Sunday, November 17

Year-end rally expected

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Daily FBM KLCI chart as at November 8, 2019

The FBM KLCI rose for the second week and to its highest level in two months. The bullish sentiment was supported by stronger ringgit and rising commodities prices. Rebound in banking stocks has also helped the index increase. Furthermore, continuous bullish performances in the global markets helped boost market confidence. The benchmark FBM KLCI increased one per cent in a week to 1,609.73 points last Friday.

Trading volume continued to increase and this indicated that the market is more confident. The average daily trading volume in the past one week was at 2.9 billion shares as compared to 2.8 billion in the previous week. The average daily trading value increased to RM2.2 billion from RM2.1 billion. Still, more lower-capped stocks favoured by the retail market are being traded.

In the FBM KLCI, gainers beat decliners 18 to 11. The top three gainers were Malaysia Airports Holdings Bhd (5.9 per cent in a week to RM8.49), Genting Bhd (5.8 per cent to RM6.21) and AMMB Holdings Bhd (four per cent to RM4.14). The top three decliners were IHH Healthcare Bhd (two per cent to RM5.51), Hong Leong Bank Bhd (1.4 per cent to RM17.06) and Top Glove Corporation Bhd (1.1 per cent to RM4.35).

Global market indices closed higher last week. US Dow is at historical highs while most European market indices are at two years high. With only two months left of the year, the FBM KLCI is still in the red. The index is 4.9 per cent lower since the beginning of this year while other markets were positive. The US, Germany, France markets indices are currently above 20 per cent year-to-date. China’s market index almost reached 20 per cent.

US dollar strengthened against major currencies. The US dollar index increased to 98.4 points last Friday from 97.2 points two weeks ago. Despite the stronger US dollar, the Malaysian ringgit was strengthened against the US dollar at RM4.13 per US dollar last Friday as compared to RM4.16 in the previous week. This shows that the ringgit has strengthened against other currencies.

Price of gold fell as strong rallies in the equities market got investors to put more attention towards the latter. COMEX Gold futures fell 3.8 per cent in a week to US$1,459.80 an ounce last Friday. Brent crude increased 1.4 per cent to US$62.51 per barrel. In the local market, crude palm oil (BMD) rose for the fifth week to a 22-month high, increasing 4.8 per cent in a week to RM2,579 per metric tonne last Friday.

The FBM KLCI stayed above the broken resistance level now turned support level at 1,585 points. This indicates the market is being supported well. The next support level is at 1,620 points, based on the 50 per cent Fibonacci retracement level of the short term down trend that started in July this year.

Technically, the FBM KLCI is strongly bullish above the short term 30-day moving average. Furthermore, the index is currently at the top band of the Ichimoku Cloud indicator. A breakout above the immediate resistance level at 1,620 points could confirm the reversal into a bullish one. However, there is still another resistance at 1,640 points based on the long term 200-day moving average.

Momentum indicators like the RSI and Momentum Oscillator are increasing and this shows a strong bullish momentum. The Oscillators have not gone into overbought levels. Furthermore, the MACD indicator continues to increase above its moving average. This shows that there is still room for the index to climb higher.

The financial reporting season has come and the market is preparing for a year-end window dressing rally. The index is expected to test the resistance level at 1,620 points. Positive results could spur market confidence and the index can break above this resistance level and climb to the next level at 1,640 points. This is likely going to happen if the index can stay above the immediate support level at 1,585 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 investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment advisor.

Global markets indices and commodities performances as at November 8, 2019