Weekly Recap

Wall Street was closed last Monday as the U.S. celebrated the Memorial Day public holiday. As soon as the U.S. stockmarkets resumed trading, however, the Dow traded into the negative zone as traders were cautious ahead of the OPEC meeting (Thursday) and jobs data (Friday) – the key index fell 86.02 pts to 17,787.20 pts on Tuesday. However, mild buying interest was noted and the Dow rose 2.48 pts and 48.89 pts to 17,789.67 pts and 17,838.56 pts on Wednesday and Thursday respectively as Institute of Supply Management‘s

Manufacturing Index stood at 52.9 in May – suggesting that the growth is positive. Nevertheless, the selling pressure emerged on Friday as the U.S. non-farm payrolls only added 38,000 last month, which is weakerthan- estimated figure of 160,000; the Dow fell 31.50 pts. Overall on the W.o.W basis, the Dow lost 66.16 pts.

Meanwhile, share prices on the local front started the week on a weaker position, tracking the public holiday in the U.S. and the FBM KLCI dropped 7.32 pts to 1,629.87 pts, accompanied by softer volumes on Monday. Follow-through selling pressure was noted and the FBM KLCI ended lower at 1,626.00 pts (-3.87 pts) on Tuesday on the back of the strong outflow of foreign funds, coupled with the MSCI Index rebalancing which was implemented on 31st May that saw transacted value hit a high of RM6.71 bln.

Nevertheless, after the FBM KLCI ended flattish on Wednesday at 1,626.50 pts (+0.50 pts), buying activities picked up and boosted the key index towards 1,630.53 pts (+4.03 pts) on Thursday, led by Axiata (+3.2% W.o.W) and Sime Darby (+0.5% W.o.W). Also, most exports-related shares like Poh Huat and Lii-Hen traded positively amid weaker Ringgit. The FBM KLCI extended its rebound on Friday and ended higher at 1,636.46 pts (+5.93 pts). Still, the FBM KLCI ended marginally lower by 0.73 pts last week.

Technology – Daily

FBM KLCI Weekly Technical Readings The weekly MACD Line is still hovering below the zero level, while the weekly RSI is below the 50. However, the daily MACD Line has been trending positively above the daily Signal Line over the past two weeks. The daily RSI has hooked above the 50 level.

FBM KLCI Support & Resistance

The FBM KLCI managed to end above the EMA9 level for the second time over the past two weeks. As the both the daily MACD and RSI indicators are suggesting that the momentum is picking up, the FBM KLCI may gain further traction on the rebound phase towards the 1,660 level. Meanwhile, if the FBM KLCI violates below the 1,610 level, the next support will be pegged around 1,600.

Moving Forward

U.S. equities could have stabilised over the near term as the Dow has been trending above the EMA20 level. Also, crude oil prices have been on the uptrend for three months. Hence, the Dow and S&P 500 may retest their all-time-high respectively over the foreseeable future. Meanwhile, share price on Bursa Malaysia should be trending positively over the near term as the FBM KLCI has surpassed the 1,630 level last week with healthy buying interest. Also, traders may look out for technology stocks amid the weaker Ringgit.

Sector focus

The Technology index has rebounded after the EMA9 crossed above EMA20. The MACD Line is approaching zero. The RSI, however, is slightly overbought. Resistance will be envisaged around 22.42. The support will be set around 21.17.

Stocks to focus

KESM – Price gapped up above the resistance of the RM4.40 level with high volumes. The MACD Line has surged above the zero level, but the RSI is overbought. Price may rally towards the RM5.00-RM5.30 levels after a short consolidation. Support will be set around RM4.00.

GHLSYS – Price experienced a trendlinebreakout above RM0.85. The MACD Indicator has issued a “Buy” signal, while the RSI has been picking up above the 30 level. Monitor for follow-through buying interest towards the RM0.91-RM0.96 levels. Support will be anchored around the RM0.83 level.

Source: M+ Online Research - 6 June 2016