Weekly Recap
Following the panic selldown two weeks ago, Wall Street ushered in strong bargain hunting activities at the start of the week amid better-than-expected corporate results from several heavyweights, namely; Microsoft Corp, 3M, Yahoo! Inc. and Hasbro Inc. The Dow traded positively at the start of the week and ended higher at 16,399.67 pts (+19.26 pts) and 16,614.81 pts (+215.14 pts) on Monday and Tuesday respectively. However, the key index took a pause on Wednesday as energy shares fell amid the declining oil prices; the key index slipped 153.49 pts to 16,461.32 pts. Nevertheless, buying interest resumed and the Dow increased 216.58 pts and 127.51 pts to 16,677.90 pts and 16,805.41 pts over the two trading days respectively as better-than-expected Eurozone factory PMI was reported at 50.3. For the week, the Dow gained 425.00 pts, recouping losses from the previous week.

Taking cue from the positive performance on Wall Street, the FBM KLCI rebounded further at the start of the week and jumped 14.83 pts to 1,803.14 pts on Monday. However, traders took the opportunity to take profit around the 1,800 psychological level and the key index slipped 6.92 pts to 1,796.22 pts on Tuesday. Nevertheless, with the negative sentiment subsiding alongside the better-than-expected U.S. corporate earnings, the FBM KLCI rebounded to end at 1,810.68 pts (+14.46 pts) and 1,818.86 pts (+8.18 pts) on Thursday and Friday respectively. On a W.o.W basis, the FBM KLCI soared 30.55 pts, its best weekly gain since Sept 2013.

FBM KLCI Weekly Technical Readings
The weekly MACD Line is below zero, but the MACD Histogram has turned green. The weekly RSI has crossed above 30.

Despite the Daily MACD Line remaining below zero, it has crossed above the Daily Signal Line. Also, the RSI is trending higher above 30.

FBM KLCI Support & Resistance
With the increased bargain hunting activities among selected heavyweights, the FBM KLCI jumped above the immediate resistance of the 1,800 level. As the daily indicators are suggesting that the positive momentum is picking over the near term, the FBM KLCI is likely to rebound towards the 1,820 and 1,840 levels over the near term. However, if the key index violates below the 1,800 level, the next support will be set around the 1,770 levels.

Moving Forward
U.S. equities may continue to stay positive as the Dow and S&P 500 have rebounded strongly amid improved corporate results last week. However, as the recent sharp fall has damaged the uptrend, we think that the near term movements will be taken as a technical rebound phase. Similarly, on the local bourse, we expect the rebound to be capped around the 1,850 level. Hence, traders are advice to stay cautious and initiate entry with a firm plan in hand.

Sector focus The FBM ACE has rebounded strongly last week and the index ended above EMA20 level. The MACD Histogram has extended another green bar, while the RSI has crossed above 30. The FBM ACE is likely to rebound towards the 6,538-6,817 levels. Support will be set around the 6,253 level.

Stocks to focus
MMSV – Price has ended above the RM0.48 level on the back of follow-through buying interest. The RSI is trending higher above 30. Price may rally towards the RM0.57-RM0.62 levels. Support will be located around the RM0.45 level.

IFCAMSC – Price experienced a breakout above the RM0.52 level with high volumes. The MACD has issued a “Buy” signal. As the price ended above 52-week high, resistances will be pegged around the RM0.62-RM0.70 levels. Support will be set around the RM0.50 level.

Source: M+ Online Research - 27 Oct 2014