Market Review

• KLCI formed an inverted Hammer candlestick last week, suggesting that any rally was capped near its high of 1664. This was in line with our Weekly Traders Brief view. Given uncertainties ahead of FOMC meeting on 14-15 June and BREXIT referendum on 23 June, KLCI wavered between 1633. 38 and 1664.04 zones. Our last week’s revised projected weekly trading range was 1635 – 1665.

• Taking cue from weak performance in Asian equities and Wall Street, KLCI declined 9.29 pts or 0.56% to 1641.22 on Friday as global investors were cautious ahead of FOMC meeting on 14-15 this month and BREXIT referendum on 23 June. The global sentiment was also dampened by a correction in oil prices.

• Dow fell 119.85 pts or 0.67% to 17865.34 overnight, weighed by a drop in oil prices; renewed global health concerns as benchmark yields fell to record lows; and investors looked ahead of BREXIT referendum on 23 June.

Technical Insights

• Evening Doji Star pointing to further selling pressure

• Based on weekly chart, the trend of KLCI is in the midst of experiencing a correction (see FIG4). It formed an inverted Hammer last week, suggesting that any rally would be capped. The local benchmark index is likely to find strong supports near 1614.14 and the psychological level of 1600 before it could hit 1580-1575 territories.

• Based on daily chart, the long black marubozu candlestick last Friday indicated further selling pressure after bearish reversal candlestick pattern, ‘E vening Doji Star’, formed (see FIG3). Noticeably, readings from MACD, RSI and Stochastics are hooking down, pointing to further profit taking from recent rally.

Market Strategy

• In the coming week ahead, we expect KLCI to see further selling pressure, as indicated by the bearish reversal candlestick pattern, ‘E vening Doji Star’, amid falling oscillators.

• Moreover, global sentiment remains jittery ahead of FOMC meeting on 14-15 this week; uncertainty surrounding the looming BREXIT referendum on 23 June; as well as declines in crude oil prices from its multi-month highs.

• We took profit on ARMADA on 10 June with a 5.6% gain after hitting above R1.

Source: Hong Leong Investment Bank Research - 13 Jun 2016