Weekly technical analysis
THE Kuala Lumpur Stock Exchange (KLSE) slipped back into the negative territory in the absence of fresh leads on Monday, moving in tandem with the weaker regional equity markets.
Trading sentiment was weak as most investors were sidelined. Heavy liquidation on selected blue chips and the lower liners dragged the primary market sharply lower, thus causing the benchmark Kuala Lumpur Composite Index (CI) to nosedive nearly one per cent before closing just off the day’s low on that day.
However, market momentum made an unexpected turnaround for the better on Tuesday. Wall Street rallied strongly after US gave a final ultimatum to the Iraqi leaders to leave their country or face war.
Regional bourses got a lift from the overnight triple-digit gains on the Dow and our market followed suit amid speculation that if war were to break out, it will be a short and swift one.
The local bourse headed further north on Wednesday as the bet for a quick war is still on. However, it ended only marginally higher, owing to profit taking.
Mild follow-through buying support pushed the CI to a higher ground shortly after it opened trading on Thursday. The deadline for the Iraqi leaders to leave has expired and the US declared that war had begun. The key index slipped back into the red soon after the coalition forces fired its first missile into Baghdad.
Nevertheless, it rebounded strongly after that when the regional markets were able to hold on to their gains despite war has started.
Share prices were higher again in early trade on Friday amid continuous bargain hunting activity but profit taking emerged to arrest the upward momentum. Trading was cautious as clouds of uncertainty returned to the markets.
Trading range for the CI this week was at 13.24 points. It hit a low of 622.32 on Monday and moved on to hit a high of 635.56 on Thursday before ending yesterday’s trading at 632.17, against 628.55 the previous week.
For the week, the key index gained a marginal 3.62-point, or 0.6 per cent.
Weekly turnover increased slightly to 938.376 million shares worth RM1.759 billion against 777.138 million shares valued at RM1.718 billion traded previously.
The daily slow-stochastics momentum index that has moved out of the bearish zone last week continued to trend higher towards the overbought territory.
Meanwhile, the daily moving average convergence/divergence (MACD) indicator managed to cross above the daily signal-line to give a buy signal yesterday.
At the same time, the weekly slow-stochastics gave a buy signal at the close of yesterday's trading. However, it is still too early to confirm as both the oscillators per cent K and D are still trending below the 20 per cent line.
As for the weekly MACD, it is still trending sideways to lower supported by the weekly signal-line in the negative territory.
Technical indicators appeared more positive this week and maintained that the local bourse has achieved its immediate downside objective and is poised to recover gradually from here.
But, no doubt the CI has rebounded quite a bit from its recent low of 615, our market is still not out of the woods yet as the key index is still trending in the downward channel.
The reason why the equity markets around the world moved up, including ours, is because investors were anticipating that the war would be short and successful for the US.
But investors should prepare for the worse. US President George W. Bush had said that the war would be longer and more difficult than some predicted.
Therefore, the immediate directions of our market will most probably be dominated by the latest developments in Iraq and sentiment will remain cautious until the war is over. Trading is likely to be volatile and the key index is envisaged to trade on a wider range the week ahead.
Support for the CI is maintained at the 614-point level, while immediate resistance is seen at 640 and the next overhead hurdle would be the 655-point level. If the key index could penetrate above the latter resistance successfully, it may signal the start of a new rally.