Business

Saturday February 21, 2009

A half-heartedbreakout for now


REVIEW: Bursa Malaysia kicked off the week on a soft platform, with the benchmark Composite Index (CI) easing 1.48 points, or 0.16%, to 908.36 as most investors adopt a cautious stance after Wall Street suffered another beating overnight.

US financial stocks were repeatedly pummelled, as Washington’s latest bank rescue plan failed to allay worries about the sector, sending the Dow down 82.35 points to 7,850.41 the previous Friday.

But unlike most regional markets, which were traded significantly lower in the wake of profit-taking activity, the magnitude of decline on the local bourse was shallow due to nibbling in select blue-chips and certain lower liners amid speculation that they may benefit from the upcoming stimulus package.

Gains in plantation and energy-related counters, following a sudden spike in global crude oil prices to US$37.51, up US$3.53 a barrel, also aided local sentiment but not good enough to keep the key index afloat.

Hence, in mixed note, the CI drifted between an intra-day high and low of 909.16 and 904.20 respectively, a tight 4.96 points throughout before ending at 907.19, losing a small 2.65-point on Monday.

The market was left to search for its own course the following day, as US markets were shut for a public holiday overnight.

Regional stock exchanges continued to bleed amid fresh concerns about the health of the global economy. Major Asian bourses, such as Japan, Sydney, Singapore, Hong Kong and Seoul plunged between 1.4% to 4.1% but at home, the setback was relatively minor, with the key index shedding only 8.66 points, or 0.95% to 898.53 on Tuesday.

Then, overnight Wall Street sank an extra 297.81 points to 7,552.60 on resumption of business after a one-day break, triggered by deepening recession fears. Many had expected regional equities to follow suit but instead, they turned mixed. In the absence of clear leads on the horizon, Bursa Malaysia struggled within a tight five-point range in the red zone but ended just 3.30 points lower at 895.23 in mid-week.

In similar fashion, but this time in the plus territory, the CI treaded around a five-point band, lifted by a modest rebound in regional bourses while Wall Street eked out 3.03 points to 7555.62 in overnight session.

However, interest was highly concentrated and that was clearly reflected in the scoreboard. Though the market was up 4.36 points at 899.59, losers beat winners by 251 to 211 on Thursday.

Sadly, thereafter, the market staged a pullback in apparent profit-taking activity, with the key index sliding 9.88 points to 889.71, dampened by poor overseas performance.

Statistics: The key index scaled to a high of 909.16 on Monday and achieved a low of 888.73 yesterday, giving investors a sum of 20.43 points to trade the past week.

Week-on-week, the CI declined a total of 20.13 points, or 2.2% to settle at 889.71 yesterday against 909.84 the previous Friday. Total turnover for the week amounted to 1.763 billion shares worth RM2.685bil, versus 1.619 billion units valued at RM2.558bil traded previously.

Technical indicators: The 14-day relative strength index was practically flirting within a narrow band around the mid-range the past week. After flashing a short-term sell at the top on Feb 12, the oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index extended the downward momentum to the neutral areas.

Meanwhile, the daily moving average convergence/divergence (MACD) histogram had indicated a bearish divergence signal and in danger of slipping below the daily signal line.

In stark contrast, weekly measurements continued to improve, with the weekly slow-stochastic momentum index and the weekly MACD climbing higher.

Outlook: The local bourse could not make much progress despite breaking out of the 21-week simple moving average for the first time in 12 months a week earlier, as investors were not enthusiastic to take up new positions due to frail offshore leads. Instead, they opted to book profit.

Despite that, Bursa Malaysia was holding quite well given the trauma the US market had been through the past week.

According to the daily chart, the recent breakthrough in the CI appears a half-hearted move for now and going forward; Bursa may just be range-bound due to limited participation from investors amid a dearth of market-stimulating news.

In short, there is still no solid confirmation of the recent bullish reversal but we will continue to look out for that.

While the weekly MACD is firming, the daily MACD is at risk of flashing a sell. Given the tricky technical reading, the key index may channel sideways pending a new lead to emerge. Resistance is maintained at 925 points, 936.63 points, 946-950 points and the next, at 963 points. As for the downside, support is seen at 886 points, 860-863 points band, followed by the 835 points.

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