CI prospects cautiously bullish

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

Last close (June 6): 681.57 points, up 10.11 points from a week ago. Week’s high: 686.49 points; Week’s low: 670.11 points. 

The KLSE Composite Index (CI) consolidated in narrow range trading in the early part of the week and broke upwards during late week in strong wave of buying. The CI finally closed at fresh rally high and at its highest level in 38 weeks. 

Volume for the first three days of trading was 166.38 millions shares. This was followed by an upward breakout on Thursday which saw the daily volume rising sharply to 108.71 million shares. Trading on Friday dipped subsequently to 69.74 million shares. 

Analysis of the daily volume shows last week's profit-taking was well absorbed and the index's upward momentum is still liquidity driven. 

For the week, TNB climbed 45 sen to RM9.35 and lifted the CI by 2.94 points. Telekom rose 25 sen and contributed 2.29 points to the index’s advances. Genting advanced 80 sen to RM14.20 and supported the index by 1.16 points. These three stocks accounted for 6.39 points or 63.20% of the 10.11-point gain in the CI. Maybank, Plus Expressways, Sime Darby and Public Bank ended with small losses and chipped away a combined 1.25 points from the index. 

Weekly volume of the 100-stock CI eased slightly to 344.83 million shares from 364.83 million a week ago. Average daily volume declined proportionally to 68.96 million shares from 72.96 million. 

Based on chart the CI closed the week on a bullish note and has not given any strong technical indication the bullish rally is over. Last week's profit-taking around the 670.00–675.00 levels and the subsequent upward breakout indicates the underlying strength of the index is still positive. The strength and support for the top few index-linked stocks would remain an important factor for the rally to resume this week. 

The daily barchart indicates an immediate chart hurdle at the 685.00–690.00 levels. Penetration of this chart barrier could clear the way and provide the necessary boost to move higher and visit the minor chart resistance at 700.00–710.00. Major chart resistance remains at the 720.00–740.00 levels. 

Chart support for this week is pegged at 670.00–665.00. Breaching of these support levels would signal the start of a strong technical correction. 

The daily and weekly technical indicators ended mostly bullish and indicated the upward momentum could continue this week. The daily Money Flow Index (MFI) rose from a week's low of 76.21 points on June 4 and closed slightly lower at 83.05. Analysis of the daily MFI shows the index is overbought and could enter a mild correction this week. 

The weekly MFI ended higher in the positive territory at 65.91 points and indicated the near-term trend was still bullish. 

Exponentially smoothed moving-average price line on daily high and low: The daily MAV-lines remained in uptrend and ended on a positive note. Closing prices above the MAV-high line for the last four weeks show the bullish trend is intact. The MAV-lines point to an immediate cycle support for this week at the 672.00–665.00 levels. 

Stochastics: The daily stochastics triggered the sell signal last week and indicated the index is technically overbought. The daily oscillators per cent K and D closed sharply lower at 69.50% and 73.86% respectively. Analysis of the daily oscillators shows the index could settle for a mild pullback this week. 

The weekly stochastics closed bullish for the near term and indicated the index is in a bullish extended-move phase. The weekly oscillators ended with the per cent K and D higher at 90.67 and 84.64 % respectively. 

The 3- and 7-day exponentially smoothed moving-average price lines closed the week positive and indicated the upward trend is continuing. The 3- and 7-day ESA-lines closed sharply higher at 679.00 and 673.00 points respectively. 

Relative Strength Index (RSI): The daily RSI (not shown in the chart) retraced from a week's high of 81.28 points on June 5 and ended slightly higher in the positive zone at 79.86. Analysis of the daily RSI shows the index is slightly toppish and could settle for a mild downward adjustment. 

The weekly RSI finished higher in the positive territory at 65.91 points and signalled the underlying strength of the near-term market is still positive. 

Daily moving-average convergence/divergence (MACD): The daily MACD (not shown in the chart) expanded on its bullish signal last week and signalled the immediate-term cycle is bullish. The daily MACD and trigger-line closed higher in the positive territory at 11.60 and 10.25 points respectively. 

The weekly MACD (not shown in the chart) signalled the bullish trend would continue in the near term. The weekly MACD closed above the trigger-line and finished higher in the negative zones at minus 1.03 and minus 5.32 points respectively. 

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