Market Watch - Weekly technical analysis

  • Business
  • Saturday, 22 Feb 2003


BUOYED by a triple-digit gain on Wall Street the previous Friday, the Kuala Lumpur Stock Exchange (KLSE) got off to a positive start, led by mining companies due to strong overseas demand for tin amid speculation that these companies may benefit from higher tin prices.  

Also, sentiment was seen improving in anticipation of more positive leads from economic data due to be released and the current financial reporting season.  

However, the lack of follow-through buying support in times of uncertainty encouraged retailers to lock in profits quickly. Mild selling on selective heavyweights dragged the Kuala Lumpur Composite Index (CI) into the negative zone on Tuesday. 

Nevertheless, counters with positive corporate developments, good financial results, or attractive dividend managed to draw some support. 

Increased bargain hunting activity on blue chips by local investors and speculative buying interest in small-capitalised stocks pushed the market up again in the mid-week despite that the largest US pension fund, California Public Employees’ Retirement System (CalPERS) had decided not to return to the Malaysian equity market. 

As the issue of war drags on, and in the absence of fresh positive leads, the CI pulled back on Thursday and Friday. 

Having fluctuated in a narrow trading range over the past five days, the CI ended the week little changed to close at 654.49 against 656.95 the previous week. Week-on-week, the key index lost a marginally 2.46 points or 0.4 per cent. 

Trading range for the CI was again tight, at 10.19-point this week. It hit a high of 662.09 on Monday before heading south to touch a low of 651.90 on Friday. 

Turnover for the full trading week totalled 870.951 million shares valued at RM1.464 billion against the previous week’s four-day sessions of 638.863 million shares worth RM1.277 billion. 

The oscillator per cent K of the daily slow-stochastics fell below the oscillator per cent D on Thursday to trigger a sell signal. 

While the daily moving average convergence/divergence (MACD) indicator retained its sell signal and moved lower to stay bearish, the 14-day relative strength index started to hook down. 

Meanwhile, both the oscillators of the weekly slow-stochastics maintained its downward momentum to end the week bearish but the weekly MACD managed to stay above the weekly signal-line to stay neutral. 

Technical signals were bearish. The local bourse may be in for further downward consolidation with the CI expected to test the 650-point support next week. 

The key index has reached near its critical level. In view of this and in case of a “whipsaw”, meaning false bearish signal, the crucial support for the CI has been lowered slightly to 645 now. 

If the CI fails to rebound or stay above this crucial support, selling pressure may heighten and will push the key index lower. Then, the next downside support area of 623 will appear weaker. 

Nevertheless, the local bourse is still expected to be ranged-bound next week. After all, this has been the market trend for the past couple of weeks and more importantly, the KLSE had remained calm despite all the uncertainties in the international arena. 

Investors could also count on the local funds, especially Valuecap, to come to the rescue if the CI is to weaken further. 

Therefore, the downside of our market could be limited with the CI likely finding support above the 645-point level. 

Immediate resistance is kept at 675. 

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