Investors prefer to stay on sidelines

SHARE prices on Bursa Malaysia slipped back into their prior consolidation mood despite the easing crude oil prices on the New York Mercantile Exchange. The Kuala Lumpur Composite Index (KLCI) continued to stay below the support of its major psychological 1,200 when it closed at 1,105.04 points yesterday.

The KLCI continued to extend its consolidation within range-bound activities on Monday. It closed lower at 1,144.00 points, giving a day-on-day loss of 6.39 points, or 0.56 per cent.

On Tuesday, share prices accelerated their consolidations southwards on weaknesses on the regional stock markets. The KLCI closed at 1,127.60 points, with a day-on-day loss of 16.40 points, or 1.43 per cent.

The index continued to ease back despite rebounds on regional stock markets. It closed at 1,119.42 points on Wednesday, 8.18 points, or 0.73 per cent, lower from the previous day..

Overall market sentiment remained at the current low levels, with the KLCI staging a mild rebound on Thursday despite strong recovery on other stock markets in the region. It closed at 1,121.17 points, posting a day-on-day gain of 1.75, or 0.16 per cent.

The KLCI resumed its consolidation on new developments on the local political front, closing at 1,105.04 points yesterday, giving a day-on-day loss of 16.13 points, or 1.44 per cent.

Week-on-week, the KLCI registered a loss of 45.35 points, or 3.94 per cent. The FTSE Bursa Malaysia Second Board Index fell 71.83 points, or 1.34 per cent, to 5,307.07 points, while the FTSE Bursa Malaysia Mesdaq Index lost 105.61 points, or 2.46 per cent, to 4,192.21 points.

Following are the readings of some of its technical indicators:

Moving Averages: The KLCI continued to stay below the support of its 10-, 20-, 30-, 50-, 100- and 200-day moving averages.

Momentum Index: Its short-term momentum index continued to stay below the support of its neutral reference line.

On Balance Volume (OBV): Its short-term OBV trend stayed below the support of its 10-day exponential moving averages.

Relative Strength Index (RSI): Its 14-day RSI stood at the 26.65 per cent level yesterday.

Outlook

The KLCI retraced to its intra-week low of 1,100.19 yesterday, breaching this column’s envisaged support zone of 1,113 to 1,147 levels).

Chartwise, the KLCI continued to stay above its intermediate-term downtrend (See weekly chart — A3:A4) albeit at lower support levels. It staged a decisive breach of the support of its immediate downside support (A5:A6).

The KLCI’s daily trend breached the support of its intermediate-term uptrend (See daily chart — B5:B6). It continued to stay below the support of its intermediate-term uptrend (B5:B6) for the third consecutive week.

The KLCI’s daily, weekly and monthly fast MACDs (moving average convergence divergence) continued to stay below its respective slow MACDs.

Its 14-day RSI stayed at the 26.65 per cent level yesterday. Its 14-week and 14-month RSI stayed at the 29.66 and 41.84 per cent levels respectively.

Last week, this column commented that the KLCI was likely to launch a mild follow-through rebound to re-challenge its overhead resistance. Instead, the KLCI slipped to even lower levels, plunging further into its grossly oversold levels.

A new twist to the political front negated the impetus provided by the easing crude oil prices. For now, investors are more contented to stay on the sidelines to let the consolidation take its full course.

From the weak market momentum generated over the week, the KLCI is likely to breach its 1,100 support level before trying to find its critical support at its immediate downside support zone (1,040-1,090 levels).

Next week, the KLCI’s overhead resistance zone hovers at the 1,108-1,170 points while its downside support zone is at the 1,067-1,101 levels.

The subject expressed above is based on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.