Negative Sentiments To Prevail

Weekly Recap

Wall Street saw mild buying support at the start of the week as investors focused on corporate earnings and traded higher just before the FOMC meeting – the Dow rose marginally to 16,982.59 pts (+22.02 pts) on Monday. However, as the U.S. and the European Union tightened sanctions against Russia, coupled with another US$10 bln cut to the bond buying plan by the Fed, selling pressure emerged and the Dow lost 70.48 pts and 31.75 pts to 16,912.11 pts and 16,880.36 pts on Tuesday and Wednesday respectively. Following Argentina’s debt default, which triggered some panic selling activities, the Dow dived further by 317.06 pts to 16,563.30 pts on Thursday and the key index ended the week lower at 16,493.37 pts (-467.20 pts W.o.W).
As the Bursa exchange resumed after the Hari Raya break, the FBM KLCI traded higher on the back of mild buying interest within selected heavyweights. Despite selling activities noted on Wall Street, the FBM KLCI rose marginally by 1.00 pts to 1,878.34 pts after hitting an intra-day high of 1,886.39 pts on Wednesday. Profit taking activities, however, emerged and the FBM KLCI declined 6.98 pts to 1,871.36 pts on Thursday. Tracking the triple-digit decline on the Dow, selling pressure further intensified among index-linked shares on Bursa Malaysia - the key index dived 8.02 pts to 1,863.34 pts on Friday. The FBM KLCI lost 14.00 pts over the shortened trading week.

FBM KLCI Weekly Technical Readings

The weekly MACD Line is drifting lower, while the weekly MACD Histogram extended another red bar. The weekly RSI, however, is slightly above 50.

The daily MACD Histogram has turned red, while the MACD Line is pointing downwards. The daily RSI, however, is oversold.

Continued

FBM KLCI Support & Resistance

The FBM KLCI has retested the immediate resistance of the 1,882 level, but retreated as profit taking activities emerged. As the FBM KLCI has violated the immediate support of the 1,870 level, coupled with both the daily and weekly indicators suggesting that the negative momentum is picking up, the key index may extend its correction phase towards the next support zone of the 1,850-1,860 levels.

Moving Forward

As the Dow has moved below the 17,000 level with strong selling pressure last week, negative sentiments may prevail over the near term and Wall Street could be trading in a volatile manner amid the Argentina debt crisis and the Eurozone’s financial instability issues. Hence, we think that local investors may also reduce their stockmarket exposures further this week and share prices on the Bursa exchange may succumb to profit taking activities.

Sector focus The FBM Small Cap index continues to stay above the EMA9 level. The MACD Histogram, however, has extended another red bar. Also, the RSI is hovering above the 70 level. The upside on the Small Cap index may be capped around the 19,176 level. Support will be set around the 18,641 level.

Stocks to focus

HAIO – Price has surged above the RM2.59 level with improved volumes. The weekly MACD Indicator has expanded positively above zero. Monitor for a breakout above RM2.73, targeting the RM3.00 level.

SCOMI – Price has experienced a two-bar breakout above the RM0.425 level, forming a bullish engulfing bar above the EMA60 level. The RSI is trending higher. Price may rally towards the RM0.45-RM0.48 levels. Support will be pegged around the RM0.415 level.

Source: MalaccaSecurities Research - 4 Aug 2014