Daily FBM KLCI chart as at December 5, 2014 using Next VIEW Advisor Professional
The FBMKLCI continued to decline last week and broke the crucial support level at 1,760 points. Plantation and banking stocks were hit as Malaysian ringgit continued to depreciate against the US dollar and falling crude palm oil and rubber prices.
Declining crude oil prices and weak export data additionally contributed to the negative sentiment. Weak Ringgit also caused foreign selling.
The FBM KLCI declined 3.9 per cent in a week, the largest weekly decline this year, to 1,749.37 points, near 15 months low.
Trading volume remained firm in the past one week as compared to the previous week.
The average daily trading volume in the past one week was two billion. Average daily value increased to RM2.3 billion from RM2 billion two weeks ago and this indicates higher priced stocks are being traded the most. Selling came in from foreign institutions.
In the past one week, foreign institutions were net sellers at RM522.4 million from Monday to Thursday last week.
Net buying from local institutions was RM278.2 million while net buying local retail net selling was RM244.1 million.
In the FBM KLCI, Only two out of 30 counters gained in the past one week. Gainers were led by Petronas Dagangan Bhd (4.5 per cent), YTL Corporation Bhd (2.5 per cent) while decliners in the index were led by SapuraKencana Petroleum (10.4 per cent), Felda Global Ventures Holdings Bhd (9.4 per cent) and PPB Group Bhd (9.3 per cent).
Markets in Asia were mixed in the past one week but the bulls continued to dominate in China and Japan. China’s Shanghai Stock Exchange Composite jumped 9.5 per cent in a week to its highest level in more than three years at 2,938.78 points.
Japan’s Nikkei 225 increased 2.6 per cent in a week to 17,920.45 points, the highest level in more than 7 years.
However, Hong Kong’s Hang Seng Index closed marginally higher at 24,002.64 points. Singapore’s Straits Times Index declined 0.7 per cent in a week to 3,324.39 points
The US market continued to climb to historical highs last week as the US dollar continued to gain strength. On Thursday, the US Dow Jones Industrial Average increased only 0.4 per cent in a week to 17,900.1 points.
Markets took a breather in Europe. London’s FTSE100 Index declined 0.6 per cent in a week to 6,679.37 and Germany’s DAX declined 1.2 per cent to 9,851.35 points.
The US dollar index increased from 88.01 two weeks ago to 89.74 points, the highest in more than five years. The Malaysian ringgit weakened to its five years low against the US dollar from RM3.39 a week ago to RM3.49 against the US dollar.
Gold rebounded strongly on Monday but was slightly bearish on the rest of the week.
COMEX gold increased 1.4 per cent in a week to US$1,206.00 an ounce.
Crude oil bearish momentum continued last week. NYMEX WTI crude oil declined 3.4 per cent in a week to US$66.73 per barrel. Crude palm oil futures in Bursa Malaysia closed marginally higher from the previous week RM2,173 per metric tonne on falling crude oil prices.
The FBM KLCI fell below the short term 30-day moving average and Ichimoku Cloud indicators after breaking above these two indicators a week ago.
The market turned bearish after the index failed to break above the immediate resistance level at 1,850 points.
This was also where the long term 200-day moving average was. So basically, the index remains in a bearish trend.
Momentum indicators turned bearish again. The RSI fell below its mid-level and the MACD indicator crossed below its moving average. Furthermore, the Bollinger Bands are expanding with the FBM KLCI trading at the bottom band.
In addition, the Ichimoku Cloud indicator is currently narrow and this indicates that the index can easily whip-saw. Moving forward, the Cloud is in a whipsaw and this indicator is weak in providing support or resistance.
Like I have mentioned in my previous article, a breakout below the crucial support level at 1,760 points could send the FBM KLCI to 1,650 points based on the pattern price target.
However, we may expect some rebounds as prices are oversold and this may attract bargain hunters.
Henceforth, I am expecting the FBM KLCI to be trending sideways as the Cloud indicator is in a whipsaw mode and range between 1,730 and 1,760 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 advisor.