KLCI stays below key support level

SHARE prices on Bursa Malaysia continued to consolidate within tight trading ranges over the last five trading days. The Kuala Lumpur Composite Index (KLCI) continued to stay below its support of 900 when it closed at 866.88 points yesterday.

Investors stayed on the sidelines as the market continued to consolidate within tight trading range on Monday. The KLCI closed at 884.06, giving a day-on-day gain of 2.41 points, or 0.27 per cent.

Share prices on Bursa Malaysia continued to extend their sideway consolidations on Tuesday. The KLCI closed at 883.09, giving a day-on-day loss of 0.97 point, or 0.11 per cent.

The index eased back on lack of fresh market leads and drifted aimlessly on Wednesday. It closed at 877.65, giving a day-on-day loss of 5.44 points, or 0.62 per cent.

Overall market sentiment deteriorated in unison with the weak performances on Wall Street and regional stock markets. The KLCI closed at 865.32 points on Thursday, giving a day-on-day loss of 12.33 points, or 1.40 per cent.

The KLCI rebounded after slipping to its intra-day low of 853.28. It closed marginally higher at 866.88 yesterday, giving a day-on-day gain of 1.56 points, or 0.18 per cent.

Elsewhere in the region, the Tokyo stock market slipped into a meaningful consolidation over the last five trading days. The Nikkei 225 Index closed at 7,910.79 points yesterday, posting a week-on-week loss of 551.60 points, or 6.52 per cent.

The Hong Kong stock market suffered heavier losses in tandem with the weak performances on Wall Street. The Hang Seng Index closed at 12,659.20, recording a week-on-week loss of 883.46 points, or 6.52 per cent.

Back on Bursa Malaysia, the KLCI posted a week-on-week loss of 14.77 points, or 1.68 per cent.

Among the other indices, the FTSE Bursa Malaysia Second Board Index fell 131.69 points, or 2.94 per cent, to the 4,354.22 level while the FTSE Bursa Malaysia Mesdaq Index lost 90.47 points, or 2.59 per cent, to 3,405.35.

Following are the readings of some of the KLCI's technical indicators:

Moving Averages: The KLCI stayed below its 10-, 20-, 30-, 50-, 100- and 200-day moving averages in their bearish sequential order.

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

*On Balance Volume (OBV): Its short-term OBV trend stayed below the support of its 10-day exponential moving averages.

Relative Strength Index (RSI): Its 14-day RSI stood at the 36.22 per cent level yesterday.

Outlook

The KLCI's technical pullback hit its intra-week low of 853.28 yesterday, staging a re-test of this column's envisaged support zone (840 to 876 levels).

Chartwise, the KLCI breached below its immediate downside support (See KLCI's weekly chart - A1:A2) at the market close. It continued to stay below its intermediate-term downtrend (A7:A8) yesterday.

The KLCI's daily trend continued to stay below its intermediate-term downtrend (See KLCI's daily chart - B3:B4). Also, it continued to stay below its intermediate-term downside support (B1:B2).

The KLCI's daily fast MACD (moving average convergence divergence) continued to stay precariously above the support of its daily slow MACD over the week. Its weekly and monthly fast MACDs continued to stay below their respective slow MACDs.

The KLCI's 14-day RSI stayed at the 36.22 per cent level. Its 14-week and 14-month RSI stayed at 23.26 and 29.05 per cent levels respectively.

The KLCI continued to consolidate in line with this column's envisaged market direction. With that, the KLCI is likely to move in unison with the weak market sentiment on Wall Street and regional stock markets next week.

The KLCI is likely to stage another test of its support of 850. A breach below this critical support is likely to see KLCI moving closer to staging another re-test of its recent low.

Next week, the KLCI's envisaged resistance zone hovers at the 870 to 905 levels while its immediate downside support is at the 830 to 864 levels.

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

Source : Business Times