Saturday March 9, 2013

It’s a new uptrend

REVIEW: Bursa Malaysia started on a steadier footing, with the FBM Kuala Lumpur Composite Index (FBM KLCI) advancing 0.83 of a point to 1,638.27 amid bargain hunting interest, boosted by a steadier Wall Street overnight.

Market sentiment was generally positive but the matching of business appeared slow, as a steep fall in crude oil prices, which saw the front month contract for April delivery diving a hefty US$1.37 a barrel to US$90.68 the previous Friday on concern about demand, had discouraged investors from bidding aggressively.

While the local bourse treaded water searching for direction, an error in keying in a sell order of Petronas Gas Bhd shares, probably by a remisier, came about and dragged the key index down by as much 14.63 points, or 0.89% in mid-morning.

Apparently, the sudden drop had affected the market. Combined with stocks in the Asia-Pacific region reversing early gains to trade lower after the recent rally, there was really no incentive on the horizon for investors to bid stocks.

In cautious session, the local bourse shed 1.46 points to 1,635.98 on Monday.

Nevertheless, overnight Wall Street sustained the upward thrust the next day, as optimism grew while the closely-watched index inched nearer to its historic highs.

Riding on the solid strength in US equities, markets in the region staged a rebound on renewed support, led by the Shanghai Composite Index, jumping 2.3%.

As expected, sentiment at home improved accordingly, tracking overseas peers.

Blue chips topped the winners list on foreign funds nibbling. Elsewhere, cheaper counters also enjoyed greater participation and that helped lift the FBM KLCI up 6.10 points to 1,642.08 on Tuesday.

Subsequently, world markets had another good day with Wall Street smashing record after China pledged its biggest government spending to boost growth and data showed the US service sector expanding at its fastest pace in a year.

Mirroring the offshore trend, the bulls on Bursa charged forward on extended buying momentum.

Like the previous day, quality issues led the way once again, driving the key index up 9.76 points to 1,651.84 in active trade on Wednesday.

However, come Thursday, Asian shares paused for a breather after a two-day strong rally and the local investors took the excuse to book gains despite Wall Street setting another record overnight.

Consequently, the local bourse tripped into consolidation mode, easing 0.91 point to 1,650.93 that day before rebounding by a small 3.03 points to 1,653.96 in a tight session yesterday.

Statistics: On a Friday-to-Friday basis, the principal index was up 16.52 points, or 1% to 1,653.96, against 1,637.44 at the settlement on March 1.

Weekly turnover stood at 4.530 billion units worth RM8.327bil, compared with 4.435 billion shares valued at RM7.76bil done a week ago.

Technical indicators: After reaching the top a week ago, the oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index continued to keep their posture above the 80% line on bullish extended mode.

The past week witnessed the 14-day relative strength index hitting a peak of 76 points on Wednesday before turning sideways, ending at the 74 points level yesterday. Elsewhere, the daily moving average convergence/divergence (MACD) histogram improved steadily, in tandem with the daily signal line to stay bullish. It had issued a buy on Feb 25.

Weekly indicators were also recovering, with the weekly slow-stochastic momentum index keeping the buy and the weekly MACD showing an encouraging convergence pictogram.

Outlook: The FBM KLCI hit a high of 1,656.65 in early business on Thursday, the best level in almost seven weeks before paring advances slightly to trade within a narrow range, undergoing consolidation. Based on the daily chart, the key index had penetrated all the moving averages on our radar screen.

Meanwhile, the imminent “golden crossing” of the 14-day day simple moving average (SMA) against the 21-day SMA discussed last week, had become apparent following the recent recovery.

In addition to that, the 14-day SMA moved one step ahead to breach the upper 200-day SMA and it appears the 21-day SMA will follow suit soon.

Given the obvious fact that the landscape is shaping up nicely and combined with the recent breakout, they give us the confirmation that a new upward wave has indeed been established.

However, volumes, being the key ingredient must expand accordingly to support the existing trend.

The immediate upside objective would be to challenge the historical apex of 1,699.68 or the 1,700 points psychological barrier.

Technically, the bulls may pause for a breather this week, but they are likely to resume the rally, once the present overbought condition is fully neutralised.

Initial support is set at the 100-day SMA of 1,646 points. Stronger floor is expected at the vicinity of 1,630 points. ru

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Saturday March 9, 2013

It’s a new uptrend