Weekly technical analysis
THE triple-digit rally on Wall Street the previous Friday failed to stimulate buying momentum on the Kuala Lumpur Stock Exchange (KLSE) at the start of the week. Trading sentiment remained cautious as investors were still waiting on the sidelines assessing the impact arising from the US-Iraq war before taking up further actions.
Limited participation among investors in times of uncertainties left the key market barometer, the Kuala Lumpur Composite Index (CI) with only less than a point gain on Monday.
Regional equity markets suffered huge losses the next day, shaken by the news that US-led forces have accounted for more casualties in the battlefields. In line with its regional peers, shares on the local bourse were broadly lower on Tuesday with most investors showing concerns that this war may last longer than expected. However, selective buying on the blue-chip stocks helped limit the losses.
Nevertheless, market sentiment got better on Wednesday pending the announcement of the stimulus package and speculations of an interest rate cut.
Bargain hunting and support from local institutions helped push the CI higher but the upward momentum was checked, as investors were not willing to buy at a higher level in the current difficult trading environment.
The hope for a rate cut was dashed after Bank Negara kept the key interest rate unchanged when releasing its annual report but the local market was mostly range-bound on Thursday and Friday as mild bargain hunting helped cushion-off some of the negative effects.
Trading range for the CI was a tight 7.91-point this week. It touched a low of 627.94 on Tuesday and moved up to a high of 635.85 yesterday.
The key market barometer ended Friday’s trading at 634.96 against 632.17 previously. Week-on-week, the CI gained a marginal 2.79 points, or 0.4 per cent.
Total turnover for the week reduced slightly to 828.289 million shares valued at RM1.724 billion against 938.376 million shares worth RM1.759 billion traded the previous week.
The daily slow-stochastics momentum index has reversed upwards. Its oscillator per cent K crossed over the oscillator per cent D to trigger a buy signal yesterday and the weekly slow-stochastics momentum index continued to trend higher from its oversold territory this week to stay neutral.
Meanwhile, the daily moving average convergence/divergence (MACD) indicator, which gave a buy signal in the negative territory last Friday, maintained its sideways to higher trending, moving in line with the daily signal-line.
At the same time, the 14-day relative strength index was trending higher.
As for the weekly MACD, it was still on a sideways-move, hovering barely above the weekly signal-line.
Indicators remain positive, suggesting that the key index may move higher gradually in the near-term.
Although the CI is still being locked in a downward channel, we still believe that the local bourse has achieved its bottom, as there was no evidence of panic selling so far with investors appeared calm despite a volatile Wall Street and regional markets.
Therefore, the local bourse is envisaged to extend the current range-bound trading pattern with an upward bias next week but then it all depends on the outcome and progress of how the US and its allies perform in the war.
Mild support for the key index is seen at 625 while stronger support is at 614.
Immediate resistance would be at 640 and the next overhead hurdle is seen at 655.