Bearish trend collection

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Daily FBM KLCI chart as at Nov 25, 2016 using Next VIEW Advisor Professional

Daily FBM KLCI chart as at Nov 25, 2016 using Next VIEW Advisor Professional

Foreign institutions continued its selling spree in Bursa Malaysia as ringgit weakened but was supported by local institutions. The Bank Negara’s move to maintain overnight policy rate at three per cent is welcomed by the market participants.

The market was directionless and the FBM KLCI traded sideways with a narrow trading range. The index increased only 0.2 per cent in a week to 1,627.26 points after trading between 1,621.42 and 1,632.71 points.

Trading volume was low and this indicates that the market is staying in the sidelines. The average daily trading volume last week was only 1.4 billion shares as compared to 1.6 billion shares two weeks ago. The average trading value has also declined from RM2.1 billion two weeks ago to only RM1.6 billion. Total market valuation fell RM5.0 billion from the previous week to RM1,657.6 billion last Friday.

Foreign institutions continued to sell but at a lower volume last week and local participants bought. Net sell from foreign institutions last week was RM493 million and net buy local institution and retail were RM388 million and RM105 million respectively. The ringgit was at RM4.45 last Friday as compared RM4.41 in the previous week.

The market was generally weighed down by the telecommunication stocks but supported by finance stocks. In the FBM KLCI gainers out-paced decliners nine to five. The top gainers for the week were Genting Malaysia Bhd (3.3 per cent in a week to RM4.73), Hong Leong Bank Bhd (2.2 per cent to RM13.24) and Genting Bhd (two per cent to RM8). The top decliners were Axiata Group Bhd (6.6 per cent to RM4.26), Telekom Malaysia Bhd (1.9 per cent to RM6.22) and Petronas Dagangan Bhd (0.8 per cent to RM23.58).

Markets in Asia mostly rebounded and closed higher. China’s Shanghai Stock Exchange Composite Index increased 2.1 per cent in a week to 3,261.49 points last Friday. Hong Kong’s Hang Seng Index added 1.8 per cent to 22,723.45 points. Japan’s Nikkei 225 index surged 2.3 per cent in a week to 18,381.22 points and Singapore’s Straits Times rose 0.7 per cent to 2,859.33 points.

The US market continued to rise as market is expecting an interest rate hike that also caused the US dollar to strengthen. The US Dow Jones Industrial Average increased 1.5 per cent in a week to 19,152.14 points last Friday. London’s FTSE100 rose 0.9 per cent in a week to 6,835.14 points and Germany’s DAX Index added 0.1 per cent to 10,678.89 points.

The US dollar index continued to climb to fresh 13-year high last week. The index increased from 101.3 points two weeks ago to 101.5 points last Friday. gold price (COMEX) fell two per cent in a week to US$1,183.4 ounce, the lowest in nine months. Crude oil (Brent) rose 0.5 per cent in a week to US$ 47.12 per barrel. Crude palm oil in Bursa Malaysia jumped 5.6 per cent in a week to RM3,031 per metric tonne to close at its highest level in 4 years.

The FBM KLCI is forming a triangle chart pattern, a pattern that usually indicates a continuation of a trend, and in this case, a down trend. The index remained bearish below the short term 30 and 200 day moving averages and the Ichimoku Cloud indicator. It also failed to climb back above the broken support level at 1,650 points, which now acts as the immediate resistance level.

Momentum indicators are starting to move sideways as the index was directionless in the past two weeks. The slightly elevated RSI and MACD indicators indicate a weak bearish momentum. The narrowing Bollinger Bands also indicates a weak momentum. However, the bearish trend may strengthen if the index falls below the immediate support level at 1,620 points.

The FBM KLCI trend is in a bearish trend correction and there is a higher chance for the trend to continue its bearish trend as indicators are bearish. The weak ringgit strengthens the bearish sentiment. Last week, the market was supported also by the generally bullish markets performances globally. A breakout below 1,620 points immediate support level would confirm the continuation and the index may test the crucial support level at 1,610 points. If it does not break below this level, expect the market to remain directionless.

 

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.