The market continued to decline last week and the index broke the crucial support level at 1,705 points.
Weak ringgit and falling commodities prices were primary concerns. Furthermore, Bursa Malaysia was not the only market that went south, most global markets suffered the same fate, especially China.
The FBM KLCI fell 3.8 per cent in a week to 1,694.15 points.
Trading volume has increased last week as selling pressure intensified.
The average daily trading volume increased to 2.6 billion shares from 2.3 billion shares two weeks ago and the average daily trading value increased to RM3.3 billion from RM2.5 billion. This indicates more higher market capped stocks, normally traded by institutions, were being targeted.
Foreign institutions continued to sell and last week even heavier. Net sell from foreign institutions was RM1,887 million while net buys from local institutions and local retail were RM1,479 million and RM408 million respectively.
In the FBM KLCI, only three counters closed higher last week. The three gainers were MISC Bhd (1.5 per cent to RM5.92), Petronas Chemicals Group Bhd (0.7 per cent to RM8.40) and KLCC Property Holdings (KLCC REIT) Bhd (0.3 per cent to RM7.55).
The top decliners were Telekom Malaysia Bhd (16.6 per cent to RM3.21), Axiata Group Bhd (10.7 per cent to RM4.26) and Sime Darby Bhd (6.9 per cent to RM2.42).
Global markets were bearish. In Asia, the fell is led by Shanghai which its benchmark index falling to a two-year low. In Europe, Germany led the fall with a 3.3 per cent decline.
However, UK’s market was held firm. US market also declined but its main technology index, the NASDAQ was held firm near historical highs.
The US dollar was firm against major currencies in the past one week.
The US dollar index closed at 94.5 points last Friday as compared to 94.8 points the week before.
The ringgit was slightly weaker against the US dollar at RM4 per US dollar last Friday as compared to RM3.99 the previous week.
In commodities, Crude oil (Brent) rebounded after two weeks of declines and increased 3.4 per cent last week to US$75.53 a barrel on Friday. Gold (COMEX) fell 0.9 per cent in a week to 1,271.10 an ounce. In the local market, crude palm oil futures fell for the third week, declining 2.3 per cent to RM2,282 per metric tonne. The price is trading near a two-year low.
The FBM KLCI broke a crucial support level at 1,705 points last week and this indicates that the bearish pressure is strong, especially from foreign institutions.
The sell down is not only restricted to the local market but also global markets and hence it is a global bearish sentiment towards equities.
Technically, the trend remained bearish below both the short and long term 30- and 200- day moving averages and these averages are declining.
he long term 200-day moving average has declined for the first time since February 2017.
Furthermore, the index is below the Ichimoku Cloud and the expanding Cloud indicates a strong bearish trend.
Momentum indicators like the RSI, MACD and Momentum Oscillator continued to decline and this indicates that the trend is strongly bearish. However, these indicates are at their oversold levels or relatively low prices.
This may attract some buyers who are looking to bargain hunt.
We see some rebound last Friday at the support level of 1,680 points.
We expect to see the index testing the broken support level at 1,705 points this week and if it fails to overcome this level, further downside is seen.
The next support level the index is going to test if it fails to overcome the 1,705 points level is at 1,620 points.
The above commentary is solely used for educational purposes and is the contributor’s point of view using technical al 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.