CI set for consolidation trading

Stock Market Signals: A weekly column by G.M. Teoh on the performance of the KLSE's Main Board.

Last close (May 9): 630.14 points, up 2.88 points from a week ago. Week’s high: 632.74 points; Week’s low: 627.62 points. 

The KLSE Composite Index (CI) recovered marginally from initial weakness early last week and struggled for most of the sessions before closing the week with small gains. Trading remained dull with the index’s advances hampered by weakness in power utility Tenaga Nasional and third largest index-linked stock Telekom Malaysia. 

For the week, CI blue-chip Maybank rose 15 sen to RM8.05 and added 1.12 points to the index. MISC, Maxis Communications, British American Tobacco, Plus Expressways and Public Bank ended with small gains and supported the CI by a combined 2.42 points. Telekom and TNB fell 15 and 5 sen respectively and chipped away a combined 1.32 points from the index. Genting dipped 30 sen to RM11.90 and shaved 0.44 of a point off the CI. 

Volume of the 100-stock CI increased to 142.97 million shares from 120.99 million shares previously. Average daily volume for the week fell to 28.59 million from 30.24 million shares a week ago. 

Based on chart the CI closed the week neutral and is expected to continue with its sideways band trading this week. The daily bar chart continues to indicate an immediate overhead barrier at the 631.00–633.00 levels. Unless we get to see a successful push above this resistance during this shortened three-day trading week, it would be difficult for the index to develop a bullish character and move higher to re-test its minor chart resistance at 636.00–638.00. 

Chart support for this week stands at 628.00 to 626.00. Violation of these support could turn the immediate chart outlook negative. 

The daily and weekly technical indicators ended neutral-to-slightly negative and indicated the index could continue in sideways band trading this week. 

The daily Money Flow Index (MFI) closed the week higher at 53.80 points and indicated the money flow of the index is still positive. The weekly MFI turned slightly positive for the near-term trend and ended higher in the negative zones at 38.16 points. 

Exponentially smoothed moving-average price line on daily high and low: The daily MAV-lines trended sideways last week. Closing prices between the MAV-lines for the last eight trading days show the index is still in a neutral phase. Based on the MAV-lines the CI has an immediate resistance at the 632.00 level and support at 628.00. 

Stochastics: The daily stochastics triggered the sell signal on May 8 and stayed negative at Friday’s close. The daily oscillators per cent K and D ended the week higher at 69.15% and 82.17% respectively. 

Analysis of the daily oscillators shows the two-week-old upward correction has ended. The weekly stochastics remain bearish for the near-term market and indicated the index’s main trend is negative. The weekly oscillator with the per cent K and D lower at 30.46 and 37.97 % respectively. 

The 3- and 7-day exponentially smoothed moving-average price lines ended the week negative and indicated a negative convergence signal. The 3- and 7-day ESA-lines closed higher at 630.66 and 630.40 points respectively. A successful negative crossover this week would turn the immediate chart picture negative. 

Relative Strength Index (RSI): The daily RSI (not shown in the chart) eased from a week's high of 51.17 points on May 7 and ended higher in the negative zone at 48.42. Analysis of the daily RSI shows the index’s immediate underlying strength is still neutral. 

The weekly RSI finished slightly lower in the negative territory at 38.16 points and indicated the overall strength of the market is neutral. 

Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) turned positive last week. The MACD and trigger-line closed the week higher in the negative territory at minus 0.81 and minus 1.08 points respectively. 

Analysis of the daily MACD indicates the index’s immediate trend is slightly positive. 

The weekly MACD (not shown in the chart) closed positive and indicated the near-term trend is constructive. The weekly MACD closed above the trigger-line and settled slightly higher in the negative zones at minus 10.05 and minus 10.29 points respectively. 

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