Near Term Weakness, Further Selling Activities

Weekly Recap

Follow-through buying interest sent the U.S. equities higher above the 17,000 level at the start of the week as investors focussed on corporate earnings. The Dow increased 111.61 pts to 17,055.42 pts on Monday as Citigroup rallied on better-than-estimated earnings.

The Dow continues to surge amid upbeat earnings report from Intel and U.S. industrial production data rising 0.2% in June – the Dow added 5.26 pts and 77.52 pts to 17,060.68 pts and 17,138.20 pts on Tuesday and Wednesday respectively. The key index, however, succumbed to profit taking activities as geopolitical tensions between Russia-Ukraine and the Middle East intensified, the Dow plunged 161.39 pts to 16,976.81 pts on Thursday. Nevertheless, on a W.o.W basis the Dow rose 156.37 pts.

Market sentiments on the Bursa exchange turned negative after a fairly positive start last week. The FBM KLCI started the week on a rebound as mild bargain hunting activities were noted which sent the index higher by 1.72 pts to 1,884.87 pts on Monday and further increased by 1.84 pts to 1,886.71 pts on Wednesday after the Nuzul Al-Quran public holiday on Tuesday. However, selling pressure started to emerge and the FBM KLCI gave way to the bears, which saw the key index declining 3.57 pts to 1,883.14 pts on Thursday.

Meanwhile, tracking the negative sentiments abroad amid the Russia-Ukraine tension, which resulted in a crash of a Malaysia plane; the FBM KLCI dived further by 10.17 pts to 1,872.97 pts on Friday. The FBM KLCI plunged 10.18 pts last week.

FBM KLCI Weekly Technical Readings

Despite the weekly MACD Line staying above zero, the weekly MACD Histogram has turned lower. The weekly RSI is drifting lower at 59.4.

The daily MACD Histogram has extended another red bar, while the RSI continues to stay below 50 last week.

Continued

FBM KLCI Support & Resistance

After failing to break above the all-time-high region of the 1,892 level, the key index has violated below the uptrend line. The key index pulled back below the support of the 1,882 level. With the daily and weekly indicators turning negative, the key index could be heading lower towards the support of the 1,850-1,860 levels. Meanwhile, resistances will be pegged around the 1,890-1,900 levels.

Moving Forward

The better-than-expected U.S. corporate earnings have offset the geopolitical concerns at this point of time. With the Dow staying above the 17,000 level, further buying support could be seen over the near term. Sentiments on the Malaysia exchange, however, could continue to be affected by the Malaysia MH17 plane crash issue. The FBM KLCI could see further selling pressure after a mild rebound. Nevertheless, trading focus could be seen on lower liners and small caps stocks.

Sector focus Despite the negative performance on the FBM KLCI, the FBM Fledgling index continues to stay above the EMA9 level – suggesting that the short term uptrend is intact. The RSI, however, is overbought. The support is located around the 15,587 level. Resistance will be pegged around the 16,000 level.

Stocks to focus

ANCOM – Price has experienced a breakout above the RM0.665 level with improved volumes. The MACD indicator has issued a “Buy” signal. Resistance will be set around the RM0.85 level. Support will be pegged around the RM0.61 level.

COMPLET – Price experienced a sideways consolidation breakout above the RM0.74 level. The RSI is trending higher. Price target will be envisaged around the RM0.835 and RM1.00 levels. Support will be located around the RM0.69 level.

Source: MalaccaSecurities Research - 21 Jul 2014