Trading likely to be rangebound

Stock Market Signals: A weekly column on the Main Board of the MSEB by G.M. Teoh 

LAST CLOSE (July 7): 926.56 points, up 11.87 points (1.29%) from a week ago. Week’s high: 927.70 points; Week’s low: 914.43 points. 

The KL Composite Index (KLCI) extended its technical recovery and closed Friday with moderate gains. 

Minor advances in most key index-linked stocks helped lift the KLCI to its best level in five weeks. 

MISC, Public Bank, Maxis Communications, Bumiputra-Commerce, IOI Corp, Genting, Sime Darby, British American Tobacco and Astro closed with minor gains of between five sen and RM1.50 and added a combined 5.40 points to the index. 

Maybank, Tenaga Nasional and Plus Expressways ended lower and erased a total 1.15 points from the index. Telekom and Petronas Gas ended the week unchanged. 

Genting and Sime Darby were unchanged. 

Volume of the KLCI for the week increased moderately to 420.83 million from 392.60 million shares previously. The average daily volume edged higher to 84.16 million from 78.52 million shares the week before. 

The weekly candlestick chart ended positive. Three white candles occurred in the past three weeks. The steady upward pattern shows the immediate-term momentum of the index is steady. 

So far, the index has regained 41 points or nearly 50% of its decline losses. If the underlying strength of the index remained strong, we may see further advances. For this to happen, the KLCI would have to break upwards from its next chart hurdle at the 928-933 levels. 

Chart support for this week stands at 920–910. A violation of these support levels would signal the start of a downward wave and turn the immediate-term chart picture negative. 

The weekly indicators remained mixed at Friday’s close and called for more sideways band trading action this week. 

Stochastic: The weekly stochastic ended with its buy signal intact. The oscillators per cent K and D settled the week higher at 58.51% and 36.20% respectively. Analysis of these oscillators shows the underlying strength of the index is neutral to slightly positive. 

The weekly Money Flow Index (MFI) ended the week lower at 37.71 points and indicated a slight negative money flow took place last week. 

The 3- and 7-week exponentially smoothed moving-average price lines (ESA-lines) closed in positive convergence and signalled the main trend was temporarily out of the bearish phase. The 3- and 7-week ESA-lines ended higher at 918.94 and 920.47 points respectively. 

The daily ESA-lines retained their bullish signal at Friday’s close. The 3-day ESA-line closed the week above the 7-day ESA-line at 923.84 and 919.75 points respectively. 

Relative Strength Index (RSI): The 9-week RSI (not shown in the chart) finished the week sharply higher at 67.22 points. Analysis of the weekly RSI shows the immediate underlying strength of the index is constructive. 

Weekly moving-average convergence/divergence (MACD): The weekly MACD (not shown in the chart) indicated a strong positive convergence at Friday’s close and suggested an upward wave had started.  

The weekly MACD closed below the trigger-line and ended higher at minus 0.18 and 0.41 point respectively. 

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