Market review

• Key regional indices ended mostly lower as profit taking activities re-emerged amid overbought situation on Wall Street. The Hang Seng Index and Nikkei 225 declined 0.58% and 0.45% respectively – the latter closed in the negative territory as export related stocks were pressured after yen strengthened against US dollar.

• Trading sentiments remained negative throughout the day as the FBM KLCI violated the 1,700 psychological level following another day of sell down in Axiata and profit taking on Genting Malaysia; the key index fell 0.36% to 1,698.35 (-0.55% wow). On the broader market, decliners outnumbered advancers by a ratio of 530-to-358 stocks.

• Meanwhile, Wall Street managed to extend the rally for the eleventh session led by Wal-Mart and Johnson and Johnson despite some mild profit taking in energy stocks after the weakness spotted in crude oil prices. The Dow inched up 0.05% (+0.96% wow).

Technical view

KLCI formed a shooting star candle on the weekly chart after violating the 1,700 level

• Selling pressure was noted on selected heavyweights sending the FBM KLCI below the 1,700 level, forming a shooting star candle. The weekly MACD Histogram has turned red. The weekly RSI and Stochastics oscillators are in the overbought region. KLCI’s upside is likely to be limited around 1,720-1,730.

Market outlook

• With buying interest remaining positive on Wall Street, we expect the momentum of Dow to be sustained towards the next resistance around the 21,000 psychological level. Traders may still be positive ahead of Trump’s address to the joint session of Congress on Tuesday, awaiting Trump’s economic plan. We revise the trailing support towards the 20,600 level.

• Over on our local bourse, shares may trade on a weaker tone after the FBM KLCI breached below the 1,700 level, coupled with the softer crude oil prices. Next support will be anchored around 1,680, followed by 1,660.

• Trading buy – GLD ETF. GLD ETF might be worth accumulating for a medium term position. Monitor for the continuation of the buying interest towards the price target of US$124-US$130. Meanwhile, support will be pegged around the US$116-118 level, with the cut loss strategy located at US$115.

• Technical View - AXIATA. AXIATA’s share prices tumbled 10.6% in two days and 11.1% wow after a sluggish 4Q16 results. Major support levels are RM4.11/4.00/3.89. If Axiata is able to rebound strongly above immediate resistance levels of RM4.34 (76.4% FR) and RM4.48 (61.8% FR), share prices may retest RM4.60-4.86

Source: Hong Leong Investment Bank Research - 27 Feb 2017