Reprieve in market sentiment boosted FBMKLCI

The FBMKLCI rose 15.03 points (0.911%) to close at 1,664.99 yesterday on the back of rebound in Crude oil prices as well as stronger regional performance (especially from China and Hong Kong). A revival in trading activity was seen during yesterday session, as investors returned from the prolonged Chinese New Year holiday season. Technically speaking, the local bourse maintained its overall sideways trading pattern to settle just above its 200-day SMA level. While MACD and RSI are trending north gradually to signify improved buying interest, Stochastic indicator has already ventured into the overbought zone. From here, we still view that the upside for the benchmark index could be capped at the 1,665 (R1) level. Hence, we continue to reiterate our view that the local bourse would likely look to consolidate from here with immediate support seen at 1,625 (S1) and

1,600 (S2).

 

Wall Street posts solid gains

Returning from the extended holiday weekend, Wall Street went against the odds of declining Crude oil prices by posting solid gains, sending the Dow higher by 222.57 points (1.39%) to 16,196.41. Taking cue from the Dow’s daily chart, it seems that investors are taking advantage of the oversold condition of the benchmark index to accumulate on weakness as depicted by the strong uptick in Stochastic from its oversold level. Nearterm outlook has turned upside-bias supported by the bullish convergence seen in the MACD. From here, we view that the Dow could possibly ride on the bullish momentum to trend higher towards the 16,500 (R1) level this week. Next overhead resistance is seen at 16,750 (R2), while immediate support is marked at 16,000 (S1) followed by 15,600 (S2).

 

Daily technical highlights – Interest brewing on furniture counters

· POHUAT (Trading Buy, TP: RM1.97). Furniture maker POHUAT appears to have marked a bottom, at RM1.45 recently. The share price rallied 8.0 sen (5.2%) yesterday to close at RM1.63. Chart-wise, POHUAT’s medium-long-term uptrend remains intact despite the sharp sell-off recently. In the shorter term, we expect the current rebound to continue as the Stochastic indicator has just hooked up from oversold levels. Note that in the previous two instances (*circled), the Stochastic BUY signal had been predictive of subsequent rallies in the share price. As such, we expect the share price to climb towards the next resistance at RM1.80 level (R1) before eyeing RM2.00 (R2). Support can be found at RM1.45 (S1) and RM1.20 (S2). For this Trading Buy strategy, take profit at RM1.97 (3 bids below RM2.00 resistance) with stop-loss set at RM1.42 (3 bids below RM1.45 support).

· HEVEA (Not Rated). HEVEA enjoyed a strong rally since Dec-2014, with its share price gaining more than 350% over a 13-month period to the recent high of RM1.79 (5th Jan 2016). Nevertheless, the stock bore the brunt of the last month’s sell-off, having retreated by as much as 68.0 sen (38%) from its RM1.79 high to an intraday low of RM1.16 last Thursday. Yesterday, HEVEA rose 8.0 sen (6.7%) to RM1.27. In a very similar chart pattern, the share price appears to have bottomed out at a solid horizontal support level (RM1.11-RM1.15), and is poised for a rebound. Technically, the Stochastic indicator has also hooked up from oversold level to reflect bottom fishing activities. From here, it is expected that the share price to move higher to retest the 100-day SMA at RM1.40 (R1). Should this level be taken out, the next resistance would be RM1.79 (R2). Immediate support levels are RM1.15 (S1) and RM1.00 (S2).