CI likely to rise with no immediate war

LAST close (Feb 14): 656.95 points, off 4.30 points from a week ago. Week’s high: 662.04 points; Week’s low: 653.49 points.  

The KLSE Composite Index (CI) congested in a tight trading band and finished the week moderately lower dampened by light selling ahead of the United Nations inspectors report on Iraq. Overall trading remained cautious as traders preferred to stay on the sidelines and only take a trading view after seeing Friday night's report. 

For the week, the main index heavyweight stocks Maybank, Petronas Gas, MISC and Maxis Communications all ended in the minus column and eroded the index by a combined 2.05 points. Telekom gained 15 sen to RM7.95 and supported the CI by 1 point and Sime Darby rose 5 sen to RM5.25 and contributed a 0.24 point gain to the index. Tenaga Nasional, PLUS Expressways and Public Bank closed unchanged for the week.  

Total volume of the 100-stock CI during the four-day trading week increased fractionally to 158.37 million shares from 158.28 million a week ago. Average daily volume for the week dropped to 39.59 million shares from 52.76 million previously.  

Trading this week are expected to be upbeat with the immediate threat for war removed following the mixed report from the UN chief inspector and no green light for war from the UN.  

Now that the inspectors have a couple more weeks to work, markets worldwide including the KLSE would likely regain some of their losses that were factored in over the last four weeks. 

Chart-wise, the CI ended the week slightly negative and is expected move into a mild upward correction this week. Based on the daily bar-chart, the index has an immediate support at the 655-650 level. The immediate chart-picture of the index is considered to be positive if this level is not violated this week.  

Chart-resistance for this week is revised higher to the 660-665 level. A successful push above this immediate chart barrier could provide fresh bullish momentum for the index to advance and re-test its mid-January highs at the 675-680 level.  

The daily and weekly technical indicators closed the week mixed and indicate that the index may have reached a temporary bottom. 

The daily Money Flow Index (MFI) declined from an intra-week high of 38.62 points on Feb 13 and settled the week sharply lower in the negative zones at 29.53 points. The daily MFI shows that the index has reached its temporary technical bottom and should settle for an upward adjustment this week.  

The weekly MFI ended slightly lower in the neutral zones at 51.41 points. Analysis of the weekly MFI showed that the near-term market is in a neutral position.  

Exponentially smoothed moving-average price line on daily high and low: The daily MAV-lines ended in gradual downtrend and indicated that the index has reached its trend-reversal support levels. Closing price at the MAV-low level signalled that the index had reached an important support and violation of the MAV-low support level of 656 points this week would signal the start of another downward cycle.  

Based on the MAV-lines, the CI has an immediate hurdle at the 663 level this week and a successful push above this resistance would indicate that an upward wave has started.  

Stochastics: The daily stochastics triggered the buy-signal during Friday’s close and signalled that the index could move into a mild upward adjustment this week. The daily oscillator per cent K and D closed the week lower at 31.26% and 30.75% respectively.  

The weekly stochastics retained its sell-signal during Friday’s close and indicated that the near-term trend of the index is still negative. The weekly oscillator per cent K and D ended the week slightly lower at 67.37 and 76.89 % respectively.  

The 3-day and 7-day exponentially smoothed moving-average (ESA) lines entered further divergence and finished the week with its sell-signal intact. The 3-day and 7-day ESA-lines closed the week with the 3-day and 7-day lines at 657 and 660 points respectively. A successful crossover this week would indicate that the four-week old downward cycle is temporary over. 

Relative strength index (RSI): The daily RSI (not shown in the chart) slipped from a weekly-high of 65.07 points on Feb 10 and settled the week slightly higher in positive zone at 56.07 points. Analysis of the daily RSI shows that the immediate underlying strength of the index is neutral-to-slightly positive.  

The weekly RSI ended in negative territory at 39.28 points. Analysis of the weekly RSI shows that the index’s near-term underlying strength is negative.  

Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) ended the week with its sell-signal intact and signalled that the four-week old gradual downtrend could continue. The MACD and trigger-line closed the week lower in positive territory at 2.80 and 4.13 points respectively.  

The weekly MACD (not shown in the chart) remained constructive for the near-term market. The weekly MACD ended above the trigger-line and closed slightly higher in the negative zones at minus 9.05 and minus 12.07 points respectively. 

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