Weekly Recap

After Wall Street trended negatively over the past four weeks, U.S. equities started the week on a cautious mode as investors and traders continue to focus on the potential interest rate hike next month. Meanwhile, the U.S. manufacturing PMI fell 0.3 to 50.5 M.o.M in May, its fresh three-year low – the Dow fell 8.01 pts to 17,492.93 pts on Monday. However, as the Dow traded near the 17,300 support, the key index rebounded strongly on the back of a strong rally on WTI crude oil to the US$50 level – the Dow rocketed 213.12 pts and 145.46 pts to 17,706.05 pts and 17,851.51 pts on Tuesday and Wednesday respectively, led by energy and materials shares.

Nevertheless, the key index took a small pause on the back of profit taking activities; the Dow lost 23.22 pts to 17,828.29 pts on Thursday. The key index, however, regained some momentum and rose 44.93 pts to 17,832.22 pts on Friday. On a weekly basis, the Dow surged strongly by 372.28 pts. Following the FBM KLCI’s marginally higher closing two weeks ago to near the 1,630 level, share prices on Bursa Malaysia extended their positive technical rebound at the start of the week; the FBM KLCI rose 6.10 pts to 1,634.89 pts on Monday, led by selected banking heavyweights. However, the key index pulled back 9.05 pts to 1,625.84 pts on Tuesday as banking heavyweights pared down some of their gains, coupled with the Ringgit weakening to RM4.12.

Nevertheless, tracking the gains on the Dow, buying interest re-emerged, boosting the FBM KLCI higher by 5.12 pts to 1,630.96 pts on Wednesday. Follow-through buying support sent the FBM KLCI higher as crude oil rallied towards the US$50 level – the key index ended higher at 1,631.09 pts (+0.13 pts) and 1,637.19 pts (+6.10 pts) over the next two trading days respectively. On a W.o.W basis, the FBM KLCI has gained 8.40 pts, marking the second winning week after the index dropped more than 100 pts.

FBM KLCI Weekly Technical Readings

The weekly MACD Line is pointing downwards below zero. Also, the weekly RSI is hovering below 50.

Meanwhile, the daily MACD Line has been trending higher above the daily Signal Line last week. The daily RSI has crossed above the 50 level.

FBM KLCI Support & Resistance

Finally, the FBM KLCI managed to surge above the EMA9 level after trading below the moving average for more than a month. With both the daily MACD and RSI indicators suggesting that the momentum could be picking up, the FBM KLCI may continue its technical rebound phase towards the immediate resistance zone of the 1,650- 1,660 levels. Meanwhile, the support region is located around the 1,600-1,610 levels.

Moving Forward

As the momentum is picking up after the technical rebound was spotted on the Dow and the S&P 500, Wall Street may continue its technical rebound phase towards the 18,000 level over the near term. Also, with the recovery in WTI crude oil prices, energy and material shares will be in focus.

Meanwhile, share prices on Bursa Malaysia are likely to rebound further after the FBM KLCI crossed above EMA9. Traders may look out for opportunities within the Ace Market and technology shares this week.

Sector focus

The Technology index surged above the 21.16 level, forming a technical rebound pattern. The MACD Indicator has turned green, while the RSI is trending above 50. Resistance will be envisaged around 22.11. Support will be set around 21.16.

Stocks to focus

GTRONIC – Price has broken above the RM3.26 level with improved volumes. As the MACD Line is trending towards zero and the RSI is hovering above 50. Price may rally towards the RM3.90 level after a short consolidation. Support will be pegged around the RM3.00 level.

INARI – Price could be forming a flag formation after hitting the RM3.05 resistance level last week. The MACD Line is approaching zero, while the RSI is trending above 50. Price target will be pegged around RM3.15-RM3.30 levels. Support will be anchored around RM2.89.

Source: M+ Online Research - 30 May 2016