Market review

• Following the decline in Dow from the 20,000 level, coupled with weaker crude oil prices, most of the Asian key indices such as Shanghai Composite Index (-0.29%), Nikkei 225 (-0.79%) and Kospi Index (-0.18%) ended in the negative territory amid increasing profit taking activities. However, Hang Seng Index gained 0.83%.

• Meanwhile, trading activities on our local bourse were active as overall market volumes hit 2.64bn, which is 80.13% higher than the average volumes of 1.49bn on the back of heightened trading activities within ACE market. The FBM ACE closed above 5,000 level. Also, the FBM KLCI was wavering between the positive and negative territory before closing higher at 1,672.05 pts (+4.15 pts). Market breadth also turned positive with 414 gainers, 368 losers, while 367 traded unchanged.

• Wall Street ended on a mixed note as Nasdaq made a fresh all-time-high at 5,551.82 pts (+0.36%), but the Dow slipped 0.16% to 19,855.53 pts led by Exxon (-1.28%) on the back of softer crude oil prices.

Technical view

Trend indicator positive, but momentum indicator overbought

• The daily MACD Histogram extended another green bar, while the daily MACD Line is hovering above zero. The RSI is hovering slightly below 70, while the Stochastics oscillator is overbought.

Market outlook

• While traders are closely monitoring Donald Trump's news conference to get potential cues on his policies, investors may sideline for the time being. Also, the cautious market sentiments were set earlier as the Dow was not able to surpass the 20,000 psychological level, coupled with weaker Brent crude oil price below the US$54 level.

• Trading focus might be shifting towards the ACE stocks as FBM ACE trended above 5,000, while the FBM Small Caps Index is taking a pause around the 200-d SMA. Hence, profit taking activities are likely to emerge further among small caps stocks after the recent gains.

• Trading Buy-GPACKET. With the closure of webe, GPACKET is expected to begin a new lease of life moving forward, supported by 4 new synergistic business pillars i.e. (1) Hardware/Solution; (2) Communications; (3) Internet of Things; and (4) E-services platform. We remain optimistic that after a brief consolidation to neutralize overbought positions, share prices are likely to resume uptrend in the mid to long term, reflected by the double bottom formation in its weekly chart. Key supports are RM0.27-RM0.28, while resistances will be set around RM0.315-RM0.36. Cut loss at RM0.25.

Source: Hong Leong Investment Bank Research - 11 Jan 2017