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Bullish trend may continue

TheEdge Wed, Jun 12, 2019 10:26am - 3 months ago

The market was quiet and directionless during the short Hari Raya Aidilfitri holiday week. Bullish global market performances were not enough to bring market participants back from their holiday spirit. The FBM KLCI declined only 0.1% in a week to 1,649.33 points last Friday. The benchmark index closed at 1,651.20 points yesterday.

Trading volume was low. The average daily trading volume has declined to only 1.4 billion shares last week from 2.2 billion shares the week before. The average fell to RM1.4 billion from RM2.6 billion.

After weeks of selling, foreign institutions were finally accumulating last week. The stronger ringgit could be the catalyst for the buying. Net sell from local and foreign institutions were RM323.3 million and RM26.7 million respectively. Net buy from foreign institutions was RM 350 million.

For the KLCI, gainers outpaced decliners 17 to 10. The top three gainers were Malaysia Airports Holdings Bhd (+3.8% in a week to RM7.62), Petronas Gas Bhd (+3.5% to RM18.28) and Hartalega Holdings Bhd (+1.4% to RM5.27). The top three decliners were Digi.Com Bhd (-3.2% to RM4.81), Sime Darby Bhd (-3% to RM2.25) and RHB Bank Bhd (-1.4% to RM5.75).

Global markets rebounded last week while the China Shanghai Stock Exchange Composite index closed lower. The China market seems to move in the opposite direction of the western markets. The US market led the bullish market with the Dow climbing 4.7% in a week.

US dollar started to weaken against major currencies. The US Dollar Index declined to 96.6 points last Friday from 97.6 points as compared with the previous week. Hence, the Malaysian ringgit strengthened against the US Dollar at RM4.16 per US dollar from RM4.19 the week before.

Crude oil fell for the third week last week at a slower pace. Crude oil (Brent) fell 1.9% in a week to US$63.24 (RM236.08) a barrel last Friday. Weak US dollar caused the price of gold to continue its bullish rally for the third week. Comex gold futures increased 2.6% to US$1,344.90 an ounce, the highest in four months. Crude palm oil (BMD) fell 2.1% in a week to RM2,027 per tonne on demand worries.

There are not many changes in the technical indications on the chart as the KLCI closed almost unchanged. The KLCI remained above the broken resistance level that turns immediate support at 1,618 points. The next technical resistance level is at 1,680.

The KLCI trend remained bullish in the short term above the short-term 30-day moving average and the short-term downtrend line. However, the index is still bearish in the longer term as the index is still below the 200-day moving average. Furthermore, the index remained in the Ichimoku Cloud indicator. A breakout above 1,670 points indicates a reversal of a long-term bearish trend based on the Cloud indicator.

Momentum indicators continue to indicate a strong bullish momentum for the KLCI despite the minor pullback last week. The Relative Strength Index and Momentum Oscillator pulled back but is still generally increasing. Furthermore, the Moving Average Convergence Divergence indicator remained above its moving average.

The fact that the market was able to hold despite a short trading week shows that the bullish rally that started three weeks ago is being supported well and the rally is not over. The KLCI is expected to continue its bullish trend towards the next resistance level at 1,680 points if it is able to stay above the immediate support at 1,618 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 investment advice or any form of recommendation. Should you need investment advice, please consult a licenced investment adviser.

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