Market failed to rally, pull back expected

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Daily FBM KLCI chart as at February 8, 2019.

Global markets indices and commodities performances as at February 8.

Last week, the market was directionless in a short trading on Chinese New Year holidays. Trading volume was low.

Furthermore, the local market lacked cues from a mixed global market performance. The benchmark FBM KLCI increased only 0.2 per cent in a week to 1,686.52 points.

The average daily trading volume fell to 1.7 billion shares from 2.5 billion shares in the previous week. The average daily trading value declined to RM1.5 billion from RM2.3 billion.

In the FBM KLCI, gainers out-paced decliners 16 to 11. The top three gainers were Westports Holdings Bhd (three per cent in a week to RM3.83), Genting Bhd (2.5 per cent to RM7.11) and Tenaga Nasional Bhd (2.3 per cent to RM13.20).

The top three decliners were Axiata Group Bhd (seven per cent to RM3.73), Malaysia Airports Holdings Bhd (1.7 per cent to RM7.90) and IOI Corporation Bhd (1.7 per cent to RM4.57).

Global market performances were mixed. Market indices in Asia closed marginally higher in a week except for Japan which fell 2.2 per cent.

The China market was closed for the week for Chinese New Year holidays. Market indices in Europe closed lower while US and London market indices closed higher.

The US dollar gained strength against major currencies last week. The US dollar Index increased to 96.6 points from 95.6 points.

However, the Malaysian ringgit was stronger against the US dollar. The ringgit was at RM4.07 per US dollar last Friday as compared to RM4.10 in the previous week.

Price of commodities were slightly bearish. Price of gold (COMEX) declined 0.3 per cent in a week to US$1,318.35 an ounce last Friday.

Crude oil (Brent) declined 1.1 per cent to US$62.09 per barrel. Crude palm oil (BMD) fell 0.4 per cent to RM2,289 per metric ton last Friday.

The FBM KLCI failed to climb above the immediate resistance level at 1,702 points in the past two weeks. This indicates that there is resistance and sentiment was weak. The immediate support level is at 1,680 points.

Technically, the FBM KLCI is bullish above but near the short term 30-day moving.

However, the index remained inside the Ichimoku Cloud indicator.

This indicates that the market trend is still directionless and would continue its up trend is the index can climb above the upper band of the Cloud at 1,710 points.

Momentum indicators remained flat. The RSI and Momentum Oscillator continued to stay near their mid-levels and the MACD is just crossing below its moving average.

This indicates that the market trend is directionless.

The failure to overcome the resistance level after two weeks indicates a weak market sentiment.

Therefore, the FBM KLCI is expected to pull back for a correction towards the immediate support levels at 1,680 points and 1,655 points if the index continues to stay below the immediate resistance level at 1,702 points.

The market would not have a clear direction if it continues to stay between 1,680 and 1,702 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.