Weekly Recap

U.S. equities started the week mildly higher by eking out marginal gains – the Dow rose 6.10 pts to 17,678.70 pts on Monday. However, as Caterpillar Inc. and Microsoft Corp. posted weaker-than-expected earnings, the Dow plunged 291.49 pts to 17,387.21 pts on Tuesday, followed by another drop of 195.84 pts to 17,191.37 pts on Wednesday. After the two-day drop, bargain hunting activities emerged as the results posted by Boeing Co. and McDonalds’s Corp. were better-than-expected; the Dow soared strongly by 225.48 pts on Thursday. Nevertheless, investors were clouded by the U.S. 4Q2014 GDP, which only grew 2.6% and despite a mild surge in crude oil prices, the Dow faced renewed selling pressure and fell 251.90 pts to 17,164.95 pts on Friday. On the W.o.W basis, the Dow fell 507.65 pts.

Meanwhile, share prices on Bursa Malaysia were looking toppish last week as the FBM KLCI traded near the EMA120 level. The FBM KLCI slipped 6.64 pts to 1,796.44 pts on Monday. Despite the negative overnight performance on Wall Street, share prices on Bursa Malaysia managed to trade higher and above the 1,800 level at 1,803.17 pts (+6.73 pts) on Tuesday - led by a rebound on oil and gas heavyweights. However, the selling pressure re-emerged and the FBM KLCI fell 7.29 pts, 13.7 pts and 0.92 pts to 1,795.88 pts, 1,782.18 pts and 1,781.26 pts over the following three trading days as crude oil price trended below the US$45 per barrel mark. Last week, the FBM KLCI lost 21.82 pts.

FBM KLCI Weekly Technical Readings

The weekly MACD Line has crossed above the weekly Signal Line, issuing a “Buy” signal on the weekly chart. The RSI, however, is below 50.

The daily MACD Histogram, meanwhile, extended another red bar. Also, the RSI has tripped below 70.

FBM KLCI Support & Resistance

Although the FBM KLCI retested the EMA120 level, it ended below the 1,800 level and coupled with the insipid daily indicators, it suggests that the momentum is weakening. If the FBM KLCI breaches below the 1,800 level, further support will be located around the 1,750-1,770 level. Meanwhile, resistance for the FBM KLCI will be envisaged around the 1,820-1,840 levels.

Moving Forward

With the Dow and crude oil prices spiking upwards strongly for the past two trading days, the trading environment has turned positive, led by energy shares. Hence, the Dow may trade higher towards the 18,000 level over the near term. Meanwhile, oil and gas shares on Bursa Malaysia should gap-up to reflect the higher WTI crude oil price, which is currently hovering above US$50. Also, traders may let the profit run if share prices sustain above EMA9.

Sector focus

The Construction index ended above the EMA120 level last week. The MACD Line is above zero, but the RSI is overbought. Resistance will be located around the 294-299 levels. Support will be set around the 285 level.

Stocks to focus

MITRA – Price has breached above the ten-year high of the RM1.17 level with improved volumes. The weekly MACD indicator has issued a “Buy” signal. The RSI continues to trend higher above 50. Resistance will be set around the RM1.30-RM1.36 levels. Support will be located around the RM1.09 level.

BENALEC – Price has surged above the RM0.78 level with high volumes. The MACD indicator has expanded positively above zero, but the RSI is overbought. Price may rally towards the RM0.90 level after a short pullback. Support will be pegged around the RM0.75 level. 

Source: M+ Online Research - 4 Feb 2015