Weekly Recap

U.S. equities managed to extend its uptrend for another week after Janet Yellen commented that the U.S. economy is growing and may withstand the gradual increase in interest rates – the Dow increased 113.27 pts to 17,920.33 pts on Monday. Follow-through buying interest was noted as the key index climbed 17.95 pts and 66.77 pts to 17,938.28 pts and 18,005.05 pts on Tuesday and Wednesday respectively - led by energy shares amid a strong recovery of WTI crude oil prices above the US$50 per barrel mark. Meanwhile, the S&P 500 closed near the 10- month high at 2,119.12 pts.

However, investors turned cautious after the recent run-up and profit taking activities reemerged, sending the Dow lower to 17,985.19 pts (-19.86 pts) on Thursday. Selling pressure intensified following a fresh poll favoured an exit in Britain’s upcoming EU referendum; the Dow lost 119.85 pts to 17,865.34 pts. Nevertheless, on a W.o.W basis, the key index gained 58.28 pts.

Meanwhile, share prices on Bursa Malaysia regained momentum after the sideways ranging phase three weeks ago. The FBM KLCI surged strongly at the start of the week in tandem with the recovery of crude oil prices above the US$50 level; the FBM KLCI rose 12.53 pts to 1,648.99 pts on Monday. Buying support boosted the key index higher by 11.63 pts to 1,660.62 pts on Tuesday, led by SapuraKencana and Petronas Chemical.

As the FBM KLCI hit the 1,660 resistance level, profit taking activities took control and the key index fell 2.77 pts to 1,657.85 pts on Wednesday. Also, with regional indices being hit by the selling wave, the FBM KLCI follow suit and declined 7.34 pts and 9.29 pts to 1,650.51 pts and 1,641.22 pts over the next two trading days respectively, led by profit taking among the oil and gas heavyweights. Still, the key index managed to stay positive for the week, rising 4.76 pts.

FBM KLCI Weekly Technical Readings Despite the weekly MACD Line hovering below zero, the weekly MACD Histogram has turned green. The weekly RSI, however, is hovering below 50.

Meanwhile, the daily MACD Line is hovering below zero. However, the daily RSI is hovering above 50.

FBM KLCI Support & Resistance

Last week, the FBM KLCI retested the resistance of 1,660 after the breakout of the 1,636 level at the start of the week. As both the weekly and daily indicators are not in tandem, the FBM KLCI may trend sideways over the near term between the 1,630-1,660 levels. If the FBM KLCI violates below the 1,610 level, further support will be located around the 1,600 psychological level.

Moving Forward

Wall Street has taken a pause after the Dow and S&P 500 traded near the previous resistance area. As Brexit worries are piling up, affecting the market sentiments, both the Dow and S&P 500 may enter into a correction phase over the near term. Meanwhile, share prices on Bursa Malaysia may trend negatively in tandem with the weaker market sentiments, coupled with the softer crude oil prices. However, traders may look out for shares under the technology sectors as the technology index is on a short term uptrend.

Sector focus

The Technology index continues to trend higher last week above the 21.55 level. The MACD Line is trending above zero. The RSI is holding above 50. Resistance will be envisaged around 22.42 and 22.88 levels. Support will be set around the 21.55 level.

Stocks to focus

GHLSYS – Price could be forming a flag formation breakout above the RM0.87 level. The MACD Line is recovering towards the zero level, while the RSI is above 50. Price target will be envisaged around the RM0.91-RM0.96 levels. Support will be set around RM0.845.

DNEX – Price experienced a breakout above the RM0.26 level with improved volumes. The MACD Indicator expanded positively above zero, while the RSI stood around 50. Resistance will be pegged around RM0.29- RM0.325 levels. Support will be located around RM0.25.

Source: M+ Online Research - 13 June 2016