Sideways correction with a bearish bias


Daily FBM KLCI chart as at January 9, 2015 using Next VIEW Advisor Professional

It was a volatile week for the market as the index rebounded from a sharp decline earlier in the week and recovered some losses. Rebounds in the global markets boosted market confidence to bargain hunt. The market was also supported by plantation counters as crude palm oil prices rose to a five-month high.

The FBM KLCI declined 1.2 per cent in a week to 1,732.44 points after rebounding from a low of 1,706.18 points on higher volume. We expected the index to test the 1,700 points support level last week.

Trading volume rose in the past one week on bargain hunting. The average daily trading volume in the past one week was 1.7 billion shares as compared to 1.4 billion shares two weeks ago.

The average daily value increased to RM1.8 billion from RM1.4 billion. This indicates higher priced stocks, which are normally traded by institutions, were being traded.

The market continued to be supported only by local institutions and retail while foreign institutions maintained their selling spree. Net buying from local institutions last week (Monday to Thursday) was RM441.9 million.

Foreign selling continued as the ringgit weakened to five-year lows against the US Dollar. Net selling from foreign institutions was RM102.4 million and RM559.3 million while net buying from local retail was RM117.4 million.

In the FBM KLCI, decliners out-paced gainers five to four. Top three weekly gainers in the index were YTL Corporation Bhd (3.1 per cent in a week), SapuraKencana Petroleum Bhd (three per cent) and Tenaga Nasional Bhd (2.6 per cent) while decliners in the index were led by IOI Properties Group Bhd (7.9 per cent), Petronas Chemicals Group Bhd (six per cent), and Malayan Banking Bhd (5.6 per cent).


Regional indices

Markets in Asia pulled back as China’s bullish rally began to ease. Shanghai Stock Exchange Composite Index rose 1.6 per cent in a week to 3,287.43 points after pulling back from its four-year high at 3,374.46 points. Singapore’s Straits Times Index declined one per cent in a week to 3,338.44 points.

Hong Kong’s Hang Seng Index rose only 0.2 per cent to 23,919.95 points 23,857.82 points. Japan’s Nikkei 225 declined 1.2 per cent in a week to 17,197.73 points.



The US market rebounded sharply to recover losses earlier in the week as the US dollar continued to increase to nine-year highs.

On Thursday, The US Dow Jones Industrial Average rose 1.5 per cent in a week to 17,907.87 points last Thursday.

London’s FTSE100 Index increased marginally to 6,572.83 points while Germany’s DAX Index rose only 0.3 per cent to 9,837.61 points.

The US dollar index rose to its nine-year high at 92.60 points. The Malaysian ringgit weakened from RM3.52 to a US dollar a week ago to RM3.56, the weakest in five-and-a-half years.

Gold continued to increase last week but crude oil continued to fall to five-and-a-half year lows. COMEX gold increased 2.1 per cent in a week to US$1,208.90 an ounce.

NYMEX WTI crude oil fell to its lowest level in five-and-a-half years, falling 8.9 per cent in a week to US$48.92 per barrel. Crude palm oil futures rose 2.8 per cent in a week to RM2,348 per metric tonne.



After rebounding near the support level at 1,700 points last week, the FBM KLCI is still below the short term 30-day moving average. This indicates that the trend is still bearish.

Furthermore, the index is below the Ichimoku Cloud indicator which is getting wider and this indicates that the bearish trend is firm.

The index formed a “doji” Japanese Candlesticks pattern and this indicates uncertainty. It also shows that there is resistance in the market.

Market sentiment is still bearish as momentum indicators like the RSI and Momentum Oscillator were still below its mid-level.

However, the bearish momentum is weak as the indicators are increasing. The index is slightly above the middle band of the Bollinger Bands indicator. Furthermore, the MACD indicator is still above its moving average.

As we move into the second week of the new year, I am expecting the index to continue its correction. Technical indicators show volatility but there is no clear


Immediate resistance level remained at 1,760 points while the immediate support level is at 1,700 points. The FBM KLCI is expected to trade within this range this week.

There is no clear direction until the market breaks the support or resistance level. In the meantime, the indicators are pointing towards a bearish bias and therefore, the index is likely going to test the support level.


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.