Weekly technical analysis
SHARE prices on the Kuala Lumpur Stock Exchange (KLSE) opened the week easier and were quick to move lower in the absence of buying incentives, dragging down the key market barometer, the Kuala Lumpur Composite Index (CI) by nearly one per cent at one stage on Monday.
However, mild bargain hunting on selected component stocks by local funds in the last hour of trading lifted the key index to positive territory at the close but market tone was still negative.
The war in Iraq continued to dampen sentiment. The local bourse succumbed to further selling pressure the next day amid concern over the prolonged war and its impact on world economy.
The key index fell sharply lower on Tuesday as investors continued to trim their portfolios to reduce holding risk in times of uncertainty.
Nevertheless, bargain-hunting activity emerged after the CI has fallen to near its immediate support level of 625 points and the overnight gains on Wall Street also aided sentiment. Selective buying on bue chips helped to prop up the market on Wednesday but trading remained cautious.
Regional markets were up on Thursday as reports said that US troops were making encouraging progress heading towards Baghdad. Our market took the cue from its peers to move higher but could not sustain its upward momentum as investors continue to sell into strength.
Market sentiment made a positive reversal on Friday after Merrill Lunch upgraded its recommendation on our equity market. Investors reacted accordingly and started to flock back to the market in anticipation that there could be further upside potential in store pending the stimulus package to be announced by our government.
Trading range for the CI was again tight, at 11.36 points this week. It touched a low of 626.03 on Tuesday before moving up to achieve a high of 637.39 yesterday before ending the week at 631.02 against 634.96 previously.
For the week, the key market barometer was marginally lower, down 3.94 points, or 0.6 per cent.
Total turnover for the week amounted to 886.379 million shares worth RM1.928 billion against 828.289 million shares valued at RM1.724 billion.
The sharp turnaround of the CI yesterday caused the daily slow-stochastics momentum index to trigger a short-term buy signal.
At the same time, the weekly slow-stochastics momentum index continued to move higher from its oversold condition.
Meanwhile, the daily moving average convergence/divergence (MACD) indicator, which has been on sideways trending over the past few days, expanded positively against the daily signal-line yesterday but there were not much changes on the weekly MACD. It was still flat, staying barely above the weekly signal-line.
Technically, the encouraging signals were suggesting that the KLSE is poised to scale higher in the coming week with the CI seen likely to penetrate above the immediate resistance of 640-point. The next overhead hurdle is at 655.
Based on the daily bar chart, our market appeared more bullish. The CI has crossed above its 21-day moving average line and at the same time, the key market barometer staged a positive breakout of its downtrend channel.
As we had mentioned our previous reports, we were convinced that the local bourse has achieved its bottom and now, the market has reversed its downtrend.
But we remain neutral despite the breakout as we have found that the missing ingredient now is the trading volume. We need to see some significant changes in this respect and the CI must break above its immediate resistance in the next couple of days convincingly before we review our stance.
Meanwhile, this is a trading market. Sentiment swings on breaking news reports. The outcome and progress of allied forces in Iraq will still influence the directions of the local bourse.
Nevertheless, investors may see some buying interest in the second board counters as all the stocks in this sector would be traded in board lots of 100 units, starting next week.
Immediate support remained at 625 while stronger base is at 614.