U.S. stockmarkets started the week on a positive note amid the crude oil price rebound, coupled with the announcement that Warren Buffett acquired a stake in Apple Inc.; the Dow surged 175.39 pts to 17,710.71 pts on Monday, while energy shares were focused as well. However, profit taking activities quickly re-emerged within the utilities sector as traders speculated that the Fed could raise interest rates in June – the Dow pared down previous gains and ended lower, tumbling more than 180 pts at 17,529.98 pts on Tuesday. Follow-through selling interest was noted and the key index fell 3.36 pts and 91.22 pts to 17,526.62 pts and 17,435.40 pts over the next two trading days respectively after the Fed’s minutes suggested a June hike is in store. Nevertheless, mild bargain hunting returned and the Dow gained 65.54 pts to 17,500.94 pts on Friday. Still, on the weekly basis, the Dow declined 34.38 pts, extending its losing streak to a fourth week.

Once again, share prices on Bursa Malaysia trended lower at the start of the week after tracking the overnight performance on the Dow, coupled with the weighting cut by MSCI - the FBM KLCI declined 7.05 pts to 1,621.21 pts after hitting an intra-day low of 1,611.91 pts on Monday. However, as crude oil prices rebounded, oil & gas index heavyweights were focused and pushed the FBM KLCI higher to 1,633.39 pts (+12.18 pts) and 1,635.72 pts (+2.33 pts) on Tuesday and Wednesday respectively.

Nevertheless, the FBM KLCI snapped a two-day winning streak and ended in the negative territory amid a weaker Ringgit, which traded near the RM4.08 level vs. the Greenback; the key index fell 1.96 pts to 1,633.76 pts on Thursday. Follow-through selling pressure was noted among telco heavyweights like DiGi and Axiata, sending the FBM KLCI lower to 1,628.79 pts (-4.97 pts) on Friday. Still, the FBM KLCI made marginal gains of 0.53 pts on the W.o.W basis.  

FBM KLCI Weekly Technical Readings

The weekly MACD Indicator expanded negatively below the zero level. Also, the weekly RSI is hovering below 50.

Meanwhile, the daily MACD Line is flattish below the zero level, but the MACD Histogram extended another green bar. The daily RSI has surged above 30.

FBM KLCI Support & Resistance

The FBM KLCI continues to stay below the EMA9 level over the past month – indicating that the trend is negative. However, as the daily RSI and MACD indicators are suggesting that the momentum could be picking up, the key index may be due for a technical rebound and climb above the 1,640 level, targeting the 1,660 level. However, if the FBM KLCI falls below the 1,600 level, the next support will be pegged around 1,550.

Moving Forward

Wall Street could extend its correction phase over the near term as the Dow and the S&P 500 are hovering below EMA20. Despite the crude oil rally, the potential interest rate hike next month may have slowed down the trading interest of most traders. Meanwhile, share prices on Bursa Malaysia could stage

a rebound if the FBM KLCI can surge above the 1,640 level. Nevertheless, traders may lookout for shares in the construction sector as the construction index is still positive.

Sector focus

The Construction index stayed fairly positive above the EMA60 level. The MACD Line is hovering sideways near the zero level and the RSI is trending positively above zero. The index may rebound towards the 290-294 levels. Support will be pegged around 284.

Stocks to focus

TRIPLC – Price has experienced a breakout above the RM1.48 level with improved volumes. The MACD Indicator has expanded positively above zero, while the RSI is trending above 50. Price target will be envisaged around the RM1.74 and RM2.00 levels. Support will be set around RM1.48.

WCT – Price trended sideways between the RM1.64-RM1.72 levels over the past two months. The MACD Line has rebounded off the zero level last week. The RSI is hovering above 50. Monitor for a breakout above RM1.72, targeting RM1.80-RM1.95. Support will be located around RM1.64.

Source: M+ Online Research - 23 May 2016