U.S. stockmarkets trended lower at the start of the week as Greece’s financial crisis intensified which may potentially mean a dropout from the Eurozone – the Dow plummeted sharply by 350.33 pts to 17,596.35 pts on Monday, violating below the 18,000 psychological level. However, following the volatile trading environment, bargain hunting activities emerged and boosting the Dow higher to 17,619.51 pts (+23.16 pts) and 17,757.91 pts (+138.40 pts) on Tuesday and Wednesday respectively. Nevertheless, the selling interest resumed ahead of the Greece bailout referendum on Sunday; the Dow declined 27.80 pts to 17,730.11 pts on Thursday. For the shortened trading week, (markets were closed on Friday) the Dow lost 216.57 pts.

Share prices on Bursa Malaysia started the week on a negative tone as investors were worried about the Greece issues and a potential downgrade of Malaysia’s credit ratings. The FBM KLCI declined 18.55 pts to 1,691.92 pts on Monday. However, the FBM KLCI rebounded sharply on the back of second quarter window dressing activities, which sent the key index to end higher at 1,706.64 pts on Tuesday. Follow-through interest was noted as Fitch upgraded Malaysia’s sovereign outlook to stable – the FBM KLCI rocketed 21.32 pts to 1,727.96 pts on Wednesday. The FBM KLCI followed on with marginal increases of 5.92 pts and 0.36 pts to 1,733.88 pts and 1,734.24 pts on Thursday and Friday respectively. Overall for the week, the FBM KLCI advanced 23.77 pts.

FBM KLCI Weekly Technical Readings

Despite the weekly MACD Line below zero, the weekly MACD Histogram turned green. The weekly RSI has crossed above 30. Meanwhile, the daily MACD Line extended its upward movement, while the daily MACD Histogram extended another green bar. The daily RSI has hooked above 50.

FBM KLCI Support & Resistance

The FBM KLCI fluctuated around the 1,700 level at the start of the week, but managed to rebound off the 1,700 psychological level and ended positively for the week. The daily indicators are suggesting that the momentum is picking up. Hence, the FBM KLCI may rebound further towards the resistance of 1,740-1,750 levels. If the key index drops below 1,700, further support will be set around the 1,670 level.

Moving Forward

As the Greeks voted “No” to the bailout, volatility is expected to increase over the near term. The Dow may trade lower towards the support of 17,600 and 17,000. Meanwhile, share prices on Bursa Malaysia is likely to follow the similar trend as market sentiments may turned cautious and the FBM KLCI could fall below the near term support of 1,700. Nevertheless, traders should focus on uptrend intact counters, which are mainly export-related shares as the Ringgit continues to weaken.

Sector focus

The Industrial Product index surged higher over the past week. The MACD Indicator has expanded positively above zero, while the RSI surged above the 50 level last week. The index may breakout above 140, targeting the 144 level. Support will be located around the 136 level.

Stocks to focus

MIECO – Price jumped above the resistance of the RM0.77 level with higher-than-average volumes. The MACD Indicator expanded positively above zero. The RSI, however, is overbought. Price target will be located around the RM0.835 level. Support will be set around RM0.71.

IRCB – Price trended sideways between the RM0.825-RM0.865 levels over the past week. The MACD Line is hovering above zero, while the RSI is above 50. Monitor for a breakout above RM0.865, targeting the RM0.945-RM1.00 levels. Support will be pegged around RM0.825. 

Source: M+ Online Research - 6 Jul 2015