Daily FBM KLCI chart as at January 31, 2020
The market, based on the benchmark FBMKLI, fell for the second consecutive week last week as the market was spooked by the Novel Coronavirus which till date there is still no vaccine and the number of those infected globally continue to grow daily. Market was bearish across the board except for rubber glove makers. The FBM KLCI increased 4.6 per cent in a week to 1,531.06 points last Friday, the lowest level in eight years.
Trading volume has increased and this indicates stronger selling pressure. The average daily trading volume in the past one week increased to 3.4 billion shares as compared to 2.5 billion two weeks ago. The average daily trading value increased to RM2.8 billion as compared to RM1.9 billion.
In the FBM KLCI, only two out of the 30 counters gained last week. The two gainers were Top Glove Corporation Bhd (5.6 per cent in a week to RM5.85 and Axiata Group Bhd (1.7 per cent to RM4.30). The top three decliners were Petronas Chemicals Group Bhd (10.6 per cent to RM6.19), Digi.com Bhd (5.6 per cent to RM4.23) and Genting Bhd (5.5 per cent to RM5.50).
Global markets were bearish. The US and Germany markets fell from their historical highs. Most markets were in the red year-to-date. Hong Kong was the hardest hitting market but it may be China, because the market was closed last week for holidays.
US dollar slightly weakened against major currencies. The US dollar index increased to 97.4 points last Friday from 97.9 points two weeks ago. The Malaysian ringgit was weaker against the US dollar at RM4.09 per US dollar last Friday as compared RM4.06 in the previous Friday.
Gold continued to soar to its highest level since April 2013 as market hedged on safer investment haven. COMEX gold increased 1.1 per cent a week to US$1,588.70 an ounce last Friday. However, crude oil (Brent) fell 6.7 per cent to US$56.65 per barrel, the lowest in six months on demand fear. In the local market, crude palm oil (BMD) followed crude oil cue, declining 9.2 per cent in a week to RM2,599 per metric tonne.
The FBM KLCI fell below its major support level at 1,550 points and fell to its lowest level in eight years. As a global standard, a market is considered in a bearish trend if its benchmark index falls 20 per cent from its high. For FBM KLCI, that level is at 1,500 points.
However, the index has already been in a technical down trend since November 2018 when the index fell below the 200-day moving average and the average started to decline. Currently, the trend is strong bullish as it stayed below the short term 30-day moving average and the Ichimoku Cloud. Furthermore, the Cloud in starting to decline.
The bearish sentiment is strong after breaking the support level at 1,550 points. All momentum indicators including the RSI, Momentum Oscillator and MACD indicate a strong bearish momentum.
The breakout below the support level at 1,550 points confirmed a bearish trend continuation. That continuation pattern has a target of 1,500 points, which also coincides with the down trend line support level.
Henceforth, the market is expected to decline further and the index may test the support level at 1,500 points if it stays below the broken support now turned resistance level at 1,550 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 January 31, 2020