CI likely to stay in congested zone

LAST close (Feb 28): 646.80 points, off 7.69 points from a week ago. Week’s high: 655.14 points; Week’s low: 646.75 points. 

The KLSE Composite Index (CI) fell on Friday on losses in blue-chip stocks as investors kept to the sidelines ahead of the weekend and awaited fresh development in the Iraq crisis.  

Throughout the week, numerous attempts were made to break below the 650-point psychological level but was supported by local funds that did not want to see the index dipping below this level.  

For the week, key index stocks Maybank, Telekom, Petronas Gas, MISC, PLUS Expressways and Public Bank all closed in the negative column and eroded a combined 3.6 points from the index. Tenaga Nasional ended unchanged. Maxis Communications, British American Tobacco closed in positive territory and support the CI by a combined 0.8 point.  

Total volume of the 100-stock KLCI rose marginally to 163.65 million shares from 162.33 million shares a week ago. Average daily volume for the week was slightly higher at 32.73 million shares from 32.46 million shares a week ago.  

Destruction of Iraq’s missiles over the weekend may force the market to return some of its earlier war-jitters discounts this week. Unless the picture in the Iraq crisis becomes clearer, the index is expected to continue in doldrum trading in the coming sessions. 

Chart-wise, the KLCI ended the week bearish and are expected to continue with its narrow-band trading this week. An immediate chart-support for this week is seen at the 640-645 level. Breaching of this immediate chart-support could turn the immediate chart-picture bearish and take the index lower to test its minor chart-support at the 630-620 level  

Chart-resistance for this week is adjusted lower to the 650-655 level.  

The daily and weekly technical indicators ended the week mostly negative and signalled that the index is not completely out of its bearish trend. 

The daily Money Flow Index (MFI) recovered from a weekly-low of 21.70 points on Feb 26 and settled the week moderately higher at 31.34 points. The daily MFI shows that the index is out of its oversold position. The weekly MFI ended slightly lower in the positive zones at 51.86 points. Analysis of the weekly MFI shows that the near-term market is still neutral.  

Exponentially smoothed moving-average price line on daily high and low: The daily MAV-lines retained its downtrend and indicated that the market is in a bearish phase.  

Closing prices below the MAV-low level for the last seven days and Friday’s close indicates that the main trend is still bearish. Based on the MAV-lines, the CI has an immediate overhead resistance at the 657-652 level, and a successful push above this resistance would signal that a trend-reversal has started. 

Stochastics: The daily stochastics triggered the sell-signal on Feb 28 and points to more downside trading. The daily oscillator per cent K and D closed the week lower at 28.27% and 32.23% respectively.  

Analysis of the daily stochastics shows that the index has not reached its technically oversold position yet. The weekly stochastics remain bearish for the near term and ended Friday with its negative signal intact. The weekly oscillator per cent K and D closed the week sharply lower at 24.55 and 47.57 % respectively.  

The 3-day and 7-day exponentially smoothed moving-average (ESA) extended on its bearish divergence and closed the week with its sell-signal intact. The 3-day and 7-day ESA-lines settled the week with the 3-day and 7-day ESA-lines at 649 and 652 points respectively. Unless a positive crossover takes place this week, the index is likely to stay negative.  

Relative strength index (RSI): The daily RSI (not shown in the chart) declined from a weekly-high of 45.31 points on Feb 25 and settled the week lower at 39.56 points.  

Analysis of the daily RSI shows that the market’s immediate underlying strength is negative. The weekly RSI ended higher in negative territory at 42.92 points. Analysis of the weekly RSI indicates that the near-term trend of the market is neutral.  

Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) remains bearish for the immediate term market and closed the week on a negative note. The MACD and trigger-line settled lower in the negative territory at minus 1.41 points and minus 0.50 points respectively. The weekly MACD (not shown in the chart) ended the week positive for the near-term trend. The weekly MACD settled above the trigger-line and closed marginally higher in the negative zones at minus 8.38 and minus 10.03 points respectively.

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