FBM KLCI - turning bullish

FBM KLCI - turning bullish

Stocks on Bursa Malaysia closed higher yesterday amid a firmer broader market as funds were seen picking up index linked stocks driven by buying interest in plantation counters. Market sentiment improved in late afternoon in line with firmer key regional bourses as the US dollar weakened. The FBM KLCI ended 5.66 points or 0.31% higher at 1,831.97 points after hovering between 1,826.28 and 1,832.37 throughout the day. Gainers outpaced losers by 466 to 325, while 322 counters were unchanged. Total volume was lower at 2.16 billion units worth RM2.03 billion from Wednesday’s 2.91 billion units worth RM1.57 billion.

The FBM KLCI opened 1.35 points higher at 1,826.31 but slipped lower to hit the intra-day low of 1,826.28 ten minutes after opening. The key index rebounded from the low and climbed higher with alternating pullback on profit-taking, and it hit the intra-day high of 1,832.37 at mid-afternoon before pulling back on profit-taking to close off high. Chart-wise, the FBM KLCI formed a bullish white candlestick which reversed the previous day down move forming a bullish reversal pattern. Hence, the FBM KLCI is likely to continue its upward move to climb higher today. Immediate overhead resistance zone is at 1,832 to 1,845 while the immediate downside support zone is at 1,826 to 1,823.

MACD climbed higher, and its histogram also extended upward after contracting for one session, indicating a resumption of the upward momentum. RSI (14) hooked upward to 62.7 from 60.5, indicating a rebound which lifted the short term relative strength higher in the bullish zone. Stochastic was higher at 94.6 from 92.6 and is above the slow stochastic line, indicating strong index strength and continuation of the short term up cycle. Readings from the indicators showed that the FBM KLCI rebounded after one session of consolidation, and hence, is likely to climb higher on follow through buying momentum.

The trend of the FBM KLCI is up as the key index has now closed above the short, medium and long term moving averages, where the rebound yesterday has lifted the FBM KLCI to close above the long term moving average resistance level of 1,830-point after pulling back to close below it the previous day. At the same time, the FBM KLCI has also breakout from the upper resistance line of the downtrend channel, indicating the downtrend is over and the beginning of a new up leg from here. Hence, the FBM KLCI is likely to climb higher to test the immediate higher resistance zone of 1,845 to 1,858 in the short term. On the broader market, rotational play on ACE market counters still remained active which offers good short term trading opportunities.

Overnight, the Dow rebounded 65.06 points or 0.37% to close at 17,763.24. Today, the FBMKLCI is likely to trade within a range of 1,815 to 1,839.

This week's expected range: 1771 – 1850
Today’s expected range: 1815 – 1839

Resistance: 1830, 1834, 1839
Support: 1815, 1819, 1822

Stocks to watch: APFT, AT, CAREPLS, CYPARK, DGSB, ECONBHD, EDUSPEC, FSBM, GDEX, GRANDFLO, IREKA, IRIS, JOHOTIN, KRONO, LNGRES, MPAY, NEXGRAM, NOVAMSC, OPCOM, PSIPTEK, RUBEREX, SYSTECH, TEKSENG, YTL

Stock pick highlight: SYSTECH (0050)

Last Price: RM0.365 +0.04
Support Level: RM0.33, RM0.31
Resistance Level: RM0.38, RM0.395, RM0.42, RM0.445, RM0.47, RM0.50, RM0.525, RM0.55, RM0.60
Entry Level: RM0.365 – RM0.38

Technical Analysis

SYSTECH (0050) rebounded from its intra-day low of 0.33 to close higher at the intra-day high of 0.365. Technically, the chart of SYSTECH formed a bullish white Marubozu candlestick with increasing volume, indicating strong buying interest came into the stock yesterday. It breaks out from the consolidation range forming a W-bottom pattern breakout. MACD swung upward and made a golden-cross over its signal-line, and its histogram also extended upward, indicating an increased in momentum to the upside and a buy signal. RSI (14) rose to 65.4 from 51, indicating the stock is turning bullish. Stochastic surged strongly upward to 68 from 36.4 and is above the slow stochastic line, indicating the stock is turning strong after recent consolidation. The medium and long term trend of SYSTECH is up, and the short term trend is up with the 5-day SMA above the 10-day SMA and is also above the 30-day SMA, and a confirmed breakout above RM0.38 will see an upside target of RM0.395, follow by RM0.42, RM0.445, RM0.47, RM0.50, RM0.525, RM0.55 and RM0.60.

Since the short term trend is bullish, day traders with shorter time frame perspective may ride on the short term bullishness and buy on breakout level (RM0.38). Those with lower risk appetite should wait at the side-line and buy on the dip.

Price Objective
Short Term – target price at (RM0.395, RM0.42, RM0.445, RM0.47), stop loss (RM0.325)
Mid Term – target price at (RM0.450, RM0.525, RM0.55, RM0.60), stop loss (RM0.305)

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