Sideways-to-lower trend seen

LAST close (Feb 7): 661.25 points, down 3.52 points from a week ago. Week’s high: 668.18 points; Week’s low: 660.21 points.  

The KLSE Composite Index (CI) ended the week slightly lower after having caught in a tight trading band during the shortened Chinese New Year/FT Day three-day trading week. Sentiment remained weak as traders remained sidelined awaiting fresh developments on Iraq. 

Light selling of the key index-linked stocks emerged following Prime Minister Datuk Seri Dr Mahathir Mohamad’s statement that ruled out the possibility of a general election before he retires in October.  

For the week, the key index heavyweight stocks Tenaga Nasional fell 10 sen to RM9.45 and chipped 0.65 point from the index. Maybank ended 5 sen lower at RM8.00 and eroded the index by 0.32 points. Maxis Communications, Sime Darby, Public Bank and Genting Bhd all ended with small losses and shaved the index by a combined 1.25 points. Petronas Gas and MISC settled with marginal gains and added a combined 0.61 of a point to the CI. Telekom, Plus Expreeways and British American Tobacco all closed the week unchanged.  

Total volume of the 100-stock CI during the shortened three-day trading week dropped to 158.28 million shares from 235.14 million shares a week ago. Average daily volume for the week fell to 52.76 million shares from 58.78 million shares previously.  

Chart-wise, the CI closed the week slightly negative and is expected to extend on its sideways-to-lower trading pattern this week. Based on the daily bar-chart, the index has an immediate support at the 658.00-650.00 level and violation of this support could pressure the CI lower in search of a fresh trading base at the 645.00-640.00 level.  

Chart-resistance for this week is adjusted slightly lower to the 668.00-665.00 level. 

Analysis of the top eight index heavyweight stocks shows that the index may likely continue with its sideways-to-lower trend this week. Telekom, Maybank, Tenaga, Maxis Communications, Sime Darby and Plus Expressways all ended technically negative based on the 3-day and 5-day moving-average lines. MISC and Petronas Gas both ended the week positive and indicated that their upward cycle is intact.  

The daily and weekly technical indicators ended the week mostly bearish and signalled that the index could remain under selling pressure this week.  

The daily Money Flow Index (MFI) slipped from an intra-week high of 57.51 points on Feb 5 and closed the week below the neutral zones at 40.85 points. The daily MFI indicates that the distribution phase may carryover into this week’s trading. The weekly MFI trended sideways and closed slightly lower in the neutral zones at 52.06 points. Analysis of the weekly MFI shows that the near-term market has the potential for further declines.  

Exponentially smoothed moving-average price line on daily high and low: The daily MAV-lines remained in sideways trend and ended the week neutral. Closing prices below the MAV-high line signalled that the index is attempting a trend change.  

Based on the MAV-lines, the CI has a vital cycle-reversal support at the 658.00 level this week. Violation of this chart-support would signal the start of a downward trend. 

Stochastics: The daily stochastics triggered the sell-signal on Feb 6 and remained bearish during Friday’s close. The daily oscillator per cent K and D ended the week lower at 53.29% and 62.19% respectively. Analysis of the daily oscillator indicates that the index has room for more downside trading.  

The weekly stochastics gave the sell-signal during Friday’s close and signalled that the near-term trend of the index is negative. The weekly oscillator per cent K and D closed the week slightly lower at 77.59 and 81.64 % respectively.  

The 3-day and 7-day exponentially smoothed moving-average lines held on to its sell-signal and indicated that a bearish cycle had started. The 3-day and 7-day ESA-lines ended the week with the 3-day and 7-day lines at 663.00 and 665.00 points respectively.  

Relative strength index (RSI): The daily RSI (not shown in the chart) fell from a weekly-high of 59.65 points on Feb 5 and concluded the week moderately lower in the neutral zones at 52.99 points. Analysis of the daily RSI shows that the immediate underlying strength of the index is weak. The weekly RSI remained in the negative territory during Friday’s close at 48.26 points. Analysis of the weekly RSI suggests that the index’s near-term strength is negative.  

Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) expanded on the sell-signal of Jan 29 and remained bearish during Friday’s close. The MACD and trigger-line settled the week lower in the positive territory at 5.73 points and 6.68 points respectively. Analysis of the daily MACD shows that the negative momentum of the market could continue.  

The weekly MACD (not shown in the chart) remained neutral-to-slightly friendly for the near-term market. The weekly MACD closed the above the trigger-line and settled slightly higher in the negative zones at minus 9.98 and minus 13.58 points respectively.