Market to remain buoyant

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Daily FBM KLCI chart as at Nov 27, 2015 using Next VIEW Advisor Professional

Daily FBM KLCI chart as at Nov 27, 2015 using Next VIEW Advisor Professional

Stronger ringgit and rebound in commodities prices helped lift the FBM KLCI.

We mentioned last week that the index is expected to trade sideways if it stays between 1,620 points and 1,690 points.

The FBM KLCI increased 1.2 per cent in a week to 1,682.59 points on Friday after trading in range between 1,661 and 1,689 points.

The Malaysian ringgit slightly strengthened against the US dollar from RM4.27 to RM4.26.

Trading volume continued to increase last week and focus remained on lower capped stocks. The average daily trading volume in the past one week was 2.8 billion shares as compared to 2.6 billion shares two weeks ago. The average trading value increased from RM2 billion to RM2.5 billion.

Foreign institutions were net buyers last week as stronger ringgit helped boost sentiment.

Net buying (From Monday to Thursday last week) from foreign institutions was RM188 million while net selling from local institution and local retail were RM146 million and RM42 million respectively.

In the FBM KLCI, gainers out-paced decliners seven to three.

Top gainers for the week were IOI Corporation Bhd (6.6 per cent in a week), Sapurakencana Petroleum Bhd (6.1) and YTL Corporation Bhd (6.1 per cent).

Top decliners were Hong Leong Bank Bhd (2.9 per cent), RHB Capital Bhd (2.3 per cent) and IHH Healthcare Bhd (2.1 per cent). Markets in Asia were dragged down by China.

China’s Shanghai Stock Exchange Composite fell sharply after several major brokerage firms announced they were under investigation on Friday.

The composite index fell 5.4 per cent in a week to 3,436.38 points last Friday.

Hong Kong’s Hang Seng Index fell three per cent in a week to 22,068.32 points.

However, Singapore’s Straits Times declined two per cent to 2,859.12 points.

However, Japan’s Nikkei 225 index closed marginally higher at 19,883.94.

Markets in US and Europe closed higher.

The US Dow Jones Industrial Average rose 0.4 per cent in a week to 17,813.39 points on Wednesday; the market was closed on Thursday.

Germany’s DAX Index increased 2.1 per cent in a week to 11,320.77 points and London’s FTSE100 rose 1.0 per cent to 6,394.86 points on Thursday.

The US dollar Index futures continued to increase to historical highs. This pressured gold prices.

The index increased from 99.1 points from last week to 99.8 points last Thursday. COMEX gold declined one per cent in a week to US$1,070.90 near six-year low.

WTI crude oil increased 2.1 per cent in a week to US$42.50 per barrel. Crude palm oil in Bursa Malaysia rebounded and increased 3.1 per cent in a week to RM2,361 per metric tonne.

The FBM KLCI is now at the short term 30-day moving average and struggle to climb and stay above it.

However, there are no signs of a bearish reversal and this indicates that the market is still being supported.

Furthermore, the index is above the Ichimoku Cloud indicator and the short term up trend line (S1 on the chart below).

The momentum indicators are starting to indicate a bullish market sentiment.

The RSI and Momentum Oscillator indicators climbed above their mid-levels and the MACD indicator rose above its trigger line or moving average.

Furthermore, the index is now trading above the middle band of the Bollinger Bands indicator but the width of the bands is narrowing and this shows that the market is still in a correction, unless the FBM KLCI breaks above 1,695 points.

The market is expected to remain buoyant but may struggle to rally as uncertainty in the global markets and weak commodities prices may weigh down the market.

We expect the market is expected to trade sideways if it stays between the immediate support level at 1,620 points and immediate resistance level at 1,690 points.

However, with the developing bullish momentum, the index may test the immediate resistance level and if this resistance level is broken and the next resistance is at 1,740 points.

Furthermore, it is near the end of the year and therefore expect support from institutions for a window dressing.

 

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.