KLCI LIKELY TO CONSOLIDATE

KLCI likely to consolidate further
AFTER staging its sharpest technical pullback last week, the Kuala Lumpur Composite Index (KLCI) continued to consolidate further during the week, albeit at a much slower pace.

Major weaknesses on regional stock markets sent share prices on Bursa Malaysia lower on Monday. The KLCI closed lower at 1,177.53 points on Monday, posting a day-on-day loss of 17.31 points, or 1.45 per cent.

Regional stock markets’ technical rebounds the next day provided stability to Bursa Malaysia.

After struggling for the major part of Tuesday, the KLCI rebounded to close at 1,180.02 points, giving a day-on-day gain of 2.49 points, or 0.21 per cent.

Continued stability on the regional stock markets helped to stabilise the overall market sentiment on Bursa Malaysia on Wednesday. The KLCI rebounded to close at 1,186.54 points, giving a day-on-day gain of 6.52 points, or 0.55 per cent.

Share prices on Bursa Malaysia traded within tight trading range yesterday. The KLCI closed at 1,189.06 points, giving a day-on-day gain of 2.52 points, or 0.21 per cent.

The KLCI posted a week-on-week loss of 5.78 points, or 0.48 per cent. The FTSE Bursa Malaysia Second Board Index lost 105.22 points or 1.83 per cent to the 5,643.60 level while the FTSE Bursa Malaysia Mesdaq Index eased 33.27 points or 0.71 per cent to 4,654.06.

Following are the readings of some of its technical indicators:

# Moving Averages: The KLCI continued to stay below the support of its 10-, 20-, 30-, 50-, 100- and 200-day moving averages.

# Momentum Index: Its short-term momentum index continued to stay below the support of its neutral reference line at market close yesterday.

# On Balance Volume (OBV): Its short-term OBV trend stayed above its 10-day exponential moving averages.

# Relative Strength Index (RSI): Its 14-day RSI stood at the 30.33 per cent level yesterday.

Outlook

The KLCI’s mild pullback hit an intra-week low of 1,166.83 points on Tuesday, staging a successful re-test of this column’s envisaged support zone (1,141 to 1,191).

Subsequent technical rebound took it to its intra-week high of 1,206.84 on Wednesday, encountering resistance at this column’s envisaged resistance zone (1,198 to 1,248).

Chartwise, the KLCI continued to stage below its immediate downside support (See KLCI’s weekly chart —A1:A2) during the week under review. It continued to trend above its immediate downside support (A5:A6).

The KLCI’s daily trend breached the neckline (See KLCI’s daily chart — B1:B2) of its headand- shoulders top formation on March 4. It continued to trend above its immediate downside support (B3:B4).

Its daily, weekly and monthly fast MACDs (moving average convergence/divergence) continued to stay below their respective slow MACDs. With that, the KLCI will continue to consolidate its recent losses in its base-building phase.

The KLCI’s 14-day RSI stayed at 30.33 per cent level yesterday. Its 14-week and 14- month RSI stayed at 31.09 and 49.17 per cent levels respectively.

In the aftermath of the 12th general election, overall market sentiment on Bursa Malaysia remained on the weak side. It takes time to rebuild its market sentiment in its base-building phase.

The KLCI is likely to consolidate further within range-bound activities. There may be intermittent market rebounds to correct its grossly oversold position.

Next week, the KLCI’s overhead resistance zone hovers at the 1,192 to 1,226 points while its downside support is at the 1,151 to 1,185 points.

The subject expressed above is based on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.