CI may remain under pressure

LAST CLOSE (Jan 30): 664.77 points, down 4.04 points from a week ago. Week’s high: 672.51 points; Week’s low: 652.11 points. 

The KLSE Composite Index (CI) turned volatile last week in reaction to developments in the Iraq issue. Prices initially dropped in early trading on Monday ahead of the United Nations inspectors report and rebounded strongly until mid-week when US President George W. Bush's tough talk of war in the State of Union address prompted another wave of selling and pressured the index to its lowest levels in three weeks. 

For the week, the key index-linked stocks Tenaga Nasional, Petronas Gas, MISC, British American Tobacco and Genting all ended with moderate gains and supported the index by a combined 4.22 points. Maybank, Maxis Communications, Sime Darby, and Plus Expressways all lost five sen each and shaved a combined 3.05 points from the CI. 

Total volume of the 100-stock CI during the shortened four-day trading week declined to 235.14 million shares from 337.54 million shares a week ago. Average daily volume for the week fell to 58.78 million shares from 67.50 million shares previously.  

Based on chart, the CI ended the week negative and is expected to stay volatile and resume its choppy trading conditions this week. During the coming three-day trading week, the CI has an important chart-support at the 660 level.  

Breaching of this support could send the index lower for a test of its next downside objective at the 655-650 levels. Minor chart-support for this week remains unchanged at the 635-645 levels. 

Chart-resistance for this week is revised lower to the 670-665 levels.  

The daily and weekly technical indicators settled the week neutral-to-bearish and indicated that the index could resume its negative momentum this week.  

The daily Money Flow Index (MFI) dropped from an intra-week high of 68.24 points on Jan 28 and settled the week lower near the neutral zones at 59.92 points.  

The daily MFI shows that the market is in a distribution phase. The weekly MFI ended the week sharply lower in the neutral zones at 52.23 points. 

Analysis of the weekly MFI shows that the index has room for further downside trading in the near term. 

Exponentially smoothed moving-average price line on daily high and low: The daily MAV-lines turned sideways and closed the week neutral. Closing prices below the MAV-low line signalled that the index is slightly negative.  

Based on the MAV-lines, the CI has an important cycle-reversal support at the 656 level this week. Breaching of this important chart-support would signal that a bearish trend has started. 

Stochastics: The daily stochastics triggered the buy-signal on Jan 28 and turned positive during Thursday’s close. The daily oscillators per cent K and D ended the week sharply higher at 69.31% and 64.28% respectively.  

Analysis of the daily oscillator shows that the index is in a mild adjustment following last week’s early sell-off.  

The weekly stochastics closed the week slightly positive and indicated that the index’s near-term trend is still constructive. The weekly oscillators per cent K and D ended the week slightly lower at 85.71% and 79.60% respectively. 

The 3-day and 7-day exponentially smoothed moving-average lines confirmed that a cycle-change had started when it crossover on Jan 29.  

The 3-day and 7-day ESA-lines closed the week with the 3-day and 7-day lines at 666.10 and 666.80 points respectively.  

Based on the daily ESA-lines, the index is expected to trend lower this week. 

Relative Strength Index (RSI): The daily RSI (not shown in the chart) eased from a week's high of 63.90 points on Jan 28 and closed the week sharply lower near the neutral zones at 57.25 points. Analysis of the daily RSI indicates that the immediate underlying strength of the index remains negative. 

The weekly RSI slipped into the negative territory and closed lower at 49.53 points. Analysis of the weekly RSI shows that the index would remain under pressure in the near term. 

Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) gave the sell-signal on Jan 29 and remained negative during Thursday’s close. 

The MACD and trigger-line ended the week lower in the positive zones at 7.25 points and 7.74 points respectively. Analysis of the daily MACD shows that the index’s immediate trend is still negative.  

The weekly MACD (not shown in the chart) closed positive for the near-term market.  

The weekly MACD settled the above the trigger-line and closed slightly higher in the negative zones at minus 11.43 and minus 15.38 points respectively. 

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