the near term. Meanwhile, share prices on Bursa Malaysia might trend sideways as the buying interest within the FBM KLCI has been muted around the all-time-high zone. Nevertheless, trading focus could be found within the property counters.

Sector focus
The Properties Index has soared over the past week, following the resistance breakout above the 1,422 level. The MACD Indicator has expanded positively above zero. Resistance will be located around the 1,461 level. Support will be set around the 1,424 level.

Stocks to focus
MULPHA – Price has rebounded off the support of the RM0.44 level accompanied by improved volumes. The MACD Histogram has turned green. Monitor for a breakout above the RM0.455 level, targeting the RM0.485-RM0.50 levels.

GOB – Price has retraced towards the RM1.01 level after the sideway breakout formation on 2nd July. The RSI is hovering around 50. Uptrend may resume and the price target will be envisaged around the RM1.07-RM1.14 levels. Support will be pegged around the RM1.00 level.

Source: Malacca Securities Research