KLCI likely to trend sideways

MAIN BOARD

THE Kuala Lumpur Composite Index (KLCI) failed to expand on its recovery rally last week and reversed direction on renewed selling on key index-linked stocks.

Strong recovery in the US and Asian markets failed to lift the politically linked bearish sentiment in Malaysia. Traders took advantage of any rally to sell and bargain-hunting buying activities fizzled last week as evident by the sharp drop in the weekly volume.

Year-to-date, the KLCI has fallen 227 points or 15.68%. From its historic peak at 1,524.69 points, the index had given back 303 points or 14.89%. The inability of the index to reverse in a sustainable manner has kept many traders on the sidelines.

The KLCI declined from the week’s high of 1,264.75 points to 1,219.97 points and ended the week near the tail-end of its intra-week’s range at 1,221.98 points, down 36.43 points or 2.89% from previously.

All the top 11 index-linked stocks finished the week with minor losses.

Sime Darby, IOI Corp, Maybank, Telekom, Public Bank, Bumiputra-Commerce, MISC, Genting, Petronas Gas, Digi.Com and KL Kepong ended the week with losses ranging from RM1.30 to 10 sen and erased a combined 27.32 points from the index.

Total volume for the week dropped to 908.91 million shares from 1.194 billion shares the previous week.

Daily average volume for the week declined sharply to 181.78 million shares from 238.91 million shares a week ago.

The daily candlestick chart closed Friday bearish. There were five black candles in the last five days, and the bearish downward pattern suggested that the index was likely to remain under selling pressure this week.

Failure of the market to expand on its upward rally last week has turned the technical picture negative. Based on the candlestick chart, we have an important support at 1,200.00-1,190.00 points. In the event of a successful downward break from here, the index would have to give back a larger portion of its most recent recovery gains.

Minor chart support is pegged at the 1,170.00-1,150.00 level, and violation of this level would set the stage for an extended bearish trend.

Chart resistance now stands at 1,235.00-1,245.00 points.

All the daily technical indicators finished the week negative and indicated that the immediate-term strength of the index was still weak.

The daily stochastic retained its sell signal on Friday’s close and indicated that the immediate term trend was negative. The oscillators percent K and D settled sharply lower at 13.66% and 35.95% respectively.

The daily Money Flow Index (MFI) fell sharply and closed in the near the oversold territory at 22.92 points. Analysis of the MFI showed that strong distribution occurred last week.

The main trend trackers, the 3- and 7-week exponentially smoothed moving average price lines (ESA lines), closed in negative divergence and indicated that the main trend was still bearish.

Meanwhile, the short-term trend trackers, the 3- and 7-day ESA lines, turned bearish on April 3. They settled Friday in bearish divergence and signalled that downward cycle would persist.

The 5-day Relative Strength Index ended sharply lower at 35.82 points and showed that the index’s immediate underlying strength was bearish.