CI may remain in range-bound trade

By G.M. Teoh

LAST CLOSE (April 11): 629.69 points, off 1.33 points from a week ago. Week’s high: 643.68 points; Week’s low: 628.93 points. 

The KLSE Composite Index (CI) rose to its highest level in five weeks in early trading, but the move was hampered by the lack of fresh bullish momentum that encouraged some moderately active profit-taking in the key index-linked stocks and forced the index to return 14.75 points before closing the week with small losses. 

Positive sentiment linked to the success of US-led forces in the war in Iraq fizzled and was replaced by negative sentiment over fears about the Asia’s deadly flu-like Severe Acute Respiratory Syndrome (SARS) virus, which is expected to slow the economy in the second quarter. 

For the week Telekom dropped 20 sen to RM7.20 and chipped 1.33 points from the index. TNB, Petronas Gas, Sime Darby and Genting closed with minor losses and erased a combined 2.95 points from the CI. However, MISC, Maxis Communications, Public Bank and Plus Expressways ended with small gains and supported the CI by a combined 1.31 points. 

Index heavyweight Maybank and British American Tobacco closed the week unchanged. 

Weekly volume of the 100-stock CI eased to 185.71 million shares from 222.74 million a week ago. Average daily volume fell to 37.14 million shares from 44.54 million previously. 

Based on chart the CI closed the week negative and signalled the bearish wave that started four sessions ago is not over. 

For the bearish momentum to continue this week the index would have to break below the 627.00–625.00 levels successfully. Failure to do so could result in more sideways band trading or even a mild upward technical correction. 

In any case, the index has an immediate overhead resistance at the 632.00–635.00 levels. Penetration of this chart barrier would signal that the recently developed downward cycle has ended. 

The daily Money Flow Index (MFI) dropped from a week's high of 72.69 points on April 8 and settled sharply lower near the neutral zones at 59.20. Sharp declines in the MFI indicate that distribution process occurred during last week’s trading. 

The weekly MFI turned slightly positive for the near-term market and ended higher in the neutral zones at 52.23 points. Analysis of the weekly MFI shows the near-term trend would stay steady. 

Exponentially smoothed moving-average price line on daily high and low: The daily MAV-lines trended sideways and ended the week on a neutral note. Closing prices below the MAV-low in the last two sessions indicate the index could stay under pressure. 

Based on the MAV-lines the CI has an immediate resistance at the 630.00–635.00 levels. 

Stochastics: The daily stochastics triggered the sell signal on April 9 and remained negative at Friday’s close. Analysis of this daily oscillator shows the index could trend lower this week. 

The daily oscillators per cent K and D ended the week sharply lower at 18.83% and 45.47% respectively. 

The weekly stochastics remained positive for the near-term market and closed Friday with their buy signal intact. The weekly oscillators per cent K and D finished higher at 47.84 and 42.34 % respectively. 

The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) crossed over on April 10 and signalled the market is in a negative cycle. The 3- and 7-day ESA-lines closed higher at 631.00 and 632.00 points respectively. 

Relative Strength Index (RSI): The daily RSI (not shown in the chart) declined sharply from a week's high of 72.69 points on April 8 and settled the week lower in the negative zone at 48.52. Analysis of the daily RSI shows the index’s immediate underlying strength is bearish. 

The weekly RSI ended higher in the neutral territory at 56.04 points. Analysis of the weekly RSI shows the index could stay positive in the near term. 

Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) managed to hold on to its buy signal at Friday’s close and indicated a strong negative convergence signal. The MACD and trigger-line closed the week slightly higher in the negative territory at minus 1.93 points and minus 2.15 points respectively. 

Analysis of this daily oscillator shows the market is attempting to start a bearish cycle. 

The weekly MACD (not shown in the chart) stayed bearish for the main trend and called for more downward pressure in the near term. The weekly MACD settled below the trigger-line and closed slightly lower in the negative zones at minus 10.77 and minus 10.47 points respectively. 

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