MARKET REVIEW

Following strong gains over the past two days on Asia’s key benchmark indices on the back of slight recovery in factory data from both the US and China regions, profit taking activities have emerged and regional stocks traded mixed. The Shanghai Composite Index and Hang Seng Index rose 0.20% and 0.21%, respective, but Nikkei 225 fell marginally by 0.02%.

On the local front, the FBM KLCI trended higher after a steep decline on Monday; the key index rose 0.26% to 1,632.83 pts led by a recovery in banking heavyweights. Market breadth was positive with 433 advancers vs. 363 decliners, accompanied by trading volumes of 2.76bn (worth RM1.97bn). Also, O&G stocks were traded actively following the firmer overnight Brent oil prices.

Wall Street ended mixed after a strong session on Monday led by profit taking activities amongst energy stocks, while Walgreen was traded lower on the back of weaker-than expected earnings and softer outlook guidance; the Dow fell 0.30%, but Nasdaq rose 0.25% and S&P500 traded unchanged.

TECHNICAL OUTLOOK: KLCI

After hitting the resistance around 1,695 level, it has been extending its downward momentum and the MACD indicator expanded negatively over the past few sessions. However, both the RSI and Stochastic oscillators are suggesting that the key index is oversold, hence could be due for a rebound. Should there be a breakout above 1,640, next target will be at 1,650, followed by 1,666. Meanwhile, support will be located around 1,626.

We see potential rebound in KLCI after stabilizing near the support of 1,626 yesterday following the oversold signal flashed by the momentum oscillators. Traders may still lookout for O&G stocks on the back of firmer crude oil prices (above USD69), construction stocks as well as building material segments with the potential revival of ECRL in the future.

TECHNICAL OUTLOOK: DOW JONES

The Dow has trended sideways over the past two months between the range of 25,188- 26,280, hovering above the SMA200. However, the MACD indicator has turned positive with the golden cross early this week. Also, both the RSI and Stochastic oscillators are still trending positively above 50. Hence, we believe the key index could poise for a breakout above resistance level of 26,300, targeting 26,951. Support will be pegged around 25,205 (SMA200).

In the US, we believe the short consolidation would continue in the near term below the resistance of 26,300 after the strong jump on Monday. Nevertheless, the 10-year and 3-month Treasury have untangled from the previous inverted yield curve situation may provide upside towards financial stocks and could lift the Dow eventually. However, should there be any negative surprises from the ongoing trade talks, it could limit he upside potential on Wall Street. The Dow’s resistance is located around 26,300 and 26,951.

TECHNICAL TRACKER: SCOMNET

Riding on medical industry after the SMP acquisition. After the Supercomal Medical Products Sdn Bhd (SMP) acquisition, SCOMNET has registered strong FY18 earnings and we believe the earnings momentum could sustain throughout FY19 with the full year contribution from SMP. We opine that the advancing technologies amongst the automotive, technology, telecommunications and medical sectors will remain robust, leading to steady demands in high-tech wires and cables moving forward. As of FY18, SCOMNET has zero debt, with a net cash of 6 sen per share. Technically, SCOMNET is poised for a triangle formation breakout above RM0.80, targeting RM0.84-0.87, followed by LT target of RM0.92. Support will be pegged around RM0.75-0.76, with a cut loss set below RM0.745.

Source: Hong Leong Investment Bank Research - 3 Apr 2019