Saturday July 21, 2012
Bulls may pause for air
By K.M. LEE
REVIEW: Shares on Bursa Malaysia started the week on a steadier platform, with the FBM Kuala Lumpur Composite Index (FBM KLCI) rising 1.99 points to 1,628.37, extending the previous session's advances amid follow-through buying.
The underlying tone of the market was positive, aided by a strong technical rebound in US markets on short-covering activity, which saw the Dow spiking 203.82 points to 12,777.09, snapping a six-day losing streak and crude oil prices jumping US$1.02 to US$87.10 the previous Friday.
Adding to the upbeat note, stocks in the Asia-Pacific region, with the exception of China equities, sustained their recovery on extended bargain hunting.
Tracking the positive offshore tone, the local bourse rose gradually throughout the day on continuous support from big funds while gains by blue chips propelled the key index up to end at the day's peak of 1,635.96, up 9.58 on Monday, which was also a new all-time high.
A day after the steep climb, Wall Street reversed down, spooked by the disappointing US retail sales figures. However losses were moderate, with the Dow losing 49.88 points to 12,727.21, as a better-than-expected corporate earnings from Citigroup helped cushion the downside.
Apparently, the latest data indicated that the US economy was flagging and many people had expected stocks in the region to be hit in the wake of a fresh bout of liquidation pressure, but in an unprecedented move, buyers continued to dominate the floor, betting that a faltering US economy would prompt more stimulus measures from the Federal Reserve.
Riding on the regional strength, the bulls on the domestic front charged forward to establish another record of 1,646.97 in the morning session but unlike major stock exchanges, such as the Hong Kong Hang Seng's Index surging 1.8%, gains on the local bourse tapered off in the afternoon, simply because some investors opted to book profit.
At the closing bell on Tuesday, the FBM KLCI only advanced a small 3.19 points to 1,639.15.
Thereafter, Bursa traded range-bound with a mild upward bias amid continuous bargain hunting interest offsetting profit-taking activity despite most overseas markets staging a rally, spurred by solid corporate earnings and Ben Bernanke's comments that Federal Reserve could step in to help the US economy.
In a generally mixed session, the key index tacked on 5.85 points to 1,645.00 in mid-week but reversed an early fresh record of 1,647.94 to close down 0.4 of a point to 1,644.60 on Thursday.
And yesterday, the FBM KLCI, which was trapped within a tight range in the plus side earlier, gave way to profit-taking activity in the afternoon, losing 1.6 points to 1,643.00.
Statistics: For the week, the major index chalked up 16.62 points, or 1% to 1,643.00 yesterday, against 1,626.38 on July 13.
Total turnover stood at 5.917 billion shares valued at RM8.290bil, compared with 6.310 billion units worth RM8.619 changed hands the prior week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index returned to the bullish territory after falling below the 80% line briefly earlier in the week.
Similarly, the 14-day relative strength index retained the posture above the 70 points line to stay bullish.
In addition, the daily moving average convergence/divergence (MACD) histogram continued to expand upward against the daily trigger line to keep the buy call.
Weekly indicators were bullish, with the weekly slow-stochastic momentum index flirting at the bullish territory and the weekly MACD retaining the buy signal.
Outlook: The local bourse sustained the upward thrust on follow-through buying momentum, with the FBM KLCI setting a new all-time high for the fourth straight week.
In fact, our market has been rising steadily albeit at a gradual pace and scaling to a new peak almost everyday over the past several weeks.
The contrasting move of our stock market against the overseas trend, where the bulls struggled to establish a new leg of upward wave due to economic uncertainty, had caught many people by surprise.
But it is not unusual for our market behaving in such a manner, as history has proven that the local bourse would on most occasions hold up well ahead of the General Election.
Based on the daily chart, the prevailing trend is constructive, as long as the key index is supported by the 14-day simple moving average (SMA), now resting at 1,628 and still rising. An additional floor is pegged at the 21-day SMA of 1,619.
Technically, indicators are painting a growing overbought pictogram, suggesting the bulls may take the excuse of limited participation from investors due to the start of Ramadan to pause for air.
To the upside, resistance is expected at every 20 points or 30 points intervals above the 1,600 psychological level.