Weekly Recap

Wall Street resumed its pullback on Monday as the Dow slid 17.72 pts to 16,991.97 pts, led by small cap shares ahead  of the U.S. earnings season. With the Dow violating the 17,000 level and the downgrade of the 2015 global growth forecast to 3.3% by the IMF, selling  pressure  was  noted  and  the  Dow plunged  272.52  pts  to  16,719.39  pts  on Tuesday.  Bargain  hunting  activities, however,  emerged  and  boosted  the  key index  to  16,994.92  pts  (+274.83  pts)  on Wednesday.  Nevertheless,  selling  interest resumed, led by computer-chip  makers  and bears  took  control  of  the  Dow,  sending  it down  334.97  pts  and  115.15  pts  to 16,659.25  pts  and  16,544.10  pts  on Thursday and Friday respectively. The Dow lost  465.59  pts  last  week  and  has  slipped 32.56 pts on the year-to-date basis.

Tracking  the  negative  tone  and  higher volatility  on  Wall  Street,  share  prices  on Bursa  Malaysia  traded  negatively  after  the long weekend with most  stocks headed into the  red  territory.  Despite  the  FBM  KLCI gapping-up  towards  the  1,850  level  on Tuesday,  profit  taking  activities  emerged and the key index ended  at  1,833.54 pts (-7.28 pts) as the  IMF’s 2015 growth forecast was  focused.  Following  the  heavy  selling activities  on  stockmarkets abroad, the FBM KLCI  continues  to  decline  9.22  pts  to 1,824.32 pts on Wednesday. The key index, however,  rebounded  5.41  pts  to  close  at 1,829.73 pts on Thursday ahead of  Budget 2015  on  the  back  of  mild  buying  interest. Nevertheless,  the  intense  selling  on  Wall Street  triggered  the  FBM  KLCI  to  tumble 20.85 pts to 1,808.88 pts on Friday.

FBM KLCI Weekly Technical Readings

The weekly MACD Line has crossed below zero for the first time since early 2012, while the weekly RSI has dropped below 30. Meanwhile,  the  daily  MACD  indicator expanded  downwards  last  week,  while  the daily RSI has crossed below 30.

FBM KLCI Support & Resistance

As the FBM  KLCI  has  breached  below the 1,838  level  last  week,  it  continues  to  dive below the 1,820 level. With both the weekly and  daily  technical  indicators  remaining weak  and  pointing  negatively,  the  FBM KLCI  is  likely  to  continue  its  downward momentum over the near term. Support will be  located  around  the  1,780-1,800  levels. Meanwhile,  resistance  will  be  pegged around the 1,840-1,850 levels.

Moving Forward

The  trading  volatility  has  increased  in overseas  stockmarkets  amid  the  global economic  growth  concerns.  Wall  Street might  continue  to  experience  a  pickup  in selling  pressure  over  the  near  term. Meanwhile,  share  prices  on  the  local  front may  trade  cautiously  as  investors  may further reduce positions  and the FBM KLCI could  slip  towards  the  1,800  psychological level.  Traders  are  advice  to  cherry  pick stocks,  where  the  uptrend  is  still  intact  for short term trading purposes.

Sector focus

The  Gloves  index  has  rebounded  off  the EMA60  level.  The  MACD  indicator, however,  is  trending  lower.  Nevertheless, the  RSI  has  crossed  above  50.  Significant resistance  will  be  envisaged  around  the 20.0,  20.5  and  21.0  levels.  Support  will  be located around the 19.1 level.

Stocks to focus

SUPERMX  –  Price  experienced  a  flag formation  breakout above the RM2.28  level with  improved  volumes.  The  MACD indicator  has  expanded  positively  above zero.  Price  may  rally  towards  the  RM2.53 level.  Support  will  be  set  around  the RM2.21 level. KOSSAN  –  Price  has  rebounded  off  the EMA60 level last Friday. The MACD Line is hovering  above  zero,  but  the  RSI  is  below 50.  Uptrend  may  resume  after  a  short consolidation. Resistance is pegged around the  RM4.60  level.  Support  will  be  located around the RM4.20 level.

Source: Mplus Online Research - 14 Oct 2014