Technical Speaking S.N.Lock 08-02-2009

SHARE prices on Bursa Malaysia rebounded in tandem with technical rebounds on Wall Street and regional stock markets over the last four trading days. The Kuala Lumpur Composite Index (KLCI) continued to stay below its critical support of 900 when it closed at 896.64 points yesterday.

The KLCI opened marginally higher at 886.18 points before falling back to its intra-day low of 873.46 on Tuesday. The KLCI closed at 879.67 points, giving a day-on-day loss of 4.78 points, or 0.54 per cent. Prices on Bursa Malaysia continued to consolidate sideways on Wednesday. The KLCI closed at 876.80 points, giving a day-on-day loss of 2.87 points, or 0.33 per cent.

The KLCI held on to its technical composure when it opened lower before rebounding to close at 879.95 points on Thursday, giving a day-on-day gain of 3.15 points, or 0.36 per cent. Shares on Bursa Malaysia rebounded sharply on news of swearing in of the new Menteri Besar of Perak.

The KLCI rebounded to close at the day’s high of 896.64 yesterday, posting a day-on-day gain of 16.69 points, or 1.90 per cent. The KLCI closed higher at 896.64 points yesterday, giving a week-on-week gain of 12.19 points, or 1.38 per cent. The FTSE Bursa Malaysia Second Board Index eased 13.51 points, or 0.34 per cent, to 3,925.11 level while the FTSE Bursa Malaysia Mesdaq Index added 8.01 points, or 0.24 per cent, to 3,375.45 level.

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

Moving Averages: The KLCI had since stayed above its 10-, 20-, 30-, and 50-day moving averages. It stayed above its 100- and 200-day moving averages.

Momentum Index: Its short-term momentum index had since stay above the support of its neutral reference line.

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

Relative Strength Index: Its 14-day RSI stood at the 55.50 per cent level yesterday.

Outlook

The KLCI’s brief technical pullback hit its intra-week low of 873.46 on Tuesday, staging a successful re-test of this column’s envisaged support zone (847 to 881 levels). Subsequent technical rebounds on Thursday and yesterday sent the KLCI to close at the day’s high of 896.64 yesterday, moving into the confines of this column’s envisaged resistance zone (887 to 921 levels).

Chartwise, the KLCI staged a technical breakout of its immediate downside support (See KLCI’s weekly chart — A1:A2). It continued to stay above its resistance-turned — support trendline (A7:A8). The KLCI’s daily trend bounced off its recently established uptrend (See daily chart — B5:B6) yesterday.

It continued to stay above its resistance-turned-support trendline (B1:B2). The KLCI’s weekly fast MACD (moving average convergence/divergence) continued to stay above the support of its weekly slow MACD at the market close on yesterday. Its daily and monthly fast MACDs continued to stay below their respective slow MACDs.

The KLCI’s 14-day RSI stayed at 55.50 per cent level yesterday. Its 14-week and 14-month RSI stayed at 39.79 and 32.37 per cent levels respectively. Following the technical breakout of its recent high of 887.27 on January 29, the KLCI is poised to bridge its gap of 3.13 points (907.15— 910.28). Once this gap is filled, the KLCI is likely to stage a re-challenge of its previous resistance high of 936.63.

The KLCI’s technical indicators are shaping nicely in the sense that a sustained technical rebound is in the offing. Once the KLCI’s daily MACD turns positive it will rebound in sync with its weekly MACD into a sustained technical rebound. Next week, the KLCI’s envisaged resistance zone hovers at the 899 to 933 levels while its immediate downside support is at 859 to 893.