Long Term Indicators Pointing Lower

Weekly Recap

U.S. equities were fairly negative amid the geopolitical turmoil, coupled with the mixed corporate earnings that was reported last week - the Dow slid 48.45 pts 17,051.73 pts on Monday. However, the key index rebounded 61.81 pts to 17,113.54 pts on Tuesday led by healthcare and technology stocks like Apple and Intel. Nevertheless, selling pressure resumed on the Dow after Caterpillar, Visa and Amazon.com reported weaker-than-expected results; the Dow fell 26.91 pts and 2.83 pts to 17,086.63 pts, 17,083.80 pts over the next two trading days respectively. Selling pressure further heightened as investors were seen reducing their positions ahead of the FOMC meeting, GDP figures and jobs data that will be reported this week; the Dow ended at 16,960.70 pts (-123.23 pts) on Friday and lost 139.61 pts over the week.

Meanwhile, following the FBM KLCI’s gap- down in the previous week amid the MH17 incident, selling pressure continued at the
start of the week – the FBM KLCI lost 4.33 pts to 1,868.64 pts on Monday. The key index, however, recouped earlier losses as bargain hunting activities emerged which boosted the FBM KLCI higher by 2.72 pts to 1,871.36 pts on Tuesday. Tracking the positive overnight performance on Wall Street, the upward momentum slowly picked up and the FBM KLCI ended higher at 1,873.83 pts (+0.47 pts), 1,877.05 pts (+5.22 pts) and 1,877.34 pts (+0.29 pts) in the following three trading days. On a W.o.W basis, the FBM KLCI gained 4.37 pts.

FBM KLCI Weekly Technical Readings

The weekly MACD Line is below the weekly Signal Line, with the weekly MACD Histogram extending another red bar. The weekly RSI, however, is above 50.

Meanwhile, the daily MACD Line is flattish below the zero level, while the daily RSI is hovering below the 50 level.

Continued

FBM KLCI Support & Resistance

With the mild buying interest amongst selected heavyweights, the FBM KLCI has rebounded from the immediate support of the 1,870 level. However, as both the daily MACD and RSI indicators are still negative, the upsides on the FBM KLCI may be capped around the 1,890-1,900 levels. On the other hand, if the FBM KLCI violates below the 1,870 level, further support will be located around the 1,838-1,850 levels.

Moving Forward

The Dow has retreated below the 17,000 level amid the mixed corporate earnings and cautious market sentiments recently. We think local investors are also likely to stay on the sidelines over the near term without any positive leads in the overseas stockmarkets. Similarly, local investors may employ sell-into-strength strategies as indicated by the weak technical indicators. Lower liners and small cap stocks under the consumer sector, however, could be traded positively over the short term period.
Sector focus The Consumer index has breached above the 600 level last Friday. The MACD indicator has issued a “Buy” signal, while the RSI is trending higher above 50. The index may rally towards the resistance of the 640 level. The support will be located around the 580 level.

Stocks to focus

TEKSENG – Price has consolidated sideways around the RM0.33 level. The MACD Histogram has turned green, while the RSI has crossed above 50. Monitor for a breakout above the RM0.34 level, targeting the RM0.38-RM0.40 levels. Support will be set around the RM0.32 level.

IQGROUP – Price has rebounded off the RM1.00 with improved volumes, forming a hammer candle. Both the MACD and RSI is trending higher. Price target will be pegged around the RM1.50 level. Support will be located around the RM1.00 level.

Source: MalaccaSecurities Research - 30 Jul 2014