Weekly Recap

U.S. equities started the week on a positive tone as the Dow halted seven consecutive days of decline, advancing 241.79 pts to 17,615.17 pts on Monday after Berkshire Hathaway agreed to acquire Precision Counterparts Corp., coupled with some rebound in selected technology stocks like Apple and Google. However, the Dow took a dive on Tuesday on the back of China’s surprise currency devaluation which took most investors off guard; the key index plunged 212.33 pts to 17,402.84 pts. Nevertheless, after a flattish close on Wednesday at 17,402.51 pts, the Dow rebounded marginally by 5.74 pts and 69.15 pts to 17,408.25 pts and 17,477.40 pts on Thursday and Friday respectively. Last week, the Dow gained 104.02 pts.

Meanwhile, share prices of most stocks on Bursa Malaysia were severely sold down last week amid the surprise move of China’s RMB devaluation and the downward trend of crude oil prices. The

FBM KLCI started the week on a negative tone, falling 28.28 pts, 17.66 pts and 26.78 pts to 1,654.37 pts, 1,636.71 pts and 1,609.93 pts over the first three trading days respectively. However, bargain hunting activities emerged around the 1,600 psychological level and boosted the key index to end higher at 1,621.62 pts (+11.69 pts) on Thursday. After a technical rebound which only lasted for a day, the selling pressure resumed and the FBM KLCI took another round of beating, diving 24.80 pts on Friday. On a W.o.W basis, the FBM KLCI plummeted 85.81 pts.

FBM KLCI Weekly Technical Readings

The weekly MACD Indicator expanded negatively below the zero level. The weekly RSI, however, is oversold.

Similarly, the daily MACD Histogram extended another red bar, in tandem with the daily MACD Line, but the RSI is oversold.

FBM KLCI Support & Resistance
After the FBM KLCI retested the 1,700 level several times, the key index finally violated below the 1,660 (neckline of the Head and Shoulders formation) on the back of heavy selling interest by foreign funds two weeks ago. With the daily MACD Indicator suggesting that the momentum is negative, the FBM KLCI may see further downside towards the support of 1,560. Meanwhile, the upside of the key index will be limited to around 1,660.

Moving Forward
U.S. stockmarkets may trend sideways for the time being as investors are staying cautious ahead of the potential interest rate hike in September and the Dow is currently hovering below the 18,000 psychological level. Meanwhile, share prices on the Bursa Malaysia may pull back towards the next support level of the 1,560 level amid the lower crude oil prices, while foreign funds are reducing their position on the back of uncertain political events.

Sector focus

The Technology index has corrected towards the support of 18.87 over the past two weeks. The MACD Indicator, however, is trending lower below zero. Nevertheless, the RSI is oversold. Resistance will be envisaged around 20.27.

Stocks to focus

PENTA – Price rebounded off the support of the RM0.725 level last week. The MACD Line, however, is hovering below zero. Also, the RSI is trending below 50. Monitor for a breakout above RM0.78, targeting the RM0.82 and RM0.90 levels. Support will be set around RM0.71.

GTRONIC – Price has rebounded off the support of RM5.57 last week. The MACD Histogram has extended another green bar, while the RSI is hovering above 30. Monitor for a breakout above the RM5.85 level. Price target will be set around RM6.00-RM6.30 levels. Support will be located around RM5.50. 

Source: M+ Online Research - 17 Aug 2015