Business

Saturday July 4, 2009

Bursa likely to tread sideways

TREND ANALYSIS By K.M.LEE


REVIEW: Despite the Composite Index (CI) gaining 2.75 points, or 0.26% to 1,078.52 at the start of the week, share prices on Bursa Malaysia quickly turned mixed to lower afterwards, as most investors moved to the sidelines, taking a cautious stance in the absence of buying incentives on the horizon.

Overnight Wall Street was down 34.01 points to 8,438.39 the previous Friday while crude oil futures slumped on liquidation pressure. Apart from that, the poor showing in major regional stock exchanges also was not helping the local sentiment.

Hence, trading on the local bourse was pretty slow. While blue chips tripped into sideways consolidation mode, second and third liners succumbed to pressure to retreat on lack of leads.

In sluggish trade, the key index drifted aimlessly between an intra-day high and low of 1,079.47 and 1,072.41 respectively, a tight seven points range throughout before ending little changed, up 0.07 of a point at 1,075.84 on Monday. Though it ended a shade firmer, market breadth was clearly not inspiring, with the scoreboard showing losers thumping winners by 318 to 245.

Subsequently, the Dow rebounded 90.99 points to 8,529.38 in the wake of fresh optimism that economic data due out soon would show signs of recovery from a prolonged recession. It was further aided by a sudden spike in crude oil futures, jumping US$2.33 to US$71.49 per barrel on concerns about supply after Nigerian militants said they had attacked oil facilities in their country.

Taking the cue from Wall Street’s improved performance overnight, the local bourse opened steadier the next day on bargain-hunting interest.

On the home front, the Government’s announcement on further liberalisation in the services sector added to the upbeat mood, which witnessed the CI racing to a peak of 1,082.74 shortly after the opening bell.

But sadly, the momentum could not be sustained for long, simply because investors were more interested to book gains rather than chasing stocks while the market continued to consolidate. Given the lack of support, the key index then reversed early gains to close a shade below the flat line on the last day of the second quarter, easing 0.6 of a point to 1,075.24 owing to profit-taking on Tuesday.

Thereafter, Bursa Malaysia basically channelled sideways on extended correction, with the key index ending up 4.16 points to 1,079.40 in mid-week, but was down 0.69 of a point to 1,078.71 on Thursday and losing a further 6.02 points to 1,072.69 in volatile trading yesterday.

Statistics: On a weekly basis, the key index ended narrowly changed, down 3.08 points, or 0.3% to 1,072.69 yesterday, as compared with 1,075.77 the previous Friday.

Total turnover for the regular week shrank to 4.993 billion units worth RM5.387bil, against 6.656 billion shares valued at RM6.935bil done a week ago.

Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index had moved out of the bullish territory, confirming the sell call it triggered on Tuesday.

Meanwhile, the daily moving average convergence/divergence indicator resumed the downward expansion against the daily trigger line to stay bearish. It flashed a sell on June 16.

However, there was not much movement in the 14-day relative strength index, flirting around a narrow band in the mid-range.

Weekly measurements were weakening, with the weekly slow-stochastic momentum index in sell mode and the upward momentum of the weekly MACD slowing considerably.

Outlook: After the recent climb, the local bourse slipped into consolidation mode in the wake of mild profit-taking selling, with the bellwether CI practically struck around a tight 15.41-point range the past week, thus giving investor little room to make a decent profit.

While the bulls take their longest rest from the huge rally commencing in early March to a nine-month high of 1,095.91 on June 12 and the market losing sparks as caution set in, investors are becoming more unsettling and worrying the key index will go back to the preliminary level.

Based on the daily bar chart, it is quite unlikely, at least for now, unless there is new sign of the health of the global economy deteriorating again, or there is any other exceptionally nasty news coming to the fore.

Technically, indicators are pointing more consolidation, probably sideways, interpreted as base building process for a new leg up later.

Initial resistance is seen at 1,083 points. Heavy resistance remains at the 1,100 points mark, of which a successful breakout will signal the start of the new bullish wave, paving the path for the key index to challenge the 1,120 points level and later, the 1,140-1,142 points band.

Current support has been adjusted slightly to 1,060 points, followed by the 1,036-1,040 points. If the next lower floor of 1,028-1,030 points band gives way, a re-test of the 1,000 points psychological mark can be expected.

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