Market Review

• Despite the strengthening Ringgit and oil prices, KLCI erased its midday rallies by dropping 7.34 pts or 0.44% to 1650.51, as traders stayed cautious ahead of FOMC meeting on 14-15 this month.

• On the external front, Asian markets mostly declined yesterday amid continuing uncertainty over the pace of the US economic recovery as well as uncertainty surrounding the looming BREXIT referendum.

• Dow retreated from its recent follow-through rebounds by 19.86 pts or 0.11% to 17985.19, as crude oil prices dropped from its multi-month highs and investors turned to less-risky assets like bonds.

Technical Insights

• Evening Doji Star pointing to potential technical correction

• Based on daily chart, KLCI formed ‘E vening Doji Star’ formation (see FIG3), a bearish reversal candlestick pattern, suggests the likelihood of correction from recent rally. Hence, a decisive break below 1650 will see further selling pressure.

• Based on weekly chart, the trend of KLCI is in the midst of experiencing a correction (see FIG4). However, recent bargain hunting may reverse the current circumstance should the key index forms a long white candlestick this week.

Market Strategy

• Overall sentiment remains cautious ahead of FOMC meeting on 14-15 this month; uncertainty surrounding the looming BREXIT; as well as higher expectation of lower market consensus for the KLCI year-end target due to lackluster local earning results.

• The local benchmark key index remains under pressure, as the bearish reversal candlestick pattern, ‘E vening Doji Star’, on daily chart, suggests the likelihood of technical correction from recent rally. Hence, a break below 1650 will see further selling pressure.

• However, today we recommend a Trading BUY on ICON which may go against major trend.

Source: Hong Leong Investment Bank Research - 10 Jun 2016