UNCERTAINTIES: Slowing momentum deters more meaningful trading participation
Blue chips were stuck in range bound trade last week, with the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI), whipsawing as rebound encouraged by better-than-expected economic numbers from major global economies failed to attract strong follow-through buying interest.
Instead, profit-taking and selling on strength checked gains, with concerns over sustained capital outflows from emerging markets and increased geopolitical tensions over Syria dampening market tone.
Week-on-week, the FBM KLCI slipped 3.78 points, or 0.22 per cent to 1,723.8, as gains on Public Bank (+34 sen) and Tenaga (+18 sen) were overshadowed by losses on CIMB (-9 sen), Felda Global Ventures (-20 sen), Petronas Chemicals (-12 sen) and Sapura Kencana Petroleum (-8 sen).
Average daily traded volume and value decreased to 1.32 billion shares and RM1.52 billion, compared to the 1.9 billion shares and RM2.5 billion respectively the previous week, as institutional participation on blue chips declined significantly.
New spot month September KLCI futures contract traded on the Bursa Malaysia Derivatives Bhd lost 10 points, or 0.6 per cent last week to 1,711.5, deteriorating to a 12.3-point discount to cash, from 6.1 points discount to the cash index the previous Friday, as the futures market undertone remained bearish, given the lingering uncertainties over the capital outflows and Syria situation.
Bursa Malaysia's blue chips slipped into profit-taking consolidation mode on Monday to digest gains from last week's strong technical rebound, from a near five-month low.
The KLCI slid 10 points to close at 1,717.56, off the opening high of 1,724.76 and low of 1,714.95, as losers beat gainers 523 to 231 on cautious trade totalling 1.08 billion shares worth RM1.2 billion.
The local market staged a rebound the next day, aided by regional strength after stronger-than-expected manufacturing data from China and Europe boosted hopes for global economic recovery.
The KLCI ended 6.65 points higher at 1,724.21, off an early low of 1,715.98 and high of 1,727.94, as gainers led losers 436 to 274 on moderate trade of 1.35 billion shares worth RM1.51 billion.
Blue chips slipped back into correction mode on Wednesday due to weak follow-through buying from the previous day's rebound and lingering geopolitical tensions in Syria.
The KLCI fell 7.45 points to settle at 1,716.76, off an opening high of 1,725.55 and an early dip to a low of 1,702.57, as losers beat gainers 431 to 277 on steady trade of 1.47 billion shares worth RM1.81 billion.
The local stock market rebounded the subsequent day, copying regional strength after a Federal Reserve survey showed that the United States economic recovery remains intact.
The KLCI rose 4.21 points to 1,720.97, off an opening low of 1,718.56 and high of 1,723.69, as gainers led losers 462 to 212 on improved trade of 1.59 billion shares worth RM1.65 billion.
Stocks extended its rangebound trade ahead of the weekend, bogged down by prevailing cautious sentiment pending an imminent United States-led military strike on Syria, ahead of the closely watched United States payrolls report.
The index gained 2.83 points to end the week at 1,723.8, off the opening low of 1,719.83 and 1,726.28, as gainers narrowly edged losers 352 to 339, on a slow trade of 1.1 billion shares worth RM1.45 billion.
Trading range for the local blue-chip benchmark index shrank to 25.37 points last week, compared with the 71.86 points range the previous week, as blue chips were forced into range bound trade given the external uncertainties.
The FBM-EMAS Index slid 11.22 points, or 0.09 per cent last week, to 11,957.36, but the FBM-Small Cap Index rose 16.96 points, or 0.12 per cent to 14,464.88, as small cap stocks went into base building mode following the previous week's severe sell-off.
The daily slow stochastic indicator for the FBM KLCI climbed up to the neutral region after the previous week's buy signal, but the weekly indicator's signal line continued to dip below the mid-point, suggesting weakening momentum.
The 14-day Relative Strength Index (RSI) indicator continued to level off with a neutral reading of 42.05 as of last Friday, while the 14-week RSI also levelled off with a reading of 46.68.
Surprisingly, the daily Moving Average Convergence Divergence (MACD) signal line flashed a crossover buy signal in negative territory, but the weekly MACD signal line extended its descent into bearish territory. The 14-day Directional Movement Index (DMI) trend indicator's +DI and -DI lines were level against each other on a steady ADX line, signaling consolidation. Conclusion
Except for the daily MACD buy signal, most other momentum and trend indicators for the FBM KLCI point to further consolidation or sideways trend this week, with the slowing trading momentum on the broader market discouraging more meaningful trading participation.
Prevailing uncertainties over the degree of capital outflows from emerging markets back to developed markets, and an impending military attack by United States-led forces on Syria and potential contagion in the Middle East will act to dampen sentiment in the immediate term.
As for the index, immediate resistance remains at 1,738, the 38.2 per cent Fibonacci Retracement level of the 7/2/13 low of 1,597 to the all-time high of 1,826, with stronger hurdles at 1,760 and 1,766, the current 100-day and 50-day moving average levels, followed by 1,772, the 23.6 per cent Fibonacci Retracement level.
On the downside, immediate support stays at 1,712, the 50 per cent Fibonacci Retracement level, followed by 1,704, the current crucial 200-day moving average support level, followed next by 1,685, the 38.2 per cent Fibonacci Retracement level and then 1,660, the intra-day low of 28 August.
Bargain blue chips such as Gamuda and Tenaga are preferred for medium-term upside, while construction and property related stocks like AZRB, Eversendai, IJM Land and MRCB are attractive to be bought for technical rebound upside, given their present oversold condition.
Meanwhile, oil and gas counters like TH Heavy Engineering and Tanjung Offshore are also attractive bargains for upside on speculation over potential for contracts.The subject
expressed above is based purely on technical analysis and opi-nions of the writer. It is not a solicitation to buy or sell.