Buying returned yesterday as the index closed higher, but it remains to be seen if it is good enough to set aside selling pressure arising from the failed test of the 1,650-pt resistance level two weeks ago. Yesterday's buying failed to push the index above the 1,630-pt resistance level and the latest 'Doji' suggests a lack of buying conviction, keeping the hint of buying seen from the 'Upper Shadow Line' of last Friday's candle unconfirmed. Nonetheless, the weakness was within the backdrop of a two-month rally. The index is now comfortably above both the 50-day MAV line and the rising 200-day MAV line, supported by the longer-term positive 'Golden Cross' that emerged in February.

Thus, selling pressure could return today but has to close below 12 July's low of 1,623 pts, which it failed to break last Thursday and Friday, to keep the downside bias intact. Further support is at 1,614 pts and followed by 5 July's low of 1,610 pts. Stronger support remains just above the 1,600-pt psychological level, at the three-week low of 1,602.50 pts. However, a sustained trade above 1,630 pts today should confirm the buying in the past two days but again, a break of the psychological 1,650 pts (tested twice last week) is required to cancel the current negative bias. Resistance is also expected at last Friday's high of 1,631.50 pts and 23 July's high of 1,645 pts.

The selling pressure that has been acting on the commodity since 6 July is likely on the back seat now as the buying seen last Friday was confirmed yesterday. Strength was marked by the gap up above the RM2,950 resistance level (which put a lid on the price in the prior four days) and the close above RM3,000 psychological level on a 'Long White Day'. Nonetheless, the commodity is still below the declining 50-day MAV line and the 200-day MAV lines, reinforced by the longer-term negative indication of the 'Death Cross' that emerged in early July. The downtrend since late March, with the latest lower highs at RM3,193 and RM3,182, remains intact.

Thus, the commodity should rise today and a firm buying should not see it closing back below the RM3,000 psychological level. The next resistance is, then, at the broken supports of RM3,050 and RM3,100 ' the 76% retracement of the late May-early June decline and 38% of the Apr-June decline. Minor resistance is also expected at RM3,030 and RM3,070. However, a failure to stay above RM3,000 should see a return of selling. The broken resistance of RM2,970 and RM2,950 has now turned into support and a break of both would strengthen selling further, as that cancels Monday's positive 'Long White Day'. Strong support is at RM2,900, where a false breakout occurred last week.

Source: OSK