The market was directionless and in a consolidation mode last week. However, the FBM KLCI failed to climb above the resistance level of the consolidation phase and fell to its lowest level in nearly five months. The index was dragged down by Genting Malaysia Bhd and Genting Bhd on the theme park issue.

This indicated that the market sentiment was bearish despite generally bullish global market performances. The benchmark KLCI fell 0.9% in a week to 1,679.86 points last Friday. The market rebounded this week and closed at 1,694.99 points yesterday.

Trading volume increased significantly last week and this indicated a stronger selling pressure as the index fell lower especially last Friday. The average daily trading volume increased to 2.8 billion from 1.8 billion shares in the previous week and the average daily trading value fell to RM3.6 billion from RM1.5 billion.

Local retailers were the net buyers last week amid selling from both local and foreign institutions. This is not a mix that we commonly see. Net buy from local institutions was RM574.3 million while net sells from local and foreign institutions were RM264.3 million and RM310 million respectively.

For the KLCI, decliners beat gainers 16 to 13. Top gainers were IHH Healthcare Bhd (+11.9% in a week to RM5.37), Axiata Group Bhd (+6.5% in a week to RM3.63), and PPB Group Bhd (+3.3% to RM17.60). The top three decliners were Genting Malaysia Bhd (-20.3% to RM7.77), Genting Bhd (-8.9% to RM3.20), and Sime Darby Bhd (-7.3% to RM3.41).

Global markets rebounded and closed mostly higher. In Asia, the Hong Kong market led as the Hang Seng Index rose 3% in a week. The US market rebounded sharply last week from a four-month low in an anticipation towards year-end rally. European markets including the UK closed higher as well.

US dollar continued to strengthen against major currencies. The US Dollar Index rose to 97.2 points last Friday from 96.9 points the week before. The ringgit strengthened against the greenback at RM4.18 to a US dollar compared with RM4.19 in the previous week.

Crude oil (Brent Crude) continued to fall although at a slower pace. The price fell 0.9% in a week to US$58.68 (RM243.52) per barrel last Friday, a new one-year low. Gold (Comex) increased only 0.2% from the previous week at US$1,226 an ounce. Locally, crude palm oil (BMD) declined 0.3% to RM2,039 last Friday.

The immediate support level is at 1,679 points and resistance is at 1,720 points. The KLCI failed to climb above the resistance level and is currently testing the support level. This indicates a bearish sentiment.

Technically, the KLCI trend remained bearish below the short-term 30-day moving average and the long-term 200-day moving average. Furthermore, the index stays below the Ichimoku Cloud indicator. Furthermore, the Cloud has begun to expand and the correction phase should be over and the bearish trend may resume.

The Relative Strength Index and Momentum Oscillator failed to climb above their mid levels and this indicated that the market still faced resistance. These indicators are starting to decline and this indicates that the bearish momentum is gaining some traction. Furthermore, the moving average convergence divergence is almost falling below its trigger line.

The KLCI tested the support line (confirmation line) of the triangle chart pattern twice in the past two weeks. Like in my previous article, the clue to which direction the market is heading lies in these support and resistance levels.

A breakout above the resistance level (1,720 points) indicates that the market is ready for a technical rebound but a breakout below the support level (1,679 points) could mean continuation of the bearish trend. The technical indicators on the chart favour a breakout of the support line and if this happens, the index may fall to the triangle pattern’s target at 1,610 points.

The above commentary is solely used for educational purposes and is the contributor’s point of view using technical analysis. The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment adviser.